Plain Language

Plain English in Title Insurance Policies

By Ronald E. HodessOn June 1, 1987, the AmericanLand Title Association (ALTA)issued its revised plain language

residential title insurance policy foruse by its member title companies.The plain language policy representsan attempt by ALTA to make the stan-dard owner's policy understandable tothe residential owner without substan-tially changing policy coverage.

The plain language policy consistsof the Owner's Information Sheet, Ta-ble of Contents, Owner's CoverageStatement, Covered Title Risks, Com-pany's Duty to Defend Against CourtCases, Schedule A, and Schedule B-Exceptions, Exclusions and Condi-tions. The standard owner's policy, onthe other hand, contains no explana-tory provisions or table of contents,and consists mainly of fine print. Theresidential owner will find that theeasy-to-read format and straightfor-ward definitional section make theplain language policy a friendlier doc-ument. However, closing agents, bro-kers, attorneys, lenders, and titleagents already familiar with the stan-

"Plain Language" is a regular feature of theMichigan Bar Journal, edited by JosephKimble for the State Bar Plain English Com-mittee. Assistant editor is George H. Hathaway.Through this column the Committee hopes topromote the use of plain English in the law.Want to contribute a plain English article?Contact Prof. Kimble at Cooley Law School,P.O. Box 13038, Lansing, MI 48901.

dard owner's policy might find theplain language policy foreign until itsuse increases. This reluctance to usethe plain language policy should beovercome because (1) the form of titleinsurance commitment which is cur-rently in use (or as slightly modified)will generally be issued before issu-ance of the plain language policy, and(2) the plain language policy is notradically different from the standardowner's policy.

The plain language policy is usedsignificantly in at least twenty-twostates, including California, Connecti-cut, Massachusetts, Missouri, andWisconsin, according to Clifford Mor-gan of First American Title InsuranceCompany in California. In Michigan,the plain language policy is not beingused. The primary reason is that peo-ple are generally unaware of it. An-other reason is that each title companyis required to obtain prior approval ofits forms from the Michigan Depart-ment of Commerce Insurance Bureau.A number of Michigan title underwrit-ers are authorized to issue the plainlanguage policy and will do so on re-quest. For instance, Minnesota TitleInsurance Company recently receivedapproval from the Michigan InsuranceBureau to use the plain language pol-icy. "We are advocating use of the 1987ALTA plain language form in Michi-gan," says John E Rohe, Associate StateCounsel for Minnesota Title. Otherunderwriters may be less willing to is-sue the plain language policy becausethey feel that the standard policy isadequate and that interest in the plainlanguage policy is low.

There are several substantive differ-ences in the insurance coverages be-tween the plain language policy andthe standard owner's policy. For in-stance, part 12 of the Covered TitleRisks in the plain language policy cov-ers against the forced removal of anexisting structure (other than a bound-ary wall or fence) if it violates an exist-ing zoning law. This coverage is notprovided for in the standard owner'spolicy The plain language policy alsocovers risks from "other defects, liensor encumbrances." This broad state-ment could be a basis for claimingcoverage which is beyond the coverageof the standard owner's policy Also,the plain language policy specificallycovers the reimbursement of rent forreasonable substitute facilities if theproperty cannot be used because of atitle claim.

In addition, the plain language pol-icy does not contain the standard ex-ceptions to coverage which are gen-erally found in Schedule B of thestandard owner's policy. These excep-tions are for parties in possession notshown of record, matters that wouldbe disclosed by a survey, mechanicliens not of record, dower rights, andbuilding and use restrictions not ofrecord. Title insurers, however, maylimit coverage by showing specificmatters as exceptions on Schedule B-Iof the policy

For the most part, the remainingterms and conditions of the two pol-icies coincide point for point. How-ever, because of the above differences,the owner will receive slightly broadercoverage from the plain language

FEBRUARY 1990|/- N

MICHIGAN BAR JOURNAL

PLAIN LANGUAGE

policy. More importantly, because theplain language policy is directed atthe consumer, the courts could be in-clined to construe provisions in a waythat would protect the consumer's bestinterests.

The plain language policy will re-main unused in Michigan until thereis sufficient demand. Real estate bro-kers and salespersons, residential

SETTLE FASTER... I

MEDIATE!" Cases Handled Quickly* Save Litigation Costs & Expenses" Help Structure Multiple Party Cases* Improve Communication Between Parties

" Confidentially Explore Settlement Options" Meet The Other Party Informally & In Person

" Our Settlement Rate Is 80%qU.S. ARBITRATION &MEDIATION OF MICHIGAN, INC.An Alternative Dispute Resolution Service

Joel H. Schavrien, Executive DirectorPaul Monicatti, Director of Services

25505 W. 12 Mile Road • Southfield, MI 48034Phone: (313) 350-3060 Fax: (313) 350-2560

Here's your opportunity to get more than just a handshake, freelunch or a little more work for making a referral on any real estatetransaction, development or acquisition.Earn substantial additional fees by referring your clients or business contacts to us

when they require new space, manufacturing facilities or other real estate. When

you do, we will give you a finders fee orcommission in the form of either equityin real estate or a cash payment.* Your EQ U IT IUSclients will also prosper because if Fthey sign a lease, they can own from P A R T N ER H I P

5-25% equity in the space they leasethrough our Tenant Ownership Program. 26955 Northwestern Highway, Suite 135

If you're looking to lease space, you can

qualify as well. (313) 262-1114* The exact amount of any fees or equity interest will be determined on a case by case basis. Brokers Protected.

117nMICHIGAN BARt JUR~NALFEBRUARY 1990

iPLAIN LANGUAGE

property sellers, attorneys, lenders,and other persons who order title in-surance will be instrumental in pro-moting the plain language policy. Thebenefits to residential property own-ers are threefold. First, as mentioned,residential owners will receive greatercoverage from the plain language pol-icy. Second, residential owners willhave a better understanding of what ti-tle insurance is and, more importantly,what title insurance is not. Third, resi-dential owners will be in a better posi-tion to evaluate a possible title claimand to increase their awareness of ti-tle matters. Michigan title companiescould also benefit from the plain lan-guage policy by using it as a market-ing tool, by avoiding frivolous claimsand promoting a better understandingof the policy, and by increasing reissuebusiness.

n summary, the residential plainlanguage title insurance policy is afirst step taken by ALTA to better

serve residential owners with a policythat is easier to understand than theexisting standard owner's policy. Theplain language policy contains a num-ber of substantive changes in coveragesthat benefit the owner even thoughthey do not greatly increase the own-er's coverage. If title orders begin toreflect a desire for the plain languagepolicy, it will become more commonto the benefit of all residential owners.

E

,'>$ Ronald E. Hodess is anassociate of the firm ofSchlussel, Lifton, Si-mon, Rands, Galvin &Jackier and practices inthe area of real estatelaw. He received his un-dergraduate businessdegree from the Univer-

sity of Michigan and his law degree fromGeorgetown University. He is a member of theMortgages and Related Financing Devices andSecurity Interests Committee of the Real Prop-erty Law Section of the State Bar of Michigan.

1 QA aar ,,an&na.IVll.l'lA-MU A b U KB FERAY1990