Most lenders require that Affirmative Coverages be given to general or specific exceptions as listed in Schedule B of the final policy insuring them for loss or damage which may result due to that matter. Rather than omitting the interest or encumbrance affecting title from the policy, the agent should list the matter as an exception to coverage in both the commitment and final policy, even though the Company may be provided with an indemnity letter from another party. The necessary affirmative coverage may then be given by attaching the appropriate endorsement to the policy. Another method for providing affirmative coverage is by inserting a note or additional language at the end of the exception in Schedule B to state the nature and extent of affirmative coverage. However, this method is not preferred and the Company discourages using this alternative method. The use of endorsements to provide supplementary or affirmative coverage is preferred. Always check with the underwriting and/or legal department for approval before providing affirmative language other than those provided for in this manual. You must be extremely careful in the wording of affirmative coverage’s. Leaving out or including just one wrong word can expose the Company to a large degree of liability in the event of a claim.
Language should conform substantially to the following:
“The Company hereby insures the insured against loss or damage incurred, in an amount not exceeding the insurance amount of this policy, by reason of the enforcement of the lien identified as Item ___ of Schedule B, against the insured property as a lien encumbering or having priority over the estate or interest insured by this policy.”
Language should conform substantially to the following:
“The Company hereby insures against loss or damage which the insured shall sustain by reason of the entry of any court order or judgment which constitutes a final determination and requires the removal of the existing improvements because of the encroachment or encroachments thereof specifically set forth at exception number ____ in Schedule B.”
As outlined elsewhere in this manual, encroachments should not be insured over in an owner’s policy without specific authorization from the Company.
See also:
Generally, the Company does not authorize an Agent to insure over prior liens of record. Before insuring over any matter of record, contact the underwriting and legal department for written authorization. At a minimum, the Company will require a properly executed Indemnity Agreement from all parties involved; sufficient funds to be held in escrow (generally a minimum of 1˝ times the amount of the liability) for a specified amount of time (pending completion of work, matter has been resolved, or until the statute of limitations has expired); and written authorization from the Company. You may not insure over pending litigation which may affect title to the insured property.
The following examples of unacceptable affirmative language should never be used when “insuring over” matters:
• The Company hereby insures against the consequences of any attack…
• This policy hereby insures against any loss by reason of the aforementioned lien…
• The Company hereby insures the insured against all loss or damage as a result of said violation…
• The Company hereby insures against the forced removal or attempted forced removal…
• This policy hereby insures against loss or damage arising out of any enforcement or attempted enforcement of the rights, if any.