Our Michigan Access Title Agency office wanted to share news with you that you soon will begin seeing new 2021 Commitments and Policies! Below are summaries of the most important changes from the ALTA 2006 version to the new 2021 version.
Remote Online Notarization
The 2021 revision provides clarification in Covered Risk 2.a.iii. that the coverage for documents not properly notarized includes the notarization of documents by Remote Online Notarization (“RON”). The reference to RON is also intended to include Remote In Person notarization also known as “RIN”.
Covered Risk 2.a.viii. is added as new coverage for any loss or damage arising out of a defect in title caused by the repudiation of a document signed by an electronic signature because the signature was not valid under applicable electronic transactions law. The additional coverage descriptions recognize the industrywide movement towards electronic transactions.
Federal Perishable Agricultural Commodities Act or the federal Packers and Stockyard Act
Covered Risk 8 in the Owner’s and Loan Policy is a new Covered Riskwhich provides coverage for the enforcement of a PACA-PSA Trust but only to the extent an “Enforcement Notice” appears in the “Public Records”.The 2021 policies add a new definition for PACA-PSA Trust described as “a trust under the federal Perishable Agricultural Commodities Act or the federal Packers and Stockyard Act.” Both of these Acts create a floating trust that operates similar to a secret lien on all assets of a purchaser of specified perishable agricultural and livestock products as defined in the Acts. Coverage is limited to enforcement actions for PACA-PSA Trusts that appear in the public records.
Uniform Voidable Transaction Act
Covered Risk 13 in the Loan Policy and Covered Risk 9 in the Owner’s Policy referred to as the “back chain creditors rights coverage” provisions have been expanded to include a voidable transfer under the Uniform Voidable Transaction Act (“UVTA”) in those jurisdictions where it has been adopted. Reference to the UVTA was included to acknowledge that 21 states have enacted the UVTA since the 2006 policy was adopted.
Curative Penalty Provision
An important change to Condition 8.c. of the Loan Policy and Condition 8.d. of the Owner’s policies increases the curative penalty provision. In the event that the Company exercises its contractual right to defend or prosecute an action to establish Title for the insured but is unsuccessful, the Amount of Insurance is increased by 15%. The 2006 policy provided for a 10% increase.
Calculation of loss under the policy
Many claims involve a Diminution In the Value of the Titlewhich is calculated as the difference between the value of the Title as insured, and the value of the Title subject to the matter insured against by the policy. Property values can fluctuate significantly up or down which raises the issue of what date should be used to calculate a loss. The 2021 policies now define “value” as “fair market value” (FMV) in the calculation of loss under the policy. Former policy language referred to “value” without any qualifier. There are also significant improvements to Condition 8 in both the Owners and Loan policies relating to the date of valuation of a loss that diminish an Insured’s exposure to market volatility. Condition 8.b. and 8.d. of the 2021 Owner’s policy now provide the Insured with the option of having the fair market value of the Title calculated as of the date of the discovery of the defect, lien or encumbrance, adverse claim or other covered matter or, alternatively the date the notice of claim is received by the Insurer. Further, if the Title to the Land was void by reason of a Covered Risk, then the Insured under Condition 8.c. may elect to use the Date of Policy for calculating the fair market value of the Title. Similarly, in Condition 8.b. of the Loan policy, there is a new provision providing the Insured Lender with the option of valuing the loss as of the date the Insured acquires the Title by foreclosure or deed in lieu of foreclosure or, the date the lien of the Insured Mortgage is extinguished or rendered unenforceable by reason of an insured matter. The Insured Owner also has the option to elect to use the date the settlement, action, or proceeding is concluding or the date the Company received notice of the claim.
New Condition 17 in the Loan Policy and Condition 18in the Owner’s Policy provides that any claims or disputes relating to the policy must be brought in an individual capacity and not as part of class action lawsuit.
The Schedule B Exceptions section contains new languageacknowledging the recording of documents in the past containing discriminatory covenants such as racial or religious restrictions limiting ownership of the property. These types of restrictions were struck down by the Supreme Court in 1948 as unenforceable and in 1968, Congress passed the Fair Housing Act banning covenants discriminating on the basis of race, color, religion or national origin. The Fair Housing Act was subsequently amended to include discrimination based on family status and disability. It has been standard in the title industry to include language after an exception for Covenants, Conditions and Restrictions (“CCRs”) disclaiming the application of any discriminatory covenants to Title and the policy. The new language states that any discriminatory covenants contained in a document excepted in Schedule B are redacted, removed, repudiated, and not republished or recirculated. Only the remaining provisions are excepted from coverage. A broad definition of “Discriminatory Covenant” is added to the Owner’s Policy at Condition 1.d. and the Loan Policy at Condition 1.e. to clarify what constitutes a discriminatory covenant subject to this policy provision. The new definition goes beyond the Fair Housing Act and encompasses any CCRs that under applicable law illegally discriminate against a class of individuals based on personal characteristics. Additional classes, such as gender identify, and sexual orientation have been specifically referenced in a non-exclusive list that is intended to encompass federal, state, and local laws protecting certain classes of individuals.
Exclusions from coverage:
Exclusion 9 in the Loan Policy and Exclusion 7 in the Owner’s policy is a new exclusion from coveragefor any discrepancy in the quantity of the area, square footage or acreage of land.
Exclusion 5 in the Owner’s Policy and Exclusion 7 in the Loan Policy is a new exclusion for any claim of a PACA-PSA Trust. The exclusion does not modify or limit the coverage provided in Covered Risk 8 in the Loan Policy and Owner’s Policy relating to PACA-PSA Trusts if an Enforcement Notice is recorded. The most likely documents of Public Record that would constitute an Enforcement Notice in relation to a PACA-PSA trust would be a Lis Pendens or complaint in litigation.