6.8 Conditions and Stipulations

• Library: Real Estate Transactions in Virginia (Virginia CLE) (2019 Ed.)

6.8 CONDITIONS AND STIPULATIONS⁴¹

6.801 In General. The Conditions and Stipulations provide the procedural rules governing policy administration. Included are definitions, procedures for providing notices, measures for computing damages, and other matters governing the relationship between the insurer and the insured. Only a few of these items are summarized below.

6.802 Definitions.

A. Insured. The insured is the beneficiary named in Schedule A and, subject to the conditions set out in the policy, successors of the named insured. Notwithstanding the fact that the named insured might eventually be brought into litigation by virtue of the warranties in the deed, the insurer

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has no retained liability requiring it to defend a remote grantee of the insured. ⁴²

There is no coverage in a loan policy for the owner-borrower. Courts that have specifically addressed the application of the third-party beneficiary doctrine to title insurance have concluded that such policies do not impose liability on the title company to anyone other than the named insured. ⁴³

B. Land. Land is defined as

the land described or referred to in Schedule A and improvements affixed thereto which by law constitute real property. The term "land" does not include any property beyond the lines of the area described in Schedule A, nor any right, title, interest, estate, or easement in abutting streets, roads, avenues, alleys, lanes, ways, or waterways.

The definition of land does not modify or limit the insurance regarding access to the land in the Insuring Provisions.

C. Public Records. Public records are records established under state statutes at the date of the policy for the purpose of imparting constructive notice of matters relating to real property to purchasers for value and without knowledge. With respect to environmental protection liens, this also includes the federal district courts.

6.803 Continuation of Coverage.

A. Owner's Policy. The policy coverage continues in force, as of the date of the policy, in favor of the insured as long as the insured retains an estate or interest in the land or holds an obligation secured by a purchase money mortgage given by a purchaser from the insured, or as long as the insured has liability by reasons of the covenants of title or warranty made by the insured in any transfer. The policy does not insure a purchaser from the insured, or an assignee of the purchase money mortgage.

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In Chicago Title Ins. Co. v. 100 Inv. Ltd. P'ship, ⁴⁴ the insured conveyed a portion of the property by special warranty deed. In a suit alleging a title defect arising before the insured's ownership, the title company was not required to defend or to pay since the insured excluded any warranty of title for matters not of its own causing.

B. Loan Policy. The policy coverage continues in force, as of the date of the policy, in favor of (i) an insured acquiring all or any part of the land by foreclosure, trustee's sale, conveyance in lieu of foreclosure, or other legal manner discharging the indebtedness; (ii) a transferee of the land acquired from an insured corporation, provided the transferee is a parent or wholly owned subsidiary of the insured; and (iii) any governmental agency or instrumentality acquiring the land pursuant to its contract of insurance or guaranty.

As in the owner's policies, coverage exists for warranties or covenants of title in the transfer instrument from the insured lender and for purchase money mortgages from the purchaser payable to the insured. There is no coverage for a purchaser from the insured or an assignee of the purchase money mortgage. ⁴⁵

6.804 Notice of Claim. The insured must notify the insurer promptly in writing (i) of litigation involving an adverse claim; (ii) of the insured's knowledge of any claim that is adverse to the title insured; or (iii) if title, as insured, is rejected as unmarketable. If prompt notice is not given, the insurer may deny liability. ⁴⁶ The issue of whether delay in notice prejudiced the insurer's ability to defend is a question for the jury. ⁴⁷

6.805 Defense and Prosecution of Claims. Upon written request and subject to the other conditions and stipulations, the insurer shall provide for the defense of the insured for any adverse title claims. The

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insurer may decline to defend non-title issues, even if presented as alternative grounds in a suit alleging a claim affecting title. The insurer has the right...