Guideline: NM 28 Endorsement - Non-Imputation - Full Equity Transfer

Explanation:

This endorsement is designed to provide protection from matters that would otherwise by excluded from policy coverage on the basis of imputed knowledge. It may be issued in conjunction with either an Owner's Policy or a Loan Policy, but it is most typically issued on an Owner’s Policy.

This endorsement limits the applicability of:

• Exclusion 3(a) - "created, suffered, assumed or agreed to by the insured claimant"
• Exclusion 3(b) - "not known to the Company, not recorded in the public records at Date of Policy, but known to the insured claimant and not disclosed in writing to the Company by the insured claimant prior to the date the insured claimant became an insured under this policy"
• Exclusion 3(e) - "resulting in loss or damage which would not have been sustained if the insured claimant had paid value for the estate or interest insured by this policy"

This coverage is not designed to protect the insured entity itself, but rather to protect one or more of the parties that have an interest in the insured entity. For example, this endorsement may be requested by a new investor as to matters known by the former owner where property is conveyed by the former owner to a new partnership composed of the former owner and a new investor. Other examples may be found in the procedural regulation. 

There are three forms of non-imputation endorsement available for use in New Mexico:

• NM 28 – for transactions involving a complete transfer of ownership in the insured
• NM 28.1 – for transactions where a new owner is brought into the ownership group
• NM 28.2 – for transactions where there is a partial transfer of the ownership interest

Underwriting Requirements:

We require the following:

1. Indemnification by the party whose knowledge is in question and an adequate affidavit or certification by that party that it knows of no outstanding claims or interests. An acceptable indemnity and affidavit form is located in Virtual Underwriter as "ALTA Nonimputation Affidavit 1".

2. Financial disclosures by the proposed indemnitor evidencing the financial strength of that party.

3. An explanation of the transaction and of the reason for the endorsement; for example, the nature of the transaction may indicate that a leveraged buyout is occurring and, thus, that an additional exception should appear.

4. The party whose knowledge is in question must be specified by name in the endorsement and not generically (such as "shareholders", "officers", "other parties by operation of law" or similar general terms).

5.  The “Name of Insured” in Schedule A of the Owner’s Policy should be the record owner for transactions where there is a partial transfer of an ownership interest.

6. A Senior Underwriter must approve issuance of the endorsement. The issuing agent must retain the written authorization for two years following the issuance of the endorsement.

7.  The issuing agent must retain the written authorization for two (2) years following the issuance of the endorsement.