§14.30 - other Forms of Title Assurances

• Jurisdiction: Washington

§14.30 OTHER FORMS OF TITLE ASSURANCES

There are numerous forms of title assurances or evidences that most title companies offer when title policies are not desirable or necessary. For the most part they can be divided into three categories: the binder, the guarantee, and the certificate.

(1) Binder to insure resale

The binder to insure a resale (see Form 14-19 on the CD accompanying this deskbook), sometimes referred to as an interim binder, was developed to provide assurance that upon a subsequent sale the insurer will issue the requested form of policy to the resale purchaser, or to the original purchaser if a resale is not made during the binder period. Examples include a lender who acquires property in a foreclosure proceeding or by a deed in lieu thereof, a company that purchases the home of a relocating employee, or someone acquiring a property in an exchange. Rather than write two owner's policies within a short period of time, the insurer would delay writing the policy until the second transaction, or write the first policy only if the second transaction did not occur.

Historically in Washington, a binder was essentially a commitment for a two-year period, although in some cases it could be extended for up to one additional year. Such forms were withdrawn by the Office of the Insurance Commissioner effective February 15, 1993, based on its interpretation of RCW 48.18.230. See, e.g., Letter from Dick Marquardt, Washington Insurance Commissioner, to Underwriting Manager, Commonwealth Title Insurance Co. (Jan. 8, 1993) (on file with WSBA-CLE). Although title insurers did not feel that those forms were a type of binder contemplated by this statute, most offer a form of title insurance binder written for a 90-day period with no provision for extension so as to comply with this interpretation.

An additional premium is usually paid for the binder at the time of the initial sale, usually 110 percent of the basic insurance rate based on the initial sale amount. If the resale is that amount or less, the ultimate policy is issued for no additional charge. If the resale is for a greater consideration, then there will be an additional premium for the increased policy liability. Also, there may be additional premium charges at the time of resale for extended coverage requested by the resale purchaser if the binder provided for a standard coverage owner's policy.

The binder is not in itself a policy of title insurance, but in many ways it is tantamount to that coverage, because in the event of a loss prior to the resale, a request for a policy could be made and a claim made thereunder.

Binders do not commit the insurer to insure the resale purchaser at a future date subject only to the matters shown in the binder as of the date of the initial acquisition. Matters intervening between the initial sale and the resale would be shown in the policy unless cleared to the satisfaction of the issuing company.

(2) Guarantees

A guarantee is a contract between the insurer and the assured under which the duties and rights of both are spelled out. Generally, the assurances relate to the correctness of information shown. Liability arises to the extent the information is incorrect. Guarantees are usually underwritten by a title insurance company even when issued by an agent. Except for the Recorded Document Guarantee, guarantees are not promulgated by the ALTA, and insurers typically develop proprietary forms. (The Recorded Document Guarantee shown at Form 14-27 on the CD accompanying this deskbook, although based on the ALTA form, has been modified for Washington state. Some companies may use the ALTA form.) Premiums for guarantees are based on the amount of liability, which may not have any relationship to the value of the land.

(a) Trustee's sale/litigation/contract forfeiture

The trustee's sale/litigation/contract forfeiture guarantee (see Form 14-20 on the CD accompanying this deskbook for a sample combination form) provides (1) the trustee under a deed of trust with information necessary for a nonjudicial sale proceeding; (2) a mortgagee with information for pursuing a...