Exclusions from Coverage: learn & quiz

The minute version

Why exclusions exist

Title insurance prices record-based title risk. Exclusions remove risks that aren't title risks (land-use regulation), are within the insured's control, or arise after closing.
Exclusions are standard and printed. Exceptions (Schedule B) are deal-specific. Endorsements can give back some excluded coverage.

Exclusion 1: laws and regulations on use, improvements, subdivision and environmental matters, and government police, forfeiture and national-security powers, except as Covered Risks 5 and 6 give back via an Enforcement Notice.
Exclusion 2: eminent domain, except Covered Risk 7.
Need more? Look at the ALTA 3 zoning series, ALTA 26 subdivision and ALTA 8.2 environmental lien coverage.

Exclusion 3 removes matters:
- (a) created, suffered, assumed or agreed to by the insured claimant;
- (b) known to the insured, not recorded, and not disclosed to the insurer;
- (c) causing no loss;
- (d) attaching after the Date of Policy (except gap and creditors'-rights coverage);
- (e) loss that wouldn't have happened if the insured had paid value as a bona fide purchaser.
"Knowledge" means actual knowledge, not constructive notice from the records.

Exclusion 4: a claim that the insured's own vesting deal was a fraudulent, voidable or preferential transfer (Covered Risk 9 handles prior transfers and certain recording failures).
Exclusion 5: PACA-PSA trust claims, except the Enforcement Notice coverage in Covered Risk 8.
Exclusion 6: taxes and assessments that become due after the Date of Policy.
Exclusion 7 (new in 2021): discrepancies in area, square footage or acreage.

Loan policies add exclusions aimed at lending, such as unenforceability from the lender's failure to comply with usury, consumer credit protection or truth-in-lending laws, and certain creditors'-rights claims about the insured mortgage itself.