Date:June 24, 2014
To:All Insurers Authorized to Write Title Insurance
From:Theodore K. Nickel, Commissioner of Insurance
Subject:Use of Blanket Exceptions in Consumer Title Insurance Policies

The Office of the Commissioner of Insurance received a complaint that some title insurance companies and agents have begun to use broad "blanket exceptions" in their title insurance policy form for owners and non-lenders (consumers) which exclude from coverage the most common encumbrances on title such as recorded restrictions, covenants and easements that could generally be discovered during a public records search. The following are examples of blanket exception language (emphasis added):

Covenants, conditions, restrictions, easements, leases, grants and exceptions or reservations for mineral rights, if any, appearing in the public record.

Or

Covenants, conditions, restrictions, easements, servitudes, reservations of mineral or mineral rights, if any, affecting title to the land which . . . (ii) appear in or are referenced in the public land records, or (iii) appear in, are shown on or are referenced in any recorded plat or certified survey map.

Or

Covenants, conditions, and restrictions, if any, affecting title which appear in the public records; easements or servitudes, if any, which appear in the public records or are shown on any recorded plat or certified survey map; reservations of mineral or mineral rights, if any, appearing in the public land records.

Title insurance policies commonly exclude encumbrances that cannot be discovered through a public records search. A title insurance policy that excludes coverage for encumbrances outside of a public records search and encumbrances which could be found by a reasonable title search of public records without identifying specifically excluded encumbrances leaves little to no coverage for the consumer and does not warn the consumer that the title they are purchasing may have defects. This conflicts with the essential purpose of providing title insurance coverage.

Section 631.20 (2) (a) 1., Wis. Stat., states:

The commissioner may disapprove a form under sub. (1) (a) or (3) upon a finding:
(a) That it is inequitable, unfairly discriminatory, misleading, deceptive, obscure or encourages misrepresentation, including cases where the form:
1. Is misleading because its benefits are too restricted to achieve the purposes for which the policy is sold;

Blanket exceptions similar to the examples listed above, in combination with other exceptions in a title insurance policy, essentially exclude all encumbrances—those that can and cannot be discovered through a public records search. Title insurance policies with blanket exceptions provide the consumer with little, if any, title insurance coverage.

For this reason, the Commissioner considers consumer title insurance policies which contain blanket exceptions to be misleading because the benefits are too restricted to achieve the purposes of title insurance. Accordingly, as of the date of this bulletin, the Commissioner will disapprove any title insurance forms for consumers or owners that include blanket exceptions submitted pursuant to s. 631.20, Wis. Stat. In addition, insurers cannot certify pursuant to s. 631.20 (1m) (a) 3., Wis. Stat., that a consumer/owner title insurance policy form which includes blanket exceptions complies with chs. 600 to 655, Wis. Stat., and rules promulgated under chs. 600 to 655, Wis. Stat. Insurers and agents of insurers who issue policies with blanket exceptions after that date of this bulletin in consumer/owner title insurance policies may be subject to enforcement action by the Office of the Commissioner of Insurance pursuant to ss. 601.41 and 601.64, Wis. Stat. Insurers may continue to list specific exemptions for actual title defects or impairments that are discovered during a public records search.

Please contact Danielle Rogacki at (608) 267-3868 or danielle.rogacki@wisconsin.gov if you have any additional questions.