- April 08, 2019
- All South Carolina Issuing Offices
- UNDERWRITING - Policy Coverage Not Limited to Matters of Record
In the recent case of Loflin v. BMP Development, LP, et al., Op. No. 5633 (S.C. Ct. App. filed March 27, 2019) (Shearouse Advance Sh. No. 13 at 74), the South Carolina Court of Appeals ruled in a case interpreting title insurance policy coverage. While the case may be subject to rehearing and ultimately certiorari from the Supreme Court, it provides a good rule of thumb and law to follow: Policy coverage is not limited to defects of record.
In the instant case involving the sale of a platted lot from the developer, a new plat was prepared at the request of the Seller of the subject land. It was dated a mere five days before the title policy was issued. This new plat was never recorded although it revealed an encroachment of a road onto the insured land which no previous plat had shown. Since there was no record notice of the road encroachment, no exception was taken. Ultimately, the insured owners filed a claim.
In reviewing the policy’s coverage the court found:
In sum, the Policy's plain language clearly indicates that it covers certain matters that would not necessarily appear in the public records. Not only is there a notable absence of the phrase "public records" in the list of Covered Title Risks but also as a practical matter, multiple items in this list are not necessarily consistent with the recordation of any documents, such as adverse possession, fraud, incompetency, and impersonation. Further, the Policy includes a notable exception to certain excluded Title Risks for those matters "appear[ing] in the public records," implying that the term "Title Risks" includes certain matters not appearing in the public records.
To avoid similar claims, Stewart reminds agents to always take exception to anything of which you have knowledge to include different items shown on multiple plats, recorded and/or unrecorded.
Purpose of “Standard Exceptions”
Every commitment you issue should contain the following (or similar) standard exceptions which may not be removed from the commitment just because a lender “asks”. These standard exceptions deal, in part, with matters not necessarily of record:
- Rights or claims of parties in possession not recorded in the Public Records.
- Easements, or claims of easements, not recorded in the Public Records.
- Encroachments, overlaps, boundary line disputes, or other matters, which would be disclosed by an accurate survey or inspection of the Land.
- Any lien, or right to a lien, for services, labor, material or equipment, heretofore or hereafter furnished, imposed by law and not recorded in the Public Records.
- Taxes or assessments which are not recorded as existing liens in the Public Records.
These exceptions generally do not appear in final policies. They are removed based in part on the owners’ or homeowners’ affidavit you have signed at closing, and also based on Stewart’s underwriting guidelines.
Matters Shown on Surveys
In lieu of or in addition to an acceptable survey, Stewart may, at its option, require an inspection of the Land and/or an affidavit from the owner of the Land stating that there are no easements, encroachments, boundary line issues or recent improvements since the date of the survey. Stewart may except in the Policy to any matter that is disclosed by such survey, inspection or affidavit.
To remove the standard survey exception for residential policies:
- Stewart does not require a survey in order to give extended coverage as to survey matters in Loan or Owners residential Policies issued on 1-4 family residential properties. In other words, you may delete the survey exception or issue the appropriate survey coverage endorsement to a Lender without any inspection or additional requirements. Note, however, that this allowance does not obviate the need for a sufficient legal description.
- You also may delete any general exception to unrecorded easements.
- You should continue to except to easements of record and any significant encroachments, conflicts or unrecorded easements of which you have actual knowledge, either by a prior survey or inspection report in your possession, your search, or information obtained from a starter policy which conforms to STG requirements.
- These 1-4 family residential policies can be either subdivision lots or acreage tracts under 25 acres.
For Stewart’s most recent bulletin regarding survey requirements for owner's and loan policies, see VU Bulletin MU2007002 (Rev 10-19-17) below. This bulletin provides additional information and links regarding Homeowners Policies and policies insuring commercial and construction matters. In Virtual Underwriter, Stewart also provides a checklist for reading surveys looking for exceptions as was presented at our February 2019 seminar (https://www.vuwriter.com/en/underwriting-manuals/2013-11/UM00000206.html#subtopic_5).
If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.
For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.
- Bulletins Replaced:
- Related Bulletins:
- MU2007002 Survey Requirements - Owner's and Loan Policies [Revised 10-19-17]
- Underwriting Manual:
- 18.40 Surveys
- Exceptions Manual: