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Basic Manual of Title Insurance, Section IV (continued)

Title Manual Main Index | Section IV Index

Includes Procedural Rule P-36 | P-37 | P-38 | P-39 | P-40 | P-41 | P-42 | P-43

P-36. Arbitration Provisions

A Company shall notify its proposed insured under a Loan Policy (Form T-2 or T-2R) or an Owner's Policy (Form T-1) of the insured's right to delete the arbitration provision [§13 of the Conditions and Stipulations of the Loan and §14 of the Conditions and Stipulations of the Owner's Policy (Form T-1) from the policy at no additional charge to the insured.

  1. A Company shall, upon specific request of the proposed insured under a Loan Policy (Form T-2 or T-2R), delete Section 13 of the Conditions relating to arbitration from that policy by

    1. Typing in Schedule B of the policy the following language:
      "Section 13 of the Conditions of this Policy is hereby deleted."

    2. Selecting the appropriate option in Schedule A of the policy to "delete Section 13."

  2. A Company shall, upon specific request of the proposed insured under an Owner's Policy (Form T-1), delete Section 14 of the Conditions relating to arbitration from that policy by typing in Schedule B of the policy the following language:
    "Section 14 of the Conditions of this Policy is hereby deleted."

  3. If a Company does not issue a commitment prior to issuance of the Owner's Policy (Form T-1) or Loan Policy (Form T-2 or T-2R), it shall provide the promulgated Deletion of Arbitration form to the insured before issuance of the policy or shall delete the arbitration provision as provided above.

Any request made under this procedural rule must be made prior to the issuance of the policy.

The Deletion of Arbitration Provision form shall read as follows:


DELETION OF ARBITRATION PROVISION

(Not applicable to the Texas Residential Owner Policy)


Arbitration is a common form of alternative dispute resolution. It can be a quicker and cheaper means to settle a dispute with your Title Insurance Company. However, if you agree to arbitrate, you give up your right to take the Title Company to court and your rights to discovery of evidence may be limited in the arbitration process. In addition, you cannot usually appeal an arbitrator's award.

Your policy contains an arbitration provision (shown below). It allows you or the Company to require arbitration if the amount of insurance is $2,000,000 or less. If you want to retain your right to sue the Company in case of a dispute over a claim, you must request deletion of the arbitration provision before the policy is issued. You can do this by signing this form and returning it to the Company at or before the closing of your real estate transaction or by writing to the Company.

The arbitration provision in the Policy is as follows:

"Either the Company or the Insured may demand that the claim or controversy shall be submitted to arbitration pursuant to the Title Insurance Arbitration Rules of the American Land Title Association ("Rules"). Except as provided in the Rules, there shall be no joinder or consolidation with claims or controversies of other persons. Arbitrable matters may include, but are not limited to, any controversy or claim between the Company and the Insured arising out of or relating to this policy, any service in connection with its issuance or the breach of a policy provision, or to any other controversy or claim arising out of the transaction giving rise to this policy. All arbitrable matters when the Amount of Insurance is $2,000,000 or less shall be arbitrated at the option of either the Company or the Insured, unless the Insured is an individual person (as distinguished from an Entity). All arbitrable matters when the Amount of Insurance is in excess of $2,000,000 shall be arbitrated only when agreed to by both the Company and the Insured. Arbitration pursuant to this policy and under the Rules shall be binding upon the parties. Judgment upon the award rendered by the Arbitrator(s) may be entered in any court of competent jurisdiction."

_________________________ ____________________
SIGNATURE DATE


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P-37. Lack of a Right of Access

If the company is not satisfied as to the insurability of access to and from the land, the title to which or a lien thereon is to insured, it may make the following exceptions to the insuring form:

  1. To the Owner Policy (Form T-1): "Lack of a right of access to and from the Land. Covered Risk number 4 is hereby deleted."

  2. To the Mortgagee Policy: "Lack of a right of access to and from the Land. Covered Risk number 4 is hereby deleted."

  3. To the Residential Owner Policy (Form T-1R): "Lack of a right of access to and from the land. Company deletes the insurance of access under Covered Title Risks."


Title Manual Main Index | Section IV Index

P-38. Residential Owner Policy of Title Insurance - One-to-Four Family Residences

A Company shall only issue a Residential Owner Policy of Title Insurance-One-to-Four Family Residences (Form T-1R) on property that is Residential Real Property, and the insured is a natural person(s) at the date the policy is issued. In the application of this rule it is permissible to issue a Residential Owner Policy of Title Insurance (Form T-1R) prior to the construction of improvements provided that the Residential Owner Policy of Title Insurance (Form T-1R) is issued to a natural person, in accordance with P-8.a. In all other cases, the Company shall issue the Owner Policy (Form T-1) when issuing a policy to an owner.

(See definition in Rule P-1.u)


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P-39. Express Insurance

  1. Encroachments. If Company amends its Area and Boundary Exception, pursuant to Procedural Rule P-2, it may except, pursuant to Procedural Rule P-5, to those matters shown on the survey that it deems to cause a possible defect in title. The Company may, if it deems the risk insurable as to encroachments, add the following language after the exception:

    "Company insures the insured against loss, if any, sustained by the insured under the terms of this Policy by reason of a final, non-appealable judgment of a court of competent jurisdiction that orders the removal of this improvement because it encroaches over or into ____________________. Company agrees to provide defense to the insured in accordance with the terms of this Policy if suit is brought against the insured to require the removal of this improvement because it encroaches as herein stated."

  2. Possible Defects. If Company determines that a title matter may cause a possible defect in title, it may except, pursuant to Procedural Rule P-5, to the matter in Schedule B, and, if it determines that the risk is insurable, it may add the following language after the exception:

    "Company insures the Insured against loss, if any, sustained by the insured under the terms of this Policy by reason of a final, non-appealable judgment of a court of competent jurisdiction that divests the Insured of its interest as Insured because of this right, claim, or interest. Company agrees to provide defense to the Insured in accordance with the terms of this Policy if suit is brought against the Insured to divest the Insured of its interests as Insured because of this right, claim, or interest."

    or


    "Company insures the Insured against loss, if any, sustained by the insured under the terms of this Policy by reason of the enforcement of said rights as to the land. Company agrees to provide defense to the Insured in accordance with the terms of this Policy if suit is brought against the Insured to enforce said rights as to the land."

  3. Liens.

    1. If Company intends to provide insurance against an enforceable lien, it shall comply with P-11. If Company then determines to issue without exception to lien pursuant to P-11b(1), (4), (5), (6), (7), it may show the lien in Schedule B of the Policy and then may state:

      "Exception No. ________ is hereby deleted. Company provides insurance as to said lien in accordance with the terms of this Policy."

    2. If Company then determines to issue with exception to the lien after otherwise complying with P-11, it may, pursuant to Procedural Rule P-5, show the lien in Schedule B and may state one of the following:

      1. If the Lien may only be foreclosed judicially:

        "Company insures the Insured against loss, if any, sustained by the insured under the terms of this Policy by reason of a final, non-appealable judgment of a court of competent jurisdiction that orders foreclosure of said lien on the land. Company agrees to provide defense to the Insured in accordance with the terms of this Policy if suit is brought against the insured to foreclose said lien on the land."

        or

      2. If the lien may be foreclosed nonjudicially:

        "Company insures the Insured against loss, if any, sustained by the insured under the terms of this Policy by reason of a foreclosure of said lien on the land. Company agrees to provide defense to the Insured in accordance with the terms of this Policy if suit is brought against the insured to foreclose said lien on the land and to take action in accordance with the terms of the policy if the holder of the lien commences a foreclosure action based on said lien."

    The provisions of this Rule shall not modify or diminish the requirements of P-11.


Title Manual Main Index | Section IV Index

P-40. Standards for Reserve Setting and Reviewing

Upon acceptance or conditional acceptance of a claim under a title insurance policy, the title insurer must:

  1. set an initial reserve within thirty (30) days.

  2. base the reserve required in (a) on an accurate estimate, in the best judgment of the Company's personnel, of the costs expected to be paid to the insured or other parties in the settlement and processing of the claim. A nominal initial reserve may be used only when opening a file without adequate information to make an appropriate assessment of the risk.

  3. when a nominal initial reserve has been set in accordance with (b) above, change the reserve to reflect the risk as soon as sufficient information has been received.

  4. review each reserve on a regular basis (at least quarterly) and adjust the reserves as warranted by new information or changed circumstances. It is equally important that a claim not be over-reserved or under-reserved.

  5. maintain written records of the initial reserve and any change to the reserve, including the reasons for any change in the reserve, in the file for review by the Commissioner for a period of four (4) years.


Title Manual Main Index | Section IV Index

P-41. Rule Number Reserved for Future Use.


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P-42. Rule Number Reserved for Future Use.


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P-43. Limited Pre-Foreclosure Policy (T-98) and Limited Pre-Foreclosure Policy Downdate Endorsement (T-99)

  1. Limited Pre-Foreclosure Policy (Form T-98)

    All the following requirements (items 1 through 11) apply to issuance of a Limited Pre-Foreclosure Policy:

    1. The premium prescribed in Rate Rule R-26 must be collected prior to issuance of the Limited Pre-Foreclosure Policy.

    2. The indebtedness secured by the Foreclosing Mortgage must be in default at the time of application for, and issuance of, the Limited Pre-Foreclosure Policy. The term "Foreclosing Mortgage" means the deed of trust, or other lien, specifically described under the section entitled Foreclosing Mortgage in the Limited Pre-Foreclosure Policy Combined Schedule (Form T-98).

    3. The Limited Pre-Foreclosure Policy may not be issued if the Foreclosing Mortgage is not insured under a Mortgagee Policy of Title Insurance on the date that the Limited Pre-Foreclosure Policy is issued. If a Mortgagee Policy of Title Insurance is issued for the purposes of qualifying the Foreclosing Mortgage for a Limited Pre-Foreclosure Policy, the Date of Policy of the Mortgagee Policy of Title Insurance shall be the date of recording of the Foreclosing Mortgage.

    4. A Commitment for Title Insurance may not be issued prior to, or in connection with, the issuance of a Limited Pre-Foreclosure Policy or Limited Pre-Foreclosure Policy Downdate Endorsement.

    5. The Name of Insured in the Limited Pre-Foreclosure Policy may include one or more of the following: (i) a named mortgagee or mortgagees; (ii) an assignee or assignees of the named mortgagee or assignee; (iii) a loan servicer(s); (iv) a trustee(s); and/or, (v) an attorney(ies).

    6. The Amount of Insurance for the Limited Pre-Foreclosure Policy must be the least of: (i) the unpaid balance of the indebtedness secured by the Foreclosing Mortgage; or, (ii) the value of the land encumbered by the Foreclosing Mortgage. If the proposed insured does not provide the Company with written evidence of the value of the land, the Amount of Insurance shall be the unpaid balance of the indebtedness secured by the Foreclosing Mortgage.

    7. Express insurance pursuant to Procedural Rule P-39 shall not be available for the Limited Pre-Foreclosure Policy.

    8. The arbitration clause may not be deleted unless all the requirements of this section are satisfied. The Company shall delete the arbitration provisions of the Limited Pre-Foreclosure Policy {i.e. Section 9 of the Conditions and Stipulations} if the proposed Insured requests, in writing, the deletion of the arbitration provisions on or before two months after the Date of Policy of the Limited Pre-Foreclosure Policy. The arbitration clause may be deleted by following these instructions:

      a) The language to be used to delete the arbitration clause {hereinafter the "Deletion Language"} under P-43.A.(8) is as follows:

      "Item 9 of the Conditions and Stipulations is hereby deleted."

      b) The arbitration clause may be deleted by: (i) inserting the Deletion Language in the Exceptions From Coverage of the Limited Pre-Foreclosure Policy Combined Schedule; or, (ii) including the Deletion Language in a T-3 endorsement; or, (iii) inserting the Deletion Language in a Limited Pre-Foreclosure Policy Downdate Endorsement issued in accordance with Procedural Rule P-43.B.

    9. As required by Article 9.38(c) of the Texas Insurance Code, a Schedule "D", which complies with Procedural Rule P-21, shall be attached to the Limited Pre-Foreclosure Policy. Provided, however, in the case of Schedule "D" to the Limited Pre-Foreclosure Policy, Procedural Rule P-21.3, is amended to read as follows:

      "As to each Limited Pre-Foreclosure Policy, the following additional language shall be included in each Schedule D, together with all required information included within the blanks contained below:

      Of the total premium shown on the Limited Pre-Foreclosure Policy Combined Schedule, $________ (or %) will be paid to the policy issuing Title Insurance Company; $________ (or %) will be retained by the issuing Title Insurance Agent; and the remainder of the estimated premium will be paid to other parties as follows:


      Amount To Whom For Services
      $______ (or %) ____ __________________ _________________
      $______ (or %) ____ __________________ _________________
      $______ (or %) ____ __________________ _________________

      Each Title Insurance Company and each Title Insurance Agent shall, prior to usage, file its proposed Limited Pre-Foreclosure Policy Schedule D form with the Texas Department of Insurance; in like manner each Title Insurance Company and Title Insurance Agent shall file all Amended Limited Pre-Foreclosure Policy Schedule D forms with the Texas Department of Insurance prior to usage.

      Each Title Insurance Company and Title Insurance Agent may, in preparing its Limited Pre-Foreclosure Policy Schedule D, use whatever reasonable format it elects, provided that such format does not alter or delete the furnishing of the disclosures hereby required. It is the express intent of this paragraph to enable usage of electronic equipment in preparation of the required Schedule D."

    10. No proforma or specimen Limited Pre-Foreclosure Policy Combined Schedule may be issued.

    11. A. T-3 Correction Endorsement may be issued to delete errors or erroneous exceptions contained in the Limited Pre-Foreclosure Policy Combined Schedule. The requirements of Section 2, Paragraph IV, of the Basic Manual, entitled "Correction of Policy or Binder" shall apply to a Correction Endorsement for a Limited Pre-Foreclosure Policy Combined Schedule.

      B. Limited Pre-Foreclosure Policy Downdate Endorsement (Form T-99)

      All the following requirements apply to issuance of a Limited Pre-Foreclosure Policy Downdate Endorsement:

      1. The Limited Pre-Foreclosure Policy may be endorsed no more than four times pursuant to issuance of a Limited Pre-Foreclosure Policy Downdate Endorsement.

      2. A Pre-Foreclosure Policy Downdate Endorsement may not be issued later than 24 months subsequent to the first {initial} issued Limited Pre-Foreclosure Policy "Date of Policy".

      3. Express insurance under Procedural Rule P-39 shall not be available for the Limited Pre-Foreclosure Policy Downdate.

      4. A commitment for title insurance may not be issued prior to, or in connection with, the issuance of a Limited Pre-Foreclosure Policy Downdate Endorsement.

      5. The indebtedness secured by the foreclosing mortgage must be in default at the time of application for, and issuance of, the Limited Pre-Foreclosure Policy Downdate Endorsement.

Continue to P-44. Equity Loan Mortgage Endorsement

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Last updated: 11/03/2015

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