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A Synopsis of the 2006 ALTA Owner's and Loan Policies, Adobted 06/17/2006

 

  The American Land Title Association adopted a new Owner’s Policy and a new Loan Policy on June 17, 2006. These new 2006 policies are commonly referred to as the ALTA Owner’s Policy (6/17/06) and the ALTA Loan Policy (06/17/06). Prior to the adoption of 2006 policies, the standard ALTA Owner’s Policy and ALTA Loan Policy used in most states were those adopted by the ALTA in 1987. An additional Exclusion from Coverage was added to the 1987 forms in 1990 and that Exclusion was amended in 1992. We commonly refer to the current modified 1987 forms as the ALTA Owner’s Policy (10-17-92) and the ALTA Loan Policy (10-17-92). However, with the exception of the 1990 addition and the 1992 modification, the 1987 forms have remained unchanged until the 2006 versions. The 1987 form along with its 1990 and 1992 modifications, will be referred to in this article as the “1992” forms. The 2006 forms will be referred to as the “2006” forms. For copies of the 2006 forms and other helpful material, you may visit the ALTA website at http://www.alta.org/forms. As with the 1992 policies, there are 5 basic parts to the 2006 Owner’s Policy and the 2006 Loan Policy: 1.      Covered Risks (Insuring Provisions or Insuring Clauses in the 1992 form)2.      Exclusions From Coverage3.      Conditions (Conditions and Stipulations in the 1992 form)4.      Schedule A – The so called “Who, What When and How Much we are insuring”5.      Schedule B – Exceptions to Coverage Each of the above will be addressed separately below. 

Covered Risks The 1992 forms have 4 Insuring Provisions in the Owner’s Policy and 8 Insuring Provisions in the Loan Policy. The 2006 forms have 10 Covered Risks in the Owner’s Policy and 14 Covered Risks in the Loan Policy. While this may seem like a great increase in coverage, and there is additional coverage granted, some of the format changes merely clarify the previously granted coverages. The first 8 Covered Risks of the 2006 Owner’s Policy and 2006 Loan Policy are identical. Covered Risk 1 of the 2006 policies is essentially identical to Insuring Provision 1 of the 1992 policies. This Covered Risk relates to matters involving Title being vested other than as stated in Schedule A. Covered Risk 2 of the 2006 policies is essentially identical to Insuring Provision 2 of the 1992 policies. This Covered Risk relates defects in, liens or encumbrances on the Title. Although more verbose than Insuring Provision 2, Covered Risk 2 basically clarifies – but does not limit - the types of matters which are considered defects in or liens or encumbrances on the Title. Covered Risk 3 of the 2006 policies is essentially identical to Insuring Provision 3 of the 1992 policies. This Covered Risk relates to unmarketable Title. Covered Risk 4 of the 2006 policies is essentially identical to Insuring Provision 4 of the 1992 policies. This Covered Risk relates to access to the insured Land. Covered Risk 5-8 essentially extract the exceptions found in Exclusions From Coverage 1 and 2 of the 1992 forms and now make those exceptions to the Exclusions part of the Covered Risks. For example, Exclusion From Coverage 1(a) of the 1992 policies excluded from coverage certain zoning matters UNLESS a notice of an enforcement or violation of such was recorded in the public records as of the Date of Policy. Covered Risk 5 of the 2006 policies takes this exception and makes it an affirmative statement that certain zoning matters are covered if a notice of a violation is recorded. It is a different approach to providing the same coverage. Since this coverage is now provided in the Covered Risks, the exceptions to the Exclusions From Coverage found in the 1992 policies are no longer found in the Exclusions From Coverage of the 2006 policies. The following will connect the 1992 Exclusion From Coverage provision to the 2006 Covered Risk 5-8. Covered Risk 5 takes the exception to certain zoning matters found in the 1992 Exclusion 1(a) and makes it a Covered Risk. Covered Risk 6 takes the exception to governmental police powers found in the 1992 Exclusion 1(b) and makes it a Covered Risk. Covered Risk 7 takes the first exception to eminent domain found in the 1992 Exclusion 2 and makes it a Covered Risk. Covered Risk 8 takes the second exception to eminent domain found in the 1992 Exclusion 2 and makes it a Covered Risk. Covered Risk 9 of the 2006 Owner’s Policy and Covered Risk 13 of the 2006 Loan Policy are essentially the same. Once again, the drafters of the 2006 forms have taken an exception found in an Exclusion From Coverage and made it a Covered Risk. In this case, we are talking about the exceptions found in the Creditors’ Rights Exclusion found in the 1992 Owner’s Policy (Exclusion 4) and the 1992 Loan Policy (Exclusion 7). These Covered Risks provide coverage for title being vested other than as stated in Schedule A either (i) due to a court order providing a transaction PRIOR to our vesting transaction being a fraudulent or preferential transfer, or (ii) the instrument vesting title constitutes a preferential or fraudulent transfer because it was (a) not timely filed or (b) fails to impart notice to a purchaser for value or to a judgment or lien creditor. Neither the 2006 nor the 1992 policies insure the Insured against creditors’ rights issues related to the Insured’s failure to be a bona fide purchaser for value.  Covered Risk 10 of the 2006 Owner’s Policy is essentially identical to Covered Risk 14 of the 2006 Loan Policy. These provisions provide additional, post-policy coverage not previously given under the 1992 forms. We are now finished with a discussion of the 10 Covered Risks found in the 2006 Owner’s Policy as well as with those Covered Risks in the 2006 Loan Policy which are identical to or similar to the Covered Risks in the 2006 Loan Policy. The remaining Covered Risks apply only to the 2006 Loan Policy. Covered Risks 9-12 of the 2006 Loan Policy are essentially similar to Insuring Provisions 5-8 of the 1992 Loan Policy. The differences are primarily clarifications. These provisions essentially address coverage issues relates to the validity, priority and enforceability of the insured instrument. Covered Risk 9 of the 2006 Loan Policy is essentially the same as Insuring Provision 5 of the 1992 Loan Policy. This Covered Risk relates to the invalidity or unenforceability of the insured mortgage. Covered Risk 10 of the 2006 Loan Policy is essentially the same as Insuring Provision 6 of the 1992 Loan Policy. This Covered Risk relates to the priority of the insured mortgage over liens or encumbrances. Covered Risk 11 of the 2006 Loan Policy is essentially the same as Insuring Provision 7 of the 1992 Loan Policy. This Covered Risk relates to lack of priority of the insured mortgage over mechanics’ liens when the work was either contracted for or commenced (a) prior to Date of Policy or (b) subsequent to Date of Policy if the work is financed by the insured mortgage and either funded or obligated to be funded as of Date of Policy. Covered Risk 12 of the 2006 Loan Policy is essentially the same as Insuring Provision 8 of the 1992 Loan Policy. This Covered Risk relates to the invalidity or unenforceability of any assignment of the insured mortgage shown in Schedule A. 

Exclusions from Coverage  Exclusions 1 and 2 of the 2006 Owner’s Policy and 2006 Loan Policy are essentially the same as Exclusions 1 and 2 in the 1992 Owner’s Policy and the 1992 Loan Policy. However, as discussed above, the exceptions to the Exclusions have been deleted in the 2006 forms and added as Covered Risks 5-8. Exclusion 1 relates to zoning and governmental police powers. Exclusion 2 relates to eminent domain. Exclusion 3 of the 2006 Owner’s Policy and 2006 Loan Policy are essentially the same as Exclusion 3 of the 1992 Owner’s Policy and 1992 Loan Policy. Exclusion 3 relates to defects, liens encumbrance, averse claims or other matters (a) created suffered, assumed or agreed to by the Insured; (b) not known to the Company, not recorded in the Public records at Date of Policy, but known to the Insured Claimant and not disclosed in writing to the Company by the Insured Claimant prior to the date the Insured claimant became an Insured under the policy; (c) resulting in no loss or damage to the Insured; (d) attaching or created subsequent to Date of Policy; or (e) resulting in a loss which would not have been sustained if the Insured Claimant had paid value for the Title. Exclusion 4 of the 2006 Owner’s Policy is essentially the same as Exclusion 4 of the 1992 Owner’s Policy. This Exclusion relates to creditors’ rights issues. However, as discussed above, the exceptions to the Exclusion have been deleted in the 2006 Owner’s Policy and added as Covered Risk 9 in the 2006 Owner’s Policy. Exclusion 5 of the 2006 Owner’s Policy is new. It is an Exclusion for taxes imposed in the gap period, if any, between the Date of Policy and the date of recording of the vesting instruments. This Exclusion also appears as a new Exclusion 7 in the 2006 Loan Policy. The remaining Exclusions only appear in the 2006 Loan Policy. Exclusion 4 of the 2006 Loan Policy is essentially the same as Exclusion 4 of the 1992 Loan Policy. It relates to doing business laws. Exclusion 5 of the 2006 Loan Policy is essentially the same as Exclusion 5 of the 1992 Loan Policy. It relates to usury, consumer credit protection and truth in lending laws. Exclusion 6 of the 2006 Loan Policy is essentially the same as Exclusion 7 of the 1992 Loan Policy. It relates to creditors’ rights issues. However, as discussed above, the exceptions to the Exclusion have been deleted in the 2006 Loan Policy and added as Covered Risk 13 in the 2006 Loan Policy. Exclusion 6 in the 1992 Loan Policy has been deleted. The drafters of the 2006 Loan Policy believe this Exclusion was unnecessary due to the “post policy” exclusion and the language of Covered Risk 11 which is limited to work contracted for or commenced either (a) prior to Date of Policy or (b) subsequent to Date of Policy if the work is financed by the insured mortgage and either funded or obligated to be funded as of Date of Policy. Exclusion 7 of the 2006 Loan Policy is new. It is an Exclusion for taxes imposed in the gap period, if any, between the Date of Policy and the date of recording of the vesting instruments. This Exclusion also appears as a new Exclusion 5 in the 2006 Owner’s Policy. 

Conditions  The discussion of the Conditions section of the 2006 owner’s and loan policies will be done separately. The 1992 policies named this section “Conditions and Stipulations”. The words “and Stipulations” were dropped because they were viewed as not adding anything of value. 

2006 Owner’s Policy - Conditions Condition 1 has been greatly modified. This definition sections of the 2006 Owner’s Policy has been expanded in an attempt to clarify the coverages provided. The definitions in many cases expand liability to include matters the policy was silent on before. The changes are as follows: 

  • (c) “Entity” – a new term added to extend coverage to more Insureds.

      ·  (d) “Insured” – includes same parties as defined in the 1992 form. However, it has been expanded to include a Grantee of an Insured under a deed delivered without consideration (i) if the Grantee is wholly owned by the insured (ii) if the grantee wholly owns the named insured, (iii) if the Grantee is wholly owns by an affiliated entity of the named insured provided the affiliated entity and the named Insured are both wholly owned by the same party, or (iv) if the grantee is a trustee or beneficiary of a trust created by a written instrument established by the Insured for estate planning purposes.

     ·    (k) “Unmarketable Title” – the language was “cleaned up” by deleting “not excluded or excepted from coverage” since all coverage is subject tot eh Exclusions and Exceptions. It was also broadened to include lessees of lenders on the Title. Condition 2 of the 2006 Owner’s Policy and Condition 2 of the 1992 Owner’s Policy are essentially similar. The language of the 2006 policy has been cleaned up, but the substance remains the same. Condition 3 of the 2006 Owner’s Policy and Condition 3 of the 1992 Owner’s Policy are essentially similar. The language has been cleaned up, in part, due to defined terms in the 2006 policy. Also, the reference to Subsection 5(a) in the 2006 policy, instead of Subsection 4(a), is a result of reordering of certain Sections in the 2006 policy. Condition 4 of the 2006 Owner’s Policy and Condition 5 of the 1992 Owner’s Policy are essentially similar. The substance of Section 4 of the 2006 policy was taken from a portion of Section 5 of the 1992 policy. The 2006 policy Proof of Loss Section has been shortened and is much more friendly to the Insured Claimant. The burden on the Insured Claimant in the 1992 policy requiring a proof of loss to automatically be given no longer exists in the 2006 policy. The 90 day period for providing the proof of loss has also disappeared. Instead, the Insurer must first attempt to determine the loss and, if it is unable to do so, may require the Insured Claimant to furnish a signed proof of loss. However, there is no requirement that the proof of loss be sworn to by the Insured Claimant. The remedy stated in the 1992 policy for failing to provide a proof of loss was removed. However, implicit in the 2006 policy Section 4 is the right of the Insurer to withh1992 payment under the policy until the Insured Claimant furnishes a signed proof of loss if requested to do so by the Insurer. Condition 5 of the 2006 Owner’s Policy and Condition 4 (a), (b) and (c) of the 1992 Owner’s Policy are essentially similar. The language of the 2006 policy has been simplified by utilizing defined terms. The change in the reference to Section 7 in the 2006 policy as opposed to Section 6 in the 1992 policy is due to reordering of certain Sections in the 2006 policy.  Condition 6 of the 2006 Owner’s Policy is similar to Conditions 4(d) and 5 of the 1992 Owner’s Policy. Subsection 6(a) of the 2006 policy was taken from Subsection 4(d) of the 1992 policy. There is no substantive difference in the language of these two Subsections. Subsection 6(b) of the 2006 policy was taken from the second paragraph of Section 5 of the 1992 policy. Even though there are some language changes, in order to bring the policy language more current with this electronic world, there still is no substantive difference between the two referenced paragraphs. The reason for reordering Sections 4, 5 and 6 of the 2006 policy was because the sequence of events and subject matter is more logical.  Condition 7 of the 2006 Owner’s Policy and Condition 6 of the 1992 Owner’s Policy are essentially similar. There are language changes in the 2006 policy to make this Section easier to read. The last paragraph of Subsection 7(a) of the 2006 policy does not require the policy to be surrendered to the Company for cancellation as is required in Subsection 6(a)(ii) of the 1992 policy. This requirement was deleted because under current claims handling practices title insurers rarely require the policy to be surrendered. Therefore, it was viewed as being unnecessary. Condition 8 of the 2006 Owner’s Policy and Condition 7 of the 1992 Owner’s Policy are essentially similar. There are language changes in Section 8 of the 2006 policy because of defined terms not defined in the 1992 policy. Subsection 8(b) of the 2006 policy expands coverage in two ways. The first expansion is a 10% increase in the Amount of Insurance under Subsection 8(b)(i) in the event the Insurer pursues its rights under Section 5 to defend or prosecute and is unsuccessful in establishing the Title as insured. The second expansion of coverage under Subsection 8(b)(ii) allows the Insured Claimant the choice of determining the loss or damage either as of the date the claim was made or the date it is settled and paid. These are significant added coverages that do not exist in the 1992 policy. Additionally, the co-insurance provision contained in Subsection 7(b) of the 1992 policy has been eliminated in the 2006 policy.  Condition 9 of the 2006 Owner’s Policy and Condition 9 of the 1992 Owner’s Policy are essentially similar. Same coverage. Even though there are minor language changes for easier readablility, substantively Section 9 of these two policies is the same. Condition 10 of the 2006 Owner’s Policy and Condition 10 of the 1992 Owner’s Policy are essentially similar. Same coverage. Even though there are minor language changes for easier readablility, substantively Section 10 of these two policies is the same. Condition 11 of the 2006 Owner’s Policy and Condition 11 of the 1992 Owner’s Policy are essentially similar. Same coverage. Even though there are minor language changes for easier readablility, substantively Section 11 of these two policies is the same. Condition 12 of the 2006 Owner’s Policy and Condition 12 of the 1992 Owner’s Policy are essentially similar. Same coverage. The first paragraph of Section 12 of the 1992 policy was deleted in the 2006 policy. This paragraph was deleted because the ALTA believes that in our current world of databases and electronic record keeping by Title Insurers, it was no longer necessary.  Condition 13 of the 2006 Owner’s Policy and Condition 13 of the 1992 Owner’s Policy are essentially similar. Same coverage. In the 2006 policy, the language of this Section has been modified in order to more clearly state the rights of the parties. The heading for the Section has been renamed. Subsection 13(a) of the 2006 policy makes it clear that when a claim has been settled the Insurer is automatically subrogated and entitled to the rights of the Insured Claimant without need of any further documentation. However, the Insurer has a right to request the Insured Claimant to execute documents to evidence the transfer of these rights. The Insured Claimant has an obligation to execute these requested documents. On the other hand, this Subsection makes it clear that if a payment of a claim does not make the Insured Claimant whole, the Insurer defers the exercises of its right to recover until such time as the Insured Claimant recovers its entire loss. The ALTA intended for Subsection 13(a) of the 1992 policy to be treated the same as stated in the 2006 policy but the language is not as clear. Subsection 13(b) of the 2006 policy contain a slight language modification, but the substance is identical to Subsection 13(b) of the 1992 policy. Condition 14 of the 2006 Owner’s Policy and Condition 14 of the 1992 Owner’s Policy are essentially similar. Depending upon whether you are pro-arbitration or against arbitration the changes made to Section 14 in the 2006 policy arguably add coverage (pro-arbitration) or decrease coverage (against arbitration). The reason one could adopt either of these views is because the thresh1992 below which either the Insured or the Insurer can force the other into arbitration has been increased from $1,000,000 in the 1992 policy to $2,000,000 in the 2006 policy. Notwithstanding the possibility of making either of these arguments it is the belief of the ALTA that the changes to this Section in the 2006 policy result in the same coverage in substance as exists in the 1992 policy. Section 14 of the 2006 policy does not contain the clause: "unless prohibited by applicable law..." as contained in the 1992 policy because that clause is unnecessary as a result of Section 16 (Severability) in both policies. Another change made to this Section in the 2006 policy is to have the claim or controversy arbitrated pursuant to the Title Insurance Aribitration Rules of the American Land Title Association ("Rules") as opposed to the American Arbitration Association. ALTA has selected the National Arbitration Forum to administer arbitration proceedings pursuant to the Rules. The 2006 policy Arbitration Section makes it clear that, except as provided in the Rules, there can be no joinder or consolidation with claims or controversies of other parties. The second paragraph of Section 14 of the 1992 policy, which states that: "the laws of the situs of the land shall apply to an arbitration..." has been deleted in the 2006 policy because that same provision is included in the Rules. The Rules are available at: http://www.alta.org/standards/arbitration/1.1.06.cfm Condition 15 of the 2006 Owner’s Policy and Condition 15 of the 1992 Owner’s Policy are essentially similar. The substance of Section 15 in the 2006 policy is the same as the 1992 policy even though there are some language changes in the 2006 policy which make it easier to read. Also, a Subsection 15(d) has been added to the 2006 policy to make it clear that any endorsement to the policy is made a part of the policy and is subject to its terms. This was done so that there is no question when an endorsement is attached that does not contain the usual boilerplate final paragraph incorporating all of the terms of the policy, that endorsement is nonetheless subject to all of the terms and provisions of the policy except as expressly modified by the endorsement.  Condition 16 of the 2006 Owner’s Policy and Condition 16 of the 1992 Owner’s Policy are essentially similar. Section 16 of the 2006 policy is substantively the same as the 1992 policy. However, the 2006 policy language has been modified to make it clear that the Severability provision applies even in situations where only part of a provision of the policy has been declared invalid or unenforceable. Condition 17 of the 2006 Owner’s Policy does not have a comparable Condition in the 1992 Owner’s Policy. The addition of this Section in the 2006 policy does not result in a reduction of coverage when comparing the 2006 policy to the 1992 policy. The first two paragraphs have been added to the 2006 policy to make it clear what law applies in interpreting and enforcing the terms of the policy. The last paragraph has been added to the 2006 policy because of increased cross-border transactions between border countries. Condition 15 of the 2006 Owner’s Policy and Condition 15 of the 1992 Owner’s Policy are essentially similar. The language has been cleaned up to fit with other language changes in the policy.  Condition 8 of the 1992 Owner’s Policy relating to Apportionment has been deleted. This gives the Insured the benefit of up to the total Amount of Insurance to be applied to provable loss for a claim on a single parcel even though the policy covers multiple parcels that are not used as a single site. This is similar protection afforded an Insured when a tie-in endorsement is issued on an Owner’s Policy. 

2006 Loan Policy – Conditions Condition 1 has been greatly modified. This definition sections of the 2006 Loan Policy has been expanded in an attempt to clarify the coverages provided. The definitions in many cases expand liability to include matters the policy was silent on before. The changes are as follows” 

  • (c)  “Entity” – a new term added to extend coverage to more Insureds.

      ·   (d) “Indebtedness” – a new term which expands the provisions of Condition 2(c) of the 1992 policy to include many more elements of indebtedness that one would expect to be included in the contractual provisions of the evidence of indebtedness secured by the Insured Mortgage. This definition specifically includes obligations secured by the Insured Mortgage evidenced by electronic means. This definition even includes advances disbursed subsequent to Date of Policy. However, the policy does not insure the validity, enforceability or priority of the Insured Mortgage as security for these advances unless they are covered under Covered Risk 11 as construction loan advances, but rather allows these advances to be included in the measure of loss. If coverage is desired for the validity, enforceability or priority of the lien of the Insured Mortgage as security for the advances, the Insured should require an ALTA 14 or 14.1 endorsement.

     ·  (d) “Insured” – includes same parties as defined in the 1992 policy. However, it has been expanded to include successors in ownership whether the successor owns the Indebteness on its own account or as a trustee or other fiduciary. Also, the 2006 policy specifically includes as an Insured the person or Entity who has "control" of the "transferable record" as these terms are defined by applicable transactions law.  This language was added to make it clear third parties such as MERS or any other entity performing similar services is also an Insured even though not specifically named when electronic mortgage transactions are involved. Additionally, the new policy includes within the definition of "Insured" certain specified successors and grantees in voluntary transfers not included in the 1992 policy. 

    ·   (m) “Unmarketable Title” – the language was “cleaned up” by deleting “not excluded or excepted from coverage” since all coverage is subject tot eh Exclusions and Exceptions. It was also broadened to include lessees of and lenders on the Title. Condition 2 of the 2006 Loan Policy and Condition 2 of the 1992 Loan Policy are essentially identical. The language of the 2006 policy has been changed because of other changes made in the policy and for easier reading. The substance of Subsection 2(a)(i) and (b) of the 1992 policy is included in Section 2 of the 2006 policy. Subsection 2(c) of the 1992 policy is unnecessary in Section 2 of the 2006 policy due to the definitions of Amount of Insurance and Indebtedness in Section 1 and because of Subsection 8(a)(iv) of the 2006 policy. Subsection 2(a)(ii) and (iii) of the 1992 policy are unnecessary in Section 2 of the 2006 policy because of the definition of Insured in the 2006 policy.  Condition 3 of the 2006 Loan Policy and Condition 3 of the 1992 Loan Policy are essentially identical. The language has been cleaned up, in part, due to defined terms in the 2006 policy. Also, the reference to Subsection 5(a) in the 2006 policy, instead of Subsection 4(a), is a result of reordering of certain Sections in the 2006 policy. Condition 4 of the 2006 Loan Policy and Condition 5 of the 1992 Loan Policy are essentially identical. The substance of Section 4 of the 2006 policy was taken from a portion of Section 5 of the 1992 policy. The 2006 policy Proof of Loss Section has been shortened and is much more friendly to the Insured Claimant. The burden on the Insured Claimant in the 1992 policy requiring a proof of loss to automatically be given no longer exists in the 2006 policy. The 90 day period for providing the proof of loss has also disappeared. Instead, the Insurer must first attempt to determine the loss and, if it is unable to do so, may require the Insured Claimant to furnish a signed proof of loss. However, there is no requirement that the proof of loss be sworn to by the Insured Claimant. The remedy stated in the 1992 policy for failing to provide a proof of loss was removed. However, implicit in the 2006 policy Section 4 is the right of the Insurer to withh1992 payment under the policy until the Insured Claimant furnishes a signed proof of loss if requested to do so by the Insurer. Condition 5 of the 2006 Loan Policy and Condition 4 (a) , (b) and (c) of the 1992 Loan Policy are essentially identical. The 2006 policy Section 5 is substantively the same as Subsection 4(a), (b) and (c) of the 1992 policy. The language of the 2006 policy has been simplified by utilizing defined terms. The change in the reference to Section 7 in the 2006 policy as opposed to Section 6 in the 1992 policy is due to reordering of certain Sections in the 2006 policy.  Condition 6 of the 2006 Loan Policy is essentially the same as Conditions 4(d) and (5) of the 1992 Loan Policy are essentially identical. This Section 6 of the 2006 policy does not have a single comparable Section in the 1992 policy. Subsection 6(a) of the 2006 policy was taken from Subsection 4(d) of the 1992 policy. There is no substantive difference in the language of these two Subsections. Subsection 6(b) of the 2006 policy was taken from the second paragraph of Section 5 of the 1992 policy. Even though there are some language changes, in order to bring the policy language more current with this electronic world, there still is no substantive difference between the two referenced paragraphs. The reason for reordering Sections 4, 5 and 6 of the 2006 policy was because the sequence of events and subject matter is more logical.  Condition 7 of the 2006 Loan Policy has added coverage no contained in the similar provision found in Condition 6 of the 1992 Loan Policy. There are language changes because of defined terms in the 2006 policy. For instance, the words "secured by the insured mortgage" following the word indebtedness in Subsection 6(a)(ii) of the 1992 policy does not appear in the 2006 policy because the term "Indebtedness" is defined in the 2006 policy as "the obligation secured by the Insured Mortgage..." thus eliminating the need for redundant language. Because Indebtedness is defined in the 2006 policy so broadly, there is additional coverage provided by this Section. The last paragraph of Subsection 7(a) of the 2006 policy does not require the policy to be surrendered to the Company for cancellation as is required in the last paragraph of 6(a) of the 1992 policy. This requirement was deleted because it was viewed as being unnecessary. If the Insurer purchases the Indebtedness it automatically becomes the Insured under the 2006 policy by reason of the definition of "Insured" in Section 1.  Condition 8 of the 2006 Loan Policy has added coverage not contained in the similar provision found in Condition 7 of the 1992 Loan Policy. There are language changes in Section 8 of the 2006 policy because of defined terms not defined in the 1992 policy. There is added coverage because of the broad definition of Indebtedness used in the 2006 policy. Also, Subsection 8(b) of the 2006 policy expands coverage in two ways. The first expansion is a 10% increase in the Amount of Insurance under Subsection 8(b)(i) in the event the Insurer pursues its rights under Section 5 to defend or prosecute and is unsuccessful in establishing the Title or the lien of the Insured Mortgage as insured. The second expansion of coverage under Subsection 8(b)(ii) allows the Insured Claimant the choice of determining the loss or damage either as of the date the claim was made or the date it is settled and paid. These are significant added coverages that do not exist in the 1992 policy. Additionally, Subsection 8(a)(iv) of the 2006 policy came from Subsection 2(c)(iii) of the 1992 policy in order to cover the Insurer's Condition 9 of the 2006 Loan Policy has added coverage not contained in the similar provision found in Condition 8 of the 1992 Loan Policy. Subsection 9(a), (b) and (c) of the 2006 policy are virtually identical to Subsection 8(a), (b) and (c) of the 1992 policy. Subsection 8(d) of the 1992 policy was deleted in the 2006 policy. The Covered Risks in the 2006 policy do not provide coverage against loss of priority to the extent of subsequent advances. However, by including amounts disbursed subsequent to Date of Policy in the definition of Indebtedness, the policy provides an increase in the indemnity protection in the event of a loss based on other Covered Risks. Condition 10 of the 2006 Loan Policy has added coverage not contained in the similar provision found in Condition 9 of the 1992 Loan Policy. Subsection 10(a) of the 2006 policy is substantively the same as Subsection 9(a) of the 1992 policy. Subsection 10(b) of the 2006 policy is substantively the same as the last part of Subsection 9(c) of the 1992 policy. Subsection 9(b) and the first part of Subsection 9(c) of the 1992 policy has been deleted from the 2006 policy which results in adding coverage. Unlike the 1992 policy, a payment on the Mortgage under the 2006 policy, does not result in a reduction in the Amount of Insurance. Instead, it results in a reduction in the Indebtedness because of the definition of Indebtedness in Section 1. Therefore, the "last-dollar" coverage issue has been eliminated in the 2006 policy. The Insured does not need to request a last-dollar endorsement when using the 2006 policy form.  Condition 11 of the 2006 Loan Policy and Condition 11 of the 1992 Loan Policy are essentially identical. Same coverage. The first paragraph of Section 11 of the 1992 policy was deleted in the 2006 policy. This paragraph was deleted because the ALTA believes that in our current world of databases and electronic record keeping by Title Insurers it was no longer necessary.  Condition 12 of the 2006 Loan Policy and Condition 12 of the 1992 Loan Policy are essentially identical. Same coverage. Same coverage. In the 2006 policy, the language of this Section has been modified in order to more clearly state the rights of the parties. The heading for the Section has been renamed. Subsection 12(a) of the 2006 policy makes it clear that when a claim has been settled the Insurer is automatically subrogated and entitled to the rights of the Insured Claimant without need of any further documentation. However, the Insurer has a right to request the Insured Claimant to execute documents to evidence the transfer of these rights. The Insured Claimant has an obligation to execute these requested documents. On the other hand, this Subsection makes it clear that if a payment of a claim does not make the Insured Claimant whole, the Insurer defers the exercise of its right to recover until such time as the Insured Claimant recovers its entire loss. The ALTA intended for Subsection 12(a) of the 1992 policy to be treated the same as stated in the 2006 policy but the language is not clear. Subsection 12(b) and (c) of the 2006 policy contain slight language modification, but the substance is identical to Subsections 12(b) and (c) of the 1992 policy. Condition 13 of the 2006 Loan Policy and Condition 13 of the 1992 Loan Policy are essentially identical. Depending upon whether you are pro-arbitration or against arbitration the changes made to Section 13 in the 2006 policy arguably add coverage (pro-arbitration) or decrease coverage (against arbitration). The reason one could adopt either of these views is because the thresh1992 below which either the Insured or the Insurer can force the other into arbitration has been increased from $1,000,000 in the 1992 policy to $2,000,000 in the 2006 policy. Notwithstanding the possibility of making either of these arguments it is the belief of the ALTA that the changes to this Section in the 2006 policy result in the same coverage in substance as exists in the 1992 policy. Section 13 of the 2006 policy does not contain the clause: "unless prohibited by applicable law..." as contained in the 1992 policy because that clause is unnecessary as a result of Section 15 (Severability) in both policies. Another change made to this Section in the 2006 policy is to have the claim or controversy arbitrated pursuant to the Title Insurance Aribitration Rules of the American Land Title Association. Condition 14 of the 2006 Loan Policy and Condition 14 of the 1992 Loan Policy are essentially identical. The substance of Section 14 in the 2006 policy is the same as the 1992 policy even though there are some language changes in the 2006 policy which make it easier to read. Also, a Subsection 14(d) has been added to the 2006 policy to make it clear that any endorsement to the policy is made a part of the policy and is subject to its terms. This was done so that there is no question when an endorsement is attached that does not contain the usual boilerplate final paragraph incorporating all of the terms of the policy, that endorsement is nonetheless subject to all of the terms and provisions of the policy except as expressly modified by the endorsement. Condition 15 of the 2006 Loan Policy and Condition 15 of the 1992 Loan Policy are essentially identical. Section 15 of the 2006 policy is substantively the same as the 1992 policy. However, the 2006 policy language has been modified to make it clear that the Severability provision applies even in situations where only part of a provision of the policy has been declared invalid or unenforceable. Condition 16 of the 2006 Loan Policy does not have a comparable Condition in the 1992 Loan Policy. The addition of this Section in the 2006 policy does not result in a reduction of coverage when comparing the 2006 policy to the 1992 policy. Subsection 16(a) has been added to the 2006 policy to make it clear what law applies in interpreting and enforcing the terms of the policy. Subsection 16(b) has been added to the 2006 policy because of increased cross-border transactions between border countries. Condition 17 of the 2006 Loan Policy and Condition 17 of the 1992 Loan Policy are essentially identical. The language has been cleaned up to fit with other language changes in the policy.  Conditions and Stipulations 10 of the 1992 Loan Policy (Liability Noncumulative) has been deleted. This item provided for the reduction of the amount of insurance when the company paid a senior mortgage or junior mortgage that the Insured had taken subject to, thereby protecting the Company from paying twice on the same loss. The deletion of this often misunderstood clause will not impact the measure of damages under the 2006 policy. In other words, if the policy was for a junior mortgage, the loss determined under the policy would be for the effect of the risk insured against on the equity, if any, in the property. That is what the insured lender was getting under the policy. The value of the land as collateral is always affected by liens that had priority to the insured indebtedness. In a junior Loan Policy, the value of the land as collateral for the junior indebtedness is the net equity left after the senior indebtedness is considered.  

 
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