1987 Alta Insurance Revisions: an Owner's Perspective-part I

• Publication year: 1988
• Pages: 445
• Citation: Vol. 17 No. 3 Pg. 445

17 Colo.Law. 445 Colorado Lawyer 1988.

1988, March, Pg. 445. 1987 ALTA Insurance Revisions: An Owner's Perspective-Part I

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445

Vol. 17, No. 3, Pg. 445

1987 ALTA Insurance Revisions: An Owner's Perspective---Part I

by Mary B. Moore and Peter T. Moore

Effective June 1, 1987, the American Land Title Association ("ALTA") adopted new title insurance policy forms. These revisions were motivated primarily by a desire to limit liability created by numerous judicial decisions which expanded coverage to an extent never anticipated by the title insurance industry. They reflect the first comprehensive, industry-wide review of title insurance since the 1970 ALTA forms were adopted.(fn1) A secondary goal was to make the new policy forms better organized and more understandable. This was accomplished; however, in several important areas, the coverages provided by the policies have been diminished with no announced reduction in premium.

The new policy forms are the result of several years of work by the ALTA Forms Committee. Much of what has been written about the revised forms during the last year has been by those representing title insurers. These commentaries either laud the benefits of the clearer language, make a line-by-line comparison of the old forms to the new forms, or emphasize the areas where coverage has been increased.(fn2) Little has been written about the issues of most concern to the owner, such as whether title insurance coverages have been reduced and whether the policies provide "adequate" coverage.(fn3)

This two-part article summarizes the important policy changes in the ALTA owner's policy and highlights those areas where the coverages have been changed to the insurer's benefit. This Part I discusses the factors that led to the 1987 revisions and notes the changes in the insuring clauses, the changes in the exclusions, and some of the new definitions contained in the conditions and stipulations section. Part II, to be published in the April issue, discusses the changes in the remaining conditions and stipulations, including the claims procedure, the duty to defend, the duty to cooperate, proof of loss or damage, coinsurance, subrogation rights and local coverage. The new arbitration provisions also will be discussed. These items represent the most significant changes in coverage when viewed from the owner's perspective.

The "Doctrine of Reasonable Expectations"

The 1987 policy revisions were motivated by the involuntary expansion of coverage created by several court decisions issued after the 1970 ALTA forms were adopted, and by the development of a legal principle often characterized by the courts as the "doctrine of reasonable expectations."

Courts have long held that any ambiguities in an insurance policy are to be construed against the insurer. This achieved the objective of providing indemnity for the insured loss and protected the insured's reasonable expectation of coverage in situations where the insurer-draftsman controls the language of the policy.(fn4) In Hahn v. Alaska Title Guaranty Co.,(fn5) the Alaska Supreme Court allowed a policy claim because the insurer did not give the insured notice of an easement transferred from the federal government to the state of Alaska. The easement, which was published in the Federal Register but not recorded in the state land title records, was found to be within the policy...