GENERIC EXCEPTIONS AND A CASE IN POINT: MINERAL RIGHTS

ATG encourages you not to include "generic" exceptions on your commitments and policies. A generic exception is one that identifies a class of defects and excepts them from coverage without an investigation into whether there are any specific instances of the defect in the title to the land insured. An example of a generic exception is as follows:

This [commitment or policy] shall not be construed as insuring the mineral interests, if any, in this legal description.

To write title insurance, you should instead conduct a search and reveal its findings with specificity. To transform the above exception into a specific exception, please conduct a search, observing the following search guidelines, and raise specific exceptions as necessary.

 

  • If there is a prior title policy that contains no reference to mineral rights, and the legal description includes the mineral estate, then assume mineral rights are included and no mineral search is required.

     

  • If the prior title policy and the deed of conveyance excepts out the mineral estate from the legal description, then no mineral rights search is required, just continue to except out the mineral estate, using the same language.

     

  • If the prior title policy excepts out the mineral rights, but the deed of conveyance does not, then you must go by the prior deed and conduct a full search, or even a search back to the land patent, depending upon circumstances. You must make sure you specifically search for a severance or lease of the minerals.

ATG requires specific exception language because title companies have a duty to search the public records, examine applicable law, and reveal the results to the insured. Dinges v Lawyers Title Ins Corp, 106 Ill App 3d 188, 191, 435 NE2d 944, 947, 62 Ill Dec 146, 149 (5th D 1982). An insured expects that the title company will conduct a professional title search, provide a legal opinion as to the condition of title, and provide a guarantee. Furthermore, the courts will uphold this expectation. Therefore, ATG members must be sure to provide a complete search of the public records and specific details of the results in title policies.

If you identify defects, liens, or encumbrances that would not be revealed by a search of the public records, then you may raise a generic exception, such as the five Standard Exceptions on the commitment, the exception for public, unrecorded roads, or the exception for drainage tiles. If you have a question about raising a "generic" exception, please contact the Underwriting Department for approval at 800.252.0402, or email at legal@atgf.com.

© ATG UB0107vol6no2

 

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