Test Bank Answer Key
Chapter 13 Title Insurance
TRUE/FALSE
1. A title examination can protect a purchaser against forged signatures on deeds.
2. A title examination cannot protect a purchaser against forged signatures on deeds.
3. A title examination can protect the purchaser against documents executed under a false power
of attorney.
4. A title examination cannot protect the purchaser against a power of attorney that has expired.
5. Schedule A of a title insurance policy contains a list of exceptions to coverage.
6. Schedule B of a title policy contains a list of exceptions to coverage.
7. An owner’s policy of title insurance insures access to and from the land.
8. A loan policy of title insurance does not insure access to and from the land.
9. A loan policy of title insurance does insure the right of access to and from the land.
10. An owner’s title insurance policy insures marketability of title, which means it insures that the
owner can sell their property.
11. Marketability of title is a legal concept and does not mean that an owner can sell their property.
12. The owner’s policy of title insurance does not insure against matters of zoning.
13. A loan policy of title insurance does insure against matters of zoning.
14. An owner’s title insurance policy excludes from coverage defects, liens, encumbrances, and
adverse claims created by the insured claimant.
15. A loan policy does not exclude from coverage defects, liens, and encumbrances that have been
created by the insured claimant.
16. A title insurance policy does not insure against matters not of public record and not known to
the title company.
17. The ideal effective date for an owner’s title policy is the date of the recording of the deed.
18. An ideal effective date for an owner’s title policy is the date of the signing of the deed.
19. Title insurance covers only losses attributable to matters in existence on the date of the policy.
20. The amount of insurance in a title insurance policy will appear on Schedule B.
21. The amount of insurance in a title insurance policy will appear on Schedule A.
22. Generally, the amount of title insurance for an owner’s policy is the purchase price of
the property.
23. An owner’s title insurance policy is transferable to a purchaser of the property.
24. An owner’s title insurance policy is not transferable to a purchaser of the property.
25. A loan policy of title insurance is transferable.
26. Any owner of the insured mortgage under a loan policy is the insured under the policy.
27. A party in possession is generally a standard exception in a loan policy.
28. Mechanics’ liens are generally a standard exception in a loan policy.
29. Mechanics’ liens are generally a standard exception in an owner’s policy.
30. A pending disbursement clause would most likely be found in an owner’s policy.
31. A pending disbursement clause would most likely be found in a construction loan title
insurance policy.
32. An insured claimant has a duty to notify the title insurance company of any title defects that
may result in a claim under the insurance.
33. A title insurance company has an obligation to defend at its own expense any title defects that
are insured by the policy.
34. A title insurance commitment is a contract to issue insurance once the transaction has
been closed.
35. Title insurance cannot be issued without a title insurance commitment.
36. A title insurance commitment should not be issued without a title examination of the property
to be insured.
37. It is not necessary for a title examination of the property to take place to issue a title
insurance commitment.
38. All requirements for the issuance of title insurance are contained on Schedule B of a title
insurance commitment.
39. All requirements that are necessary for title insurance to be issued are shown on Schedule A
of a title insurance commitment.
40. An ideal effective date for a loan policy is the date of the recordation of the mortgage.
MULTIPLE CHOICE
1. Which of the following is not a risk covered by title insurance?
A. Forged signature on deed
B. Recorded easement
C. Falsification of public records
D. Deed signed under an expired power of attorney
2. Which of the following risks are not insured against in an owner’s ALTA policy?
A. Mechanics’ and materialmen’s liens
B. Access to public road
C. Title is unmarketable
D. Title is not vested in the insured
3. Which of the following information would not be found on Schedule A to an owner’s title
insurance policy?
A. Effective date of policy
B. Name of the insured
C. Exception for parties in possession
D. Description of property insured
4. Which of the following is not an exclusion to an owner’s title insurance policy?
A. Matters of survey
B. Zoning and other government regulations
C. Matters created, suffered, assumed, or agreed to by the insured
5. An owner purchases real property for $100,000.00 and obtains a loan for $80,000.00 from a
lender. An owner’s title insurance policy could be purchased for the following amount:
A. $100,000.00
B. $80,000.00
C. $100,000.00 or $80,000.00
D. None of the above
6. An owner purchases a $100,000 parcel of property but only insures for $60,000. There is a
partial loss under the policy of $30,000. Under the coinsurance rules, the title insurance
company would be liable for the following claim:
A. $30,000
B. $12,000
C. $18,000
D. $24,000
7. Which of the following information is found on Schedule A of an owner’s policy?
A. Effective date of policy
B. Amount of insurance
C. Name of insured
D. Number of policy
E. (a) and (c)
F. All of the above
8. A standard mechanics’ lien exception can be removed from a title insurance policy by
providing the title insurance company with the following:
A. Survey
B. Affidavit that no liens exist
C. Title examination
D. Pending disbursement clause
9. Exceptions for encroachments can be deleted from a title insurance policy by providing the title
insurance company with the following:
A. Affidavit
B. Title examination
C. Survey
D. Pending disbursement endorsement
10. Matters discovered from a title examination of a property would probably be found on
A. Schedule A of a title insurance policy.
B. Schedule C of a title insurance policy.
C. Schedule B of a title insurance policy.
D. none of the above.
11. Which of the following matters is not insured against in a loan title insurance policy?
A. Mechanics’ liens
B. Access to public road
C. Invalidity of mortgage due to usury
D. Priority of the mortgage
12. A pending disbursement clause would most likely be found in
A. construction loan title insurance policy.
B. loan title insurance policy.
C. owner’s title insurance policy.
D. none of the above.
13. In a title insurance policy to insure a first priority mortgage loan, if a prior mortgage is found in
the title examination, it would be located in which schedule of the title commitment?
A. Schedule B, Part 1
B. Schedule B, Part 2
C. Schedule A
D. Schedule C
14. Premiums for title insurance are generally payable:
A. annually.
B. monthly.
C. once at time of issuance.
D. semiannually.
15. The effective date of an owner’s title insurance policy should be the
A. date the deed was signed.
B. date of recording of the deed.
C. date of title examination.
D. date of title commitment.
SHORT ANSWERS
1. James and Paris purchased a home from David and Dana and purchased an owner’s policy of
title insurance in connection with the purchase. After the sale, it was discovered that David and
Dana were separated at the time of the sale and Dana’s signature was forged on the deed. Dana
claims that the deed is void as to her half interest and demands $100,000 for her interest in the
home. James and Paris file a claim with the title insurance company. Will the title insurance
company protect them from Dana’s claim?
2. Good Fortune Company purchases land improved with a building and buys an owner’s title
insurance policy in connection with the purchase. The policy is a standard policy with no
special endorsements. When Good Fortune applies for a permit to open a restaurant, they are
told by the city that the property does not have adequate parking under the zoning ordinance to
be used as a restaurant. Does Good Fortune have any valid claim against the title insurance
company because of this issue?
3. Acme Real Estate Ventures owns a small shopping center. Acme’s ownership is insured by an
owner’s title insurance company. Acme sells the shopping center to Farris Investments. Farris
reviews Acme’s insurance policy showing ownership in Acme and does a title examination
from the date of that policy that shows that Acme has not sold the property. Farris buys the
property but does not get an owner’s policy of title insurance. Later Farris discovers that Acme
did not own the property, as there was a forged deed to one of the previous owners. Can Farris
make a claim against the Acme policy?