Title Insurance -
CLTA vs ALTA Title Coverage

There are generally two types of title insurance policies used.

CLTA (California Land Title Association) is insuring against loss including attorney fees (up to the purchase price for as long as the homeowner owns the property) due to all matters of record, fraud and forgery, and it assures that title is being vested in the person shown on the policy.

The ALTA (American Land Title Association) policy covers the same items as the CLTA policy as well as many additional risks such as unrecorded mechanic's liens, assessments, encumbrances, encroachments, easements, water rights, mining claims, patent reservations, conflicts of boundary lines, shortages in area access to and from the land and other visible matter, as the title company actually performs a physical inspection before it issues an ALTA policy.

Institutional lenders demand an ALTA policy as it insures the lender against loss for the entire length of the loan and the un-enforceability or invalidity of the note and deed of trust.

Coverage: The ALTA loan policy insures the lender against loss or damage up to the policy limit, plus costs and attorneys. Fees incurred under the policy that are caused by (1) title being vested in a person other than the one shown in the policy, (2) title defects, (3) liens and encumbrances, (4) lack of a right of access to the land, (5) marketability of title, (6) prior mechanics' liens, and street improvement assessment liens. In addition, the policy insures the priority and validity of the lender's lien on the property, except to the extent that the insured encumbrance is invalid or unenforceable due to usury, the effect of any consumer credit protection, or truth in­ lending laws.

In addition, policy coverage is extended to the following matters that are ordinarily excluded from the CLTA standard coverage policy: off-record defects, liens, encumbrances, easements, and encroachments; rights of parties in possession or rights discoverable by inquiry of parties in possession and not shown on the public records; water rights, mining claims, and patent reservations; and discrepancies or conflicts in boundary lines and shortages in areas that are not reflected in the public records.

Exceptions To Coverage: The primary difference between the ALTA loan policy and the CLTA Standard Coverage Policy is the omission of the standard exceptions contained in Schedule B, Part I of the CLTA policy. No standard exceptions are set out in the ALTA loan policy. Instead, the title insurer will list specific matters that constitute exceptions to the coverage of the lender's lien.

Matters that constitute defects, liens, or encumbrances on the title and that would be subordinate to the insured lien are set forth in Schedule B, Part II of the ALTA loan policy. In most cases, such matters would be listed in the preliminary title report issued by the insurer before closing of the transaction and issuance of the policy and the lender would require them to be deleted from the policy.

Excerpts from "California Title Insurance Practice"