Regulator warns of title insurance coverage ‘exceptions’
|By George Hesselberg, The Wisconsin State Journal|
|McClatchy-Tribune Information Services|
In an unusual bulletin, Insurance Commissioner
The companies "have begun to use broad 'blanket exceptions' in their title insurance policy form for owners and (consumers), which exclude from coverage the most common encumbrances ... that could generally be discovered during a public records search," Nickel said.
Most title insurance policies exclude coverage of the type of information that cannot be found in public records, but there have been some that exempt even public record search results, Nickel said.
This "leaves little to no coverage for the consumer and does not warn the consumer that the title they are purchasing may have defects," he said, adding the obvious: "This conflicts with the essential purpose of providing title insurance coverage."
The reason for the warning, said department spokesman J.P. Wieske, is "we received a complaint, not from the standpoint of a claim denied, but from the standpoint of someone seeing this in the marketplace and having concerns about it."
Title insurance complaints are rare, he said, and all insurance companies must submit the policies they sell to state regulators, but this or these policies are out there.
"You have to watch out for blanket exceptions," he said. "If it says something like 'we don't cover anything in the public records,' you might look at it differently," he said. "The important thing is to read your policy. If you have to purchase title insurance, make arrangements before closing to read it so you are not under pressure or stuck in a situation where if you reject the policy" the closing is jeopardized.
The commissioner's office said title insurance policies typically exclude coverage of "encumbrances" that can't be discovered via a public records search. But state law says that a policy can be rejected that is "misleading because its benefits are too restricted to achieve the purposes for which the policy is sold."
A lawyer for the
Conrad said Wednesday that "most consumers don't know what all this language means in the first place, and they may not understand what (a blanket exception) is doing. For people buying homes, they are getting less than what they assume. They are getting less protection."
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