Ask the Underwriter

By: Robin Watts, Maine State Counsel

Q: I’m issuing a 2021 ALTA Loan Policy and the lender has requested a Deletion of Arbitration Condition Endorsement. What is the Deletion of Arbitration Condition Endorsement, and does it make a difference whether I’m issuing the 2021 Loan Policy jacket or the 2006 Loan Policy Jacket?

A: The Deletion of Arbitration Condition Endorsement is a First American Endorsement that may be used to delete the Policy Condition relating to arbitration. There is version of the endorsement that is used with an ALTA Loan Policy and a version of the endorsement that is used with an ALTA Owner Policy. It is important to select the correct version of the endorsement because the paragraph number containing the Arbitration Condition differs between the ALTA Loan Policy and the ALTA Owner Policy. In addition, the new 2021 ALTA Loan and Owner Policies contain different paragraph numbers for the Arbitration Condition than the 2006 ALTA Loan and Owner Policy. If you are asked to issue the Deletion of Arbitration Condition Endorsement with a 2021 ALTA Loan or Owner Policy, verify that you have the most recent versions of the endorsements, as these endorsements have been revised to reflect the appropriate paragraph numbers for the Arbitration Condition.

Q: I recently started using the 2021 ALTA Loan and Owner Policies and noticed that my software does not print a general exception on Schedule B, Part I for real estate tax and municipal assessments which become due and payable subsequent to the Date of Policy. Is it necessary to add this type of tax exception to Schedule B of these policies?

A: No. So long as the real estate taxes and municipal assessments are paid current through the date of closing, it is not necessary to include a Schedule B, Part I exception for real estate taxes and municipal assessments which become due and payable subsequent to the Date of Policy. The 2021 ALTA Loan and Owner Policies contain Covered Risks which insure against loss or damage resulting from the lien of real estate taxes or assessments imposed on the Title by a governmental authority due or payable but unpaid at Date of Policy. In addition, the Exclusions from Coverage in the policies exclude liens relating to real estate taxes and municipal assessments that become due and payable after the Date of Policy.

Q: I recently issued a 2021 ALTA Owner Policy to two co-tenants, Mary Malloy and Jonathan Jones. Jonathan plans to convey his interest in the insured land to Mary. Will Mary be insured under the 2021 ALTA Owner Policy for the interest acquired from Jonathan?

A: Yes. The definition of Insured in the 2021 ALTA Owner Policy contains a new provision in Paragraph 1.g.i.(e)(5) of the Conditions. The definition is expanded to include as a successor insured “the grantee of an Insured under a deed or other instrument transferring the Title, if the grantee is … another Insured named in Item 1 of Schedule A.” Therefore, as a grantee from Jonathan, Mary, who is already an Insured under the policy, will succeed to Jonathan’s interest as an Insured under the policy as well. This coverage is automatic, so there is no need to amend the policy with an endorsement.

The information contained in this document was prepared by First American Title Insurance Company (“FATICO”) for informational purposes only and does not constitute legal advice. FATICO is not a law firm and this information is not intended to be legal advice. Readers should not act upon this without seeking advice from professional advisers.

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