Determining continuity of coverage requires an examination of the terms of the policy.
The 2006 Standard ALTA Owner policy (in Definition of Terms) defines Insured to include the Insured named in Schedule A of the policy and:
- Successors to the Title of the Insured by operation of law as distinguished from purchase, including heirs, devisees, survivors, personal representatives, or next of kin;
- Successor to an Insured by dissolution, merger, consolidation, distribution or reorganization;
- Successors to an Insured by its conversion to another kind of Entity;
- A grantee of an Insured under a deed delivered without payment of actual valuable consideration conveying the Title:
- if the stock, shares, memberships, or other equity interests of the grantee are wholly-Owned by the Named insured.
- If the grantee wholly owns the named insured.
- If the grantee is a trustee or beneficiary of a trust created by a written instrument established by the Insured named in Schedule A for estate planning purposes.
An Expanded Protection Owner Policy (see Conditions, Continuation of Coverage) insures the Insured named in Schedule A of the policy and:
- Anyone who inherits Your title because of your death;
- Your spouse who receives Your Title through divorce;
- Trustee or successor trustee of a Trust to whom You transfer title;
- The beneficiaries of Your Trust upon Your death;
- Anyone who receives Your Title by a transfer effective on Your death as authorized by law
Grantee’s perspective: Except for the limited conveyances described above, a grantee named in a conveyance from an Insured will not have title insurance coverage.
- Transfer by Warranty Deed: The grantor’s owner policy remains in full force and effect. See the foregoing to see if the grantee is a successor Insured.
- Transfer by Quit Claim: A conveyance by QC deed may terminate the grantor’s OP coverage on the theory that the seller cannot be sued for breach of warranty or unmarketable title. However, as discussed above, under certain circumstances, the grantee may be a successor Insured.
- Specific Situations and exceptions to the termination of coverage in grantee(s)
- Joint Tenancy: Property is owned by Insured joint tenants, A & B. A later conveys to B by QC deed. As explained above, after transfer, A may have no insurance coverage. Though B’s original one-half interest is still insured, B is not insured for the one-half interest conveyed by A. If B wants coverage for the new one-half interest conveyed by A’s QC deed, then B will need to get an endorsement to the policy. If A wants to keep coverage in place, the better practice is for A to convey by WD – though B will still be insured for only a 1/2 interest unless B has the policy endorsed.
- Tenancy by the Entirety: If the parties are married and Insured Owner #1 conveys to Insured Owner #2 by QC then #2 still has 100% coverage due of the nature of the tenancy. As explained above, #1’s conveyance by QC deed may terminate #1’s coverage. If #1 conveys by WD then #1 will still be insured under the policy.
- Transfer to entity: (1) A conveyance by QC to an entity (LLC, LLP, corporation, trust, etc.) may operate to terminate the grantor’s coverage and, except as provided above, the grantee will not be an Insured under the seller’s policy; (2) a conveyance by WD will not terminate the grantor’s OP coverage but, except as provided above, the grantee will not be an Insured under the seller’s policy.
Change Endorsement must be issued if a policy requires a corrected after it was issued. Provide the VATC office with the policy number and desired change to be made. We will provide you and/or the lender with the endorsement. Under most circumstances, an endorsement fee is not required.