Dewey Developer found a nice pristine undeveloped 200-acre tract of land in a rural part of the state. It offered a variety of landscapes: flat, wooded, mountainous, and it even had streams running through it. It would be perfect for the development he had in mind, and the price was right. Dewey purchased the tract foregoing having it surveyed until he was going to file a plat on record showing the road system and lots. While having the tract laid out and divided, the surveyor reported that he had discovered a cabin located deep in the middle of the 200 acres with a parcel that was fenced in. Dewey drove out to the cabin and discovered it was not being lived in, but it did show signs of recent human activity. There were no power lines running to the cabin.
Dewey reported his finding to the attorney who had closed the 200-acre purchase for him, and the attorney advised he had done a 62-year title search and had found no evidence of any conveyances to third parties. The attorney decided to dig a little deeper, and when he took the title back further, he discovered an out conveyance for a 15-acre parcel which covered the tract the cabin was located on. However, the description in the next deed out in the chain neglected to account for this 15 acres. In order to have discovered this out conveyance, the attorney would have had to have conducted a 66-year title search. The attorney advised Dewey to submit a claim with his title insurance company, but when he did, the claim was denied because of the survey exception in the title policy.
Is there anything that Dewey could have done differently, and does he have any options now? The obvious answer to the first question is that Dewey could have had the property surveyed before he purchased it, since the surveyor was the party who discovered the cabin. Surveying a 200-acre tract of land is expensive, but so is losing a 15-acre parcel.
Although Dewey’s title policy contained an exception for survey matters, he could resubmit the claim and ask the title company to reconsider based on the fact that the loss of such a large amount of land goes to the aspect of the title that was insured under Schedule A. Title insurance policies insure fee title, and the loss of title of land described under Schedule A of the policy may be covered pursuant to further consideration by the company. Dewey could also ask the title company to reconsider the claim on the basis of Marketability of Title.
In the 2006 ALTA Owner’s Policy, on the face page, under “Covered Risks” the policy provides:
COVERED RISKS SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B, AND THE CONDITIONS, BLANK TITLE INSURANCE COMPANY, a Blank corporation (the “Company”) insures as of Date of Policy and, to the extent stated in Covered Risks 11, 13, and 14, after Date of Policy, against loss or damage, not exceeding the Amount of Insurance, sustained or incurred by the Insured by reason of:
1. Title being vested other than as stated in Schedule A, and
3. Unmarketable Title.
Items 1 and 3 may offer the opportunity for Dewey to have his claim re-evaluated and compensated for the loss of the 15 acres that he thought he purchased.