Posting for

Monday, August 17, 1998

by: Paul Hammann

phammann@firstam.com

and: Cliff Morgan

cmorgan@firstam.com

NEW HOMEOWNER'S POLICY/EAGLE POLICY/SECOND GENERATION EAGLE POLICY

(Intro by Bert Rush: After introduction of the EAGLE Policy in CA in February 1997, the California Land Title Assn. drafted and has now approved a new form of owner's policy--called the CLTA Homeowner's Policy of Title Insurance, approved 6/2/98. Since Cliff Morgan is Chair of the CLTA Forms and Practices Committee, and since the experience of underwriters in CA with EAGLE-type offerings has been very good, the new policy enlarges upon the coverages of the EAGLE owner's policy. The ALTA will vote whether to approve the form at the Annual Convention in NYC in October--and Cliff predicts it'll be close. In any case, First American is gearing up to begin marketing the new form soon. Paul Hammann [Santa Ana] wrote copy for a new advertising brochure--which is reprinted below.)

SECOND GENERATION

EAGLE POLICY

First American Title Insurance Company introduces the all new EAGLE Policy--our answer to the need for expanded title coverage for owners of one-to-four family residences, including condominiums.

The EAGLE policy includes exciting new coverages never offered before--not even in our original EAGLE policy! What's more, the new EAGLE Policy never expires, even when the homeowner no longer holds title.

No policy issued by any company in our industry has ever offered a broader, more comprehensive, more reassuring range of coverages for the homeowner. Many of the coverages, including post-policy coverages, were developed as First American "firsts", as the company continues to innovate ways to protect people and their property. Now, the post-policy coverages have been expanded in this new EAGLE Policy.

Take a look at the new coverages automatically included in the EAGLE Policy-- they're another "first" from First American.

Here is WHAT'S exciting. . .

POST-POLICY PROTECTION FOR COVERED RISKS

Several important new risks are now covered on a post-policy basis. This means that some defects in title that did not exist at the time the insured purchased the property, but are now asserted by others, are covered. These post-policy covered risks involve cases in which someone other than the homeowner claims to own an interest in the title; or has rights affecting the title arising out of leases, contracts or options; or claims to have rights affecting the title arising out forgery or impersonation; or has an easement on the land or has a right to limit the insureds' use of the land; or in which the title is defective.

The following are several examples of this post-policy protection:

POST-POLICY FORGERY

The homeowner is covered when someone forges the insured's signature to a deed or mortgage in an effort to sell or impose a lien or restriction on their home.

POST-POLICY ENCROACHMENT

This coverage protects the homeowner if, after his or her purchase, someone else builds a structure (excluding boundary walls and fences) which encroaches on the homeowner's land.

POST-POLICY CLOUD ON TITLE

Coverage is provided when the homeowner's title is clouded because someone recorded in the land records a document containing the legal description of the homeowner's land, whether by mistake or in a specific effort to cause the insured harm, and the homeowner is prevented from completing a loan or sale transaction on their home.

POST-POLICY ADVERSE POSSESSION

Coverage is extended to a homeowner when someone claims to have the insured's title arising out of someone else's continued use and occupancy.

POST-POLICY EASEMENT BY PRESCRIPTION

The homeowner is covered in the event another party claims to have the right to use a part of the insured's land as an easement because of continuous use over rime.

Previously, these types of risks were only covered if they existed on the policy date, although our original EAGLE Policy included coverage on a post-policy basis for forgery and encroachments onto the land.

Other exciting coverages include:

EXPANDED ACCESS

The new EAGLE Policy expands access coverage to include, for the first time, actual vehicular and pedestrian access to and from the land, based upon a legal right. The access coverage traditionally provided by title insurance was tied to a legal right of access and did not include actual access. The new EAGLE Policy affords the type of access protection most needed by homeowners.

BUILDING PERMIT AND ZONING VIOLATION

Coverage is extended to a homeowner who is forced to remove or correct existing structures that were built without a building permit or that violate an existing zoning law or zoning regulation. The zoning coverage even extends to boundary walls and fences! The original EAGLE Policy's coverage in this area was tied to forced removal, not forced remediation. Because we have found it far more likely that a homeowner would be forced to correct a building permit or zoning violation than to actually remove the structure, the coverage has been expanded in the new EAGLE Policy to specifically include forced remediation. The homeowner is covered for losses up to $25,000 (after a small deductible) for building permit violations and forced remediation of zoning violations, and up to the full Policy Amount for forced removal of structures due to zoning violations.

SUBDIVISION VIOLATION

The homeowner is covered where subdivision laws have been violated prior to the homeowner's purchase and, as a result, the homeowner is unable to obtain a building permit, is forced to correct or remove the violation, or is unable to complete a sale or loan transaction. The new EAGLE Policy continues to provide homeowners up to $10,000 (after a small deductible) for protection against this risk--a benefit which homeowners who obtained our original EAGLE Policy have found most valuable.

ENCROACHMENT BY BOUNDARY WALLS AND FENCES

The homeowner is covered if he or she is forced to remove a boundary wall or fence because it encroaches onto a neighbor's land, onto an easement or over a building set-back line. Previous policies excluded boundary walls and fences from this type of coverage. We have found that the encroachment of boundary walls and fences onto neighboring land is far more likely to occur than the encroachment of other structures and, therefore, have determined to provide the homeowner protection of up to $5,000 (after a small deductible) for these types of encroachments.

RESTRICTIVE COVENANT VIOLATIONS

Coverage is provided for violations of restrictive covenants occurring before the homeowner acquired the land if the homeowner is forced to correct or remove the violation or if the homeowner's title is lost or taken because of the violation. Examples of such violations would include the following, if not permitted by the applicable restrictions: (1) additional buildings; (2) types of roof material; (3) color of home; (4) number of stories; and (5) types of fencing. While these coverages have been available by endorsement for some time, they were never provided automatically until our original EAGLE Policy. The new EAGLE Policy expands the coverage in this area from that provided in the original EAGLE Policy by eliminating the deductible that applied to a portion of this coverage.

Another benefit expanded. . .

Coverage amounts continue to increase annually under the EAGLE Policy, but now First American will increase the policy ten percent of the original amount in each of the first five years! This helps homeowners cover increases in the value of their property be raising the limit of insurance protection.

And another. . .

The first line of one of the conditions in the new EAGLE Policy contains this unprecedented statement: "This policy insures you forever, even after you no longer have your title." All other policies terminate when the homeowner gives up title to a property and no longer has liability under title warranties made to a buyer or lender--but not the new EAGLE Policy. It is paid for just once, but it lives forever.

And another. . .

Now, living trust coverage includes not only the trustees of a trust, but the beneficiaries as well. This important expansion of a benefit recognizes the growing popularity of living trusts as well as the concerns of trustors for those who will succeed them in the ownership of real property.

Why change a good thing?

The EAGLE Protection Owner's Policy was reborn in its new form--and with important new benefits and conditions--in order to provide the broadest protection currently available to the nation's growing family of homeowners.

All the coverages that were new with the original EAGLE Policy--all the important features that have made this policy so effective for homeowners--have been retained.

Call your local First American representative for more details or specific policy language. We'll be glad to show you how a remarkably innovative range of features and benefits created the protection every homeowner needs.

The EAGLE Policy--peace of mind for homeowners and the professionals who serve them.

Questions, comment, argument? Just press the "reply" button and send your thoughts to LandSakes.

**********

Following Monday's posting, Carol Brooks (Bedford, NH) writes:

Bert, Cliff,Your message addressed:

"The first line of one of the conditions in the new EAGLE Policy contains this unprecedented statement: "This policy insures you forever, even after you no longer have your title." All other policies terminate when the home- owner gives up title to a property and no longer has liability under title warranties made to a buyer or lender--but not the new EAGLE Policy. It is paid for just once, but it lives forever."

Question?

Are the loss provisions the same? Conditions and Stipulations the same? For example, is the policy still in effect for loss/defense - but only as of date of the policy and after date of policy for enumerated Eagle items? Does the new Eagle live forever to allow the named insured, i.e. an individual interest, to assert loss/defense in any post-policy entity, i.e. partnership, corporation, in which the named insured has an equitable interest? If the policy lives forever, don't we lose repeat reissue-policy business?

I'd like to learn more!

Reply to Carol: I've held off answering this--hoping I could get Paul Hammann or Cliff to reply--but they've been in meetings all week so I'll give my impressions. We had a meeting here in Orange Co. this week for California Chief Title Officers and agents, to acquaint them with the new form. Paul and Cliff explained the new form pretty much line by line. I sense a great deal of enthusiasm--they've geared up to hit the market here pretty hard after the ALTA Annual Convention.

Anyway, to answer your questions: Yes, the policy continues in force after the insured interest terminates, for the life of the insured homeowner(s). After the insured's interest in covered property is terminated, the policy remains in effect as of the original policy date--except as to those matters insured post-policy. Where's the risk? In the past we've had a few (very few) claims where an insured was named in a lawsuit involving formerly-owned property. These are generally easy to get out of, at least as to covered matters. The only real liability of a former owner should be in connection with some hazardous condition on the land--installed or not disclosed by the former owner when he/she sells--but that's not covered by the policy. What does this coverage do? Seems to me it accomodates to some extent the arguments made last year in the California legislature in favor of legislation which would have provided for assignable policies of title insurance, in the sense that now we can say that the policy coverage doesn't go away--it continues to cover the insured(s) for life--but it would be unfair to add on insureds in perpetuity by assignments. The policy language also makes clear the policy is not assignable.

Your second question: No, the individual insured cannot pass his/her coverage along to a business entity (corporation, etc.) in which the insured might later become a principal, although it does provide for continuation of coverage if the individual insured places title in a trust. As in present policies, there are continuation of coverage provisions for heirs of an insured, as well as a spouse who derives title through dissolution of marriage. (Where the spouse succeeding to title was not previously insured, this would be new coverage.)

Third: I don't see that we'll lose repeat/re-issue business. Each new owner should want his/her own policy to protect him against matters attaching through ownership of his/her grantor, and to make sure the new owner will have direct recourse under his own policy--rather than complaining against his grantor and having to wait and see what happens. And if the new owner doesn't get his own policy, he'll have virtually no post-policy coverage--since post-policy matters won't bother a past owner at all. The added value being offered the consumer, plus additional premium which may be charged, should more than assure the new policy's acceptance as a win-win proposition for the consumer and title companies.

Consider this: The new form brings us closer to the day when a homeowner having trouble with his title, or with a neighbor or trespasser, thinks first to call his or her title insurer. Not the realtor, not an attorney, not the homeowner's carrier--but us. I think that's where we want and need to be in the marketplace of tomorrow. And, consumers are ready for it.

By the way, last Thursday Prof. Pat Randolph posted the text of our new arketing brochure on his DIRT listserv. He has about 1200 subscribers around the country--realtors, surveyors, attorneys, etc. Anyone hearing anything???

**********

Following up on Monday's posting, Keith Pearson (Glendale/L.A.) writes:

I got a forward on the DIRT listing via David Boss who as you know does coverage opinions for us and is based in San Diego. Also, addressing the coverage forever provision, it might seem to actually embolden Rep. Burton to try again on the assumable title policies bill by saying if they are insuring forever why can't these rights be conveyed and updated. Maybe I'm being paranoid but Rep. Burton seems to look at us and see guys with horns and pointy tails all decked out in red. I know it is too late now since the policy is filed but maybe we ought to get ready for Rep. Burton's next assault on this front.

P.S. Just because you're paranoid, doesn't mean they are not out to get you.

**********

Last Friday, following Carol Brooks' and my Q&A re our posting on the New Homeowner's Policy, I asked, "...last Thursday Prof. Pat Randolph posted the text of our new marketing brochure on his DIRT listserv. He has about 1200 subscribers around the country--realtors, surveyors, attorneys, etc. Anyone hearing anything???"

To this, Troy Kelley (Glendale/L.A.) replies:

A few outside customers subscribe to the list. Our marketing statement went out of First American, out on the DIRT list to his subscribers (our customers) verbatim, and back to me from very pleased emailing customers. That's the way all our efforts should work in terms of speed and content.