Learn · Topic 2
The Policy Form: Covered Risks
The Covered Risks are the heart of the policy. Here's what the 2021 ALTA owner's policy insures, in plain English.
DISCLAIMER: For informational and educational purposes only. Nothing here is legal advice, a title opinion, or a commitment to insure, and no attorney-client relationship is created. No one may rely on this content for any transaction or legal decision. Coverage is governed solely by the terms of an issued policy or commitment, and requirements vary by state and underwriter. Consult your own attorney and underwriter. Views are my own and not those of my employer.
The minute version
How the Covered Risks are framed
- The policy insures against loss "by reason of" the listed Covered Risks, subject to the Exclusions, the Schedule B Exceptions and the Conditions.
- Read all four together. Coverage given in one place can be taken away in another, and endorsements can add it back.
The core title risks
- Title vested other than as stated in Schedule A.
- Any defect, lien or encumbrance on title. The 2021 form spells out examples: forgery, fraud, impersonation, unauthorized transfers, defective execution or notarization (including remote online notarization), invalid powers of attorney, bad recording or indexing, defective court proceedings, and repudiated electronic signatures.
- Unpaid taxes and assessments that were due and payable.
- Survey matters (encroachments, boundary overlaps and similar) that an accurate and complete land title survey would have disclosed.
Marketability and access
- Unmarketable Title: a matter that would let a buyer, tenant or lender walk away under a contract requiring marketable title.
- No right of access to and from the land. That is a legal right of access. Actual vehicular access to a named street comes from the ALTA 17 endorsement.
Government and notice-based risks
- Violations of land-use laws, enforcement of police or national-security powers, eminent domain and PACA-PSA trusts are covered only to the extent of an Enforcement Notice recorded in the Public Records (eminent domain also if a taking already occurred and binds a buyer without Knowledge).
Creditors' rights and the gap
- Covered Risk 9 covers loss when a prior transfer in the chain is avoided as a fraudulent or preferential transfer, and certain recording-timing problems with the insured's own deed.
- Covered Risk 10 covers defects created or recorded after the Date of Policy but before the insured deed is recorded: the "gap."
What changed in 2021
- New ALTA policy forms took effect July 1, 2021. They added the electronic-era defects, the Enforcement Notice concept, PACA-PSA trust coverage, and a 15% increase in the Amount of Insurance if the insurer tries to cure and fails (up from 10% in 2006).
- The 2021 jacket also says the policy is valid even if issued electronically or without a signature, the protection that ALTA 39 provides.
Topic quiz
10 questions on The Policy Form: Covered Risks
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