Title insurance companies are reluctant to offer insurance coverage until the duly executed instruments under which the proposed insured acquire their titles or interests are filed in the appropriate recording offices or registries.
It is common procedure to effect a continuation, date-down, or bring-down search covering the period from the date and time of the commitment to the date and time of the recording, in order to inform the parties of those intervening matters found of record, if any, and to obtain proper instructions from the parties to the transaction on how to dispose or handle such matters.
Title insurance companies are sometimes asked to insure a title as of the time of the closing of the transaction instead of the time of the recording of the instruments, and thus, to give coverage against intervening matters found of record between closing and recording.
This kind of coverage is known as gap insurance. The gap may consist of minutes, hours, or days. In some locations insuring the gap is the customary practice; in some others, it is unknown.
Considerations In Regard To Gap Insurance
- Gap insurance should be avoided, whenever possible, because of the additional amount of liability to be assumed by the Company.
- The possible time length of the gap to be insured must be determined in advance.
- The validity of the reasons for the gap insurance request must be fully established.
- Proper title indemnity in favor of the Company must be executed by the seller(s) or mortgagor(s) of the property in order to protect the Company against any possible intervening matters found of record.