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Title being vested other than as stated in Schedule A;

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Any defect in or lien or encumbrance on the title;

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Any statutory or constitutional mechanic’s, contractor’s, or materialman’s lien for labor or material having its inception on or before Date of Policy;

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Lack of good and indefeasible Title.

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No right of access to and from the Land;

The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damage, costs, attorneys’ fees or expenses which arise by reason of:

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a) Any law, ordinance or governmental regulation (including those related to building and zoning) restricting, regulating, prohibiting or relating to

(i) the occupancy, use, or enjoyment of the Land;

(ii) the character, dimensions or location of any improvement erected on the land;

(iii) subdivision of land; or

(iv) environmental protection,

or the effect of any violation of these laws, ordinances or governmental regulations, except to the extent that a notice of the enforcement thereof or a notice of a defect, lien or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at Date of Policy.

b) Any governmental police power not excluded by (a) above, except to the extent that a notice of the exercise thereof or a notice of a defect, lien or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at Date of Policy.

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created, suffered, assumed or agreed to by the Insured Claimant;

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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;

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resulting in no loss or damage to the Insured Claimant;

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attaching or created subsequent to Date of Policy; or

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Guaranty File Number

The reference number or guaranty file number issued by the title agent is inserted here.

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Policy Number

Every Owner Policy must have a designated number for purposes of reference and identification. Generally, these policy numbers are preprinted on the policy jackets. The policy number either preprinted or typed must coincide with the policy number to be typed on Schedule A.

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Date of Policy

The date of the policy (month, day, and year) of the policy must coincide with the date of recording of the last instrument to be reflected in the policy, either as an exception or creating the interest being insured.

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Amount of Insurance

According to Procedural Rule P-66, an Owner Policy must always be written for:

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the current sales price of the land and any existing improvements, plus, at the option of the insured, the cost of improvements immediately contemplated to be erected; or

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if there is no sale, the amount shall be the value of the land and any existing improvements, plus, at the option of the insured, the cost of improvements immediately contemplated to be erected.

When the policy is written to include the cost of improvements which are to be erected in the future, the applicable clauses under Procedural Rule P-8a must be inserted in Schedule B of the policy.

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Name of Insured

The “insured” is the person or persons or the entity for whose benefit the Owner Policy is written. The insured will normally be a purchaser and its name or names must be the same as the vestee of the estate or interest of the insured.

It should be noted, however, that by definition the insured extends not only to the name insured, but also to:

“successors to the Title of the Insured by operation of law as distinguished from purchase, including heirs, , devisees, survivors, personal representatives, next of kin;:

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successors to an Insured by dissolution, merger,  consolidation, distribution or reorganization;

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successors to an Insured by its conversion to another kind of Entity;

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a grantee of an Insured under a deed delivered without payment of actual value consideration conveying the Title;

- If the stock, shares, memberships, or other equity interests of the grantee are wholly-owned by the named Insured,

- If the grantee wholly owns the named Insured,

- If the grantee is wholly-owned by an affiliated Entity of the named Insured, provided the affiliated Entity and the named Insured are both wholly-owned by the same person or Entity, or

- If the grantee is a trustee or beneficiary of a trust created by a written instrument established by the Insured named in Schedule A for estate planning purposes.

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Estate or Interest Being Insured

The estate or interest in the land being insured must be properly set forth, in the same manner as stated in the instrument under which title was acquired by the party to be insured (or by the party in whose name title is vested).

Item No. 2, Schedule A shows the paragraph as follows:

“2. The estate or interest in the Land that is insured by this policy is:”

It is necessary to insert the estate or interest (Fee Simple, Leasehold, Easement etc.).

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Vesting of Title

Item No. 3 of Schedule A shows the following:

“3. Title is insured as vested in:”

This makes necessary the insertion of the name of the party in whose name title is vested.

See Deeds of Conveyance, Section 4.16 for further discussion on vesting of title.

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Description of the Land

Schedule A, Item No. 4. of the Owner Policy shows the following:

“4. The land referred to in this policy is described as follows:”

It is of primary importance that the sufficiency of the legal description enable a competent surveyor to locate the property on the ground.

By policy definition, “land” means “the land described in Schedule A, and affixed improvements that by law constitute real property...” As is evident, the title to personal property is not included in the coverage of a title insurance policy.

The legal description of an area of land, if no exclusions appear, includes the surface, the soil and minerals underneath the surface, the air space above it, trees and growing crops, buildings and other structures permanently affixed to it, etc.. While most title policies cover all of the land, it is possible to insure some portion of the land if this is specified in the Schedule A description of the land.

See TX Owners Policy Schedule A T-1 in the Texas Forms Section.

Schedule B of the Owner Policy lists matters which are not a part of the insurance of a particular parcel of land.

In an Owner Policy, Schedule B is divided into two parts: the general and special exceptions. The general exceptions state those matters which are excluded from coverage according to the rules and regulations of the Texas Department of Insurance. The special exceptions are the exceptions relating to defects, encumbrances, liens, covenants, restrictions or other matters affecting only the particular property being insured.

Schedule B of the Owner Policy reads as follows:

“This policy does not insure against loss or damage (and the Company will not pay costs, attorney’’s fees or expenses) that arise by reason of the terms and conditions of the leases and easements, if any, shown in Schedule A, and the following matters:”

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Item No. 1 in Schedule B of the Owner Policy is the restrictive covenant exception. All restrictive covenants affecting the property shown in Schedule A No. 4 must be listed. If there are no restrictive covenants affecting the property, the exception must be deleted.

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Item No. 2 is the survey exception. This exception can be amended to read “shortages in area” in accordance with Procedural Rule P-2 on the Owner Policy. An additional fifteen percent (15%) of the basic rate for the T-1 or five percent (5%) of the basic rate for a T-1R must be charged if this type of coverage is given in accordance with Rate Rule R-16.

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Item No. 3 is the homestead exception which excepts to any homestead, community property or survivorship rights in the property being insured. This exception may not be deleted.

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Item No. 4 is the tidelands or water rights exception. There is no provision for deletion of this exception.

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Item No. 5 is the tax exception. There is no provision for deletion of this exception.

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Item No. 6 is the general exception to all the terms of documents which are special exceptions to the title of the property. The exceptions that follow this particular exception can be liens of record against the property, easements and rights of way, maintenance assessments, mineral interests etc.. If there are no special exceptions to be listed on Schedule B, Item No. 6 of the Owner Policy should be deleted in its entirety.

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All special exceptions listed in Schedule B of the Owner Policy must be made in accordance with Procedural Rule P-5. Procedural Rule P-5 states that the exception must be specific in nature.

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In the Owner Policy, title agents should take exception to the “rights of parties in possession”. In a commercial property transaction, the exception may be reformed to read “rights of tenants in possession”. In accordance with Procedural Rule P-3, a waiver of inspection must be signed by the insured before this exception can be placed in the Owner Policy. If the insured does not accept this exception in their policy, the title agent can make an inspection of the subject property to assure themselves that no third party is actually occupying the property outside of the record owners. A reasonable charge may be made for this inspection.

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When an Owner Policy is issued prior to completion of improvements, the following language must be inserted in Schedule B pursuant to Procedural Rule P-8(a)l:

“Any and all liens arising by reason of unpaid bills or claims for work performed or materials furnished in connection with improvements placed, or to be placed, upon the subject land. However, the Company does insure the Insured against loss, if any, sustained by the Insured under this Policy if such liens have been filed with the County Clerk of _____________, County, Texas, prior to the date hereof”, and

“Liability hereunder at the date hereof is limited to $_______. Liability shall increase as contemplated improvements are made, so that any loss payable hereunder shall be limited to said sum plus the amount actually expended by the Insured in improvements at the time the loss occurs. Any expenditures made for improvements, subsequent to the date of this policy, will be deemed made as of the date of this policy. In no event shall the liability of the Company hereunder exceed the face amount of this policy. Nothing contained in this paragraph shall be construed as limiting any exception or any printed provision of this policy.”

In the event the premium for the Owner Policy is paid in installments pursuant to Rate Rule R-2(b) or (c), the following shall be added to the “Liability” paragraph:

“Notwithstanding the foregoing, liability hereunder shall only increase as down-date endorsements are issued pursuant to expenditures made for improvements and as the corresponding fractional premium for the policy and the full premium for the down-date endorsement are paid.”

Upon completion of the improvements, an owner’s acceptance affidavit and an all bills paid affidavit from the builder/contractor should be required before eliminating the completion of improvements and liability paragraphs. If any unpaid bills for labor or materials are suspected, a thorough investigation of all circumstances should be made before a deletion is made. If this situation occurs, appropriate underwriting personnel should be contacted immediately.

See TX Owners Policy Schedule B T-1 in the Texas Forms Section.

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Leasehold Endorsement

See Leasehold Insurance, Section 11.04.

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Increased Value Endorsement (T-34)

This endorsement can be issued when the value of the property has increased since the original Owner Policy was issued. Sufficient evidence must be secured to support the requested increase in value. Title agents should be careful not to confuse the increased value endorsement with a situation wherein the insured is seeking to place improvements on the property. The applicable rate is found in Rate Rule R-15(a).

See TX Increased Value Endorsement for Owner Policy T-34 and the TX Increased Value Endorsement for Residential Owner Policy T-34 in the Texas Forms Section.

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Completion of Improvements Endorsement

When an Owner Policy is issued in accordance with Procedural Rule P-8(a) and the coverage increases as provided in Rate Rule R-2, the Company may extend the effective date of the Owner Policy and state the amount then existing under the Owner Policy by issuing the endorsement provided for in Form T-3, Instruction VIII.

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Supplemental Coverage Manufactured Housing Unit Endorsement

Where an Owner's Policy has been issued covering the land and a manufactured housing unit that has been affixed to the land so as to become part of the real property, the Company may, issue the Supplemental Coverage Manufactured Housing Unit Endorsement (Form T-31.1) upon the payment prescribed in Rate Rule R-15.c and all expenses required by the Company.

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Please note: Procedural Rule P-17 allows for electronically reproduced endorsements which do not need facsimile signatures of Stewart Title Guaranty or numbering. GF files and HUD-1 closing statements must reflect issuance of endorsements in the case of audits of the agent.

An authorized signatory should countersign the policy in the appropriate space on the jacket. In addition, the issuing agent’s full name, address, and telephone number should appear on the jacket.