Title insurance: preliminary reports and CLTA and ALTA policies

Correct answer: To propose title insurance subject to stated requirements and exceptions

A preliminary report describes proposed insurance and its conditions; it is distinct from the issued policy.

Correct answer: A requirement that must be satisfied for issuance

An action that must occur before issuance is a requirement, here the payoff needed to address an existing lien.

Correct answer: The easement is outside the policy’s coverage as stated in the exception

An exception identifies a matter removed from coverage, not a promise to eliminate it.

Correct answer: The lender’s insured security interest and lien priority

A loan policy protects the lender’s insured interest in the collateral and its lien priority under the policy.

Correct answer: The buyer needs owner’s coverage to insure the buyer’s title interest

Who pays for a policy does not change the insured interest. A loan policy does not replace owner’s insurance.

Correct answer: It broadens protection to certain risks outside the public records

The traditional distinction concerns the scope of title risks, including certain off-record risks under extended coverage.

Correct answer: Ask about extended coverage and the inspection or underwriting needed for the claim

An unrecorded possession claim is an off-record title risk, so the buyer should discuss extended coverage and its underwriting.

Correct answer: Federal law prohibits that seller-imposed condition

12 U.S.C. § 2608(a) bars a seller from conditioning a covered sale on the buyer purchasing title insurance from a particular company.

Correct answer: Owner versus lender describes the insured interest; standard versus extended describes scope

The insured interest and the breadth of covered risks are separate dimensions, not interchangeable labels.

Correct answer: California Land Title Association

CLTA is the California Land Title Association, associated with title policy forms and traditional standard-coverage terminology.

Correct answer: American Land Title Association

ALTA means American Land Title Association.

Correct answer: Have the legal description discrepancy resolved with the title company

The legal description identifies the land involved in the proposed coverage; a mismatch requires correction or clarification.

Correct answer: $4,200

Section 2608(b) specifies three times all title insurance charges. $1,400 × 3 = $4,200.

Correct answer: A covered ownership claim based on a deed defect predating the policy

Title insurance addresses covered defects and claims affecting title, usually rooted in events before the policy date.

Correct answer: They protect different insured interests despite having the same dollar limit

Equal dollar limits do not erase the difference between ownership protection and protection of a lender’s security interest.

Correct answer: The preliminary title report

The preliminary report identifies proposed exceptions and other matters relevant to issuance of title insurance.

Correct answer: Incorrect, because the requirement calls for action while the exception identifies a matter outside coverage

A requirement is a condition to satisfy; an exception identifies a matter the proposed insurance does not cover.

Correct answer: The specific boundary exception remains important despite the extended label

The actual policy terms control. A general description of extended coverage does not remove an express exception.

Correct answer: A premium purchases coverage for the policy’s duration rather than an annually renewable term

Title insurance ordinarily uses a premium for the duration of the policy, rather than annual renewal premiums.

Correct answer: The insurer may need information about off-record or boundary matters to underwrite the coverage

Additional underwriting, including a survey, may be needed to assess risks considered for extended coverage.

Correct answer: The prohibition covers both direct and indirect seller requirements

Section 2608(a) expressly prohibits a seller from directly or indirectly imposing the specified title-insurance purchase condition.

Correct answer: Who holds the title interest described in the proposed insurance

Vesting concerns how title is held. A mismatch calls for investigation of the ownership shown in the report.

Correct answer: It principally addresses public-record title risks and certain covered defects such as forgery

Traditional standard title coverage principally concerns public-record risks, while also including certain covered defects such as forgery.

Correct answer: The argument is flawed because standard coverage can include covered defects such as forgery

The standard-coverage concept includes certain covered defects such as forgery; it is not limited to properly recorded valid liens.

Correct answer: The insurer continued to exclude that identified easement from coverage

The repeated exception shows continued treatment of the easement as outside coverage, not its removal or insurance against it.

Correct answer: The report proposes coverage; the issued policy states the insurance actually provided

The report and policy occupy different stages: proposal and actual issuance of insurance.

Correct answer: An owner’s title insurance policy

An owner’s policy protects the insured owner’s title interest, distinct from the lender’s security interest.

Correct answer: The described recommendation does not require the buyer to use that company as a condition of sale

Section 2608(a) targets a direct or indirect seller requirement imposed as a condition of sale. The stated facts expressly preserve free choice.

Correct answer: Compare the covered risks, exclusions, exceptions, and endorsements for the buyer’s concerns

Coverage depends on the actual policy terms, so the buyer should compare their treatment of the risks of concern.

Correct answer: Investigate the restriction’s effect and seek resolution or understand the exception before closing

An adverse proposed exception needs review and possible resolution, rather than an assumption that insurance removes the underlying restriction.

Correct answer: It generally addresses covered title risks rooted in events before the policy date

Title insurance typically concerns preexisting title risks even when the resulting claim is discovered later.

Correct answer: The violating seller is liable to the buyer

Section 2608(b) imposes liability on the violating seller in favor of the buyer.

Correct answer: The scope of the insured title risks

The added off-record protection changes coverage scope, while the insured interest and amount remain the same.

Correct answer: Exception

An exception identifies a specific matter excluded from the stated insurance protection.

Correct answer: Incorrect, because the insurer is still gathering information for proposed coverage; the report is not the issued policy

An underwriting request concerns conditions for proposed insurance and does not turn the preliminary report into an issued policy.

Correct answer: The stated federally related mortgage loan trigger is absent

Section 2608(a) concerns property purchased with assistance of a federally related mortgage loan. That trigger is absent on these facts.

Correct answer: All charges made for the title insurance

The section measures liability as three times all charges made for the title insurance, not the sale price, loan amount, or all closing costs.

Correct answer: A lender’s title policy insuring the lender’s security interest

Protection of the lender’s insured security interest and lien priority is the role of a lender’s title policy.

Correct answer: Incorrect, because insurance can issue while identified interests remain and are excepted

Issuance of title insurance does not mean all interests have been eliminated; continuing interests can be listed as exceptions.

Correct answer: That it identifies the intended insured interest and provides the agreed coverage with understood exceptions

Completing requirements does not replace checking the insured interest, scope, and remaining exceptions in the actual insurance.