The Office of General Counsel issued the following informal opinion on September 24, 2001, representing the position of the New York State Insurance Department.
Re: Survey Exception in a New York State Land Title Insurance Policy
1. May a title insurance policy delivered or issued for delivery in New York contain an exception other than as filed and approved by the Superintendent?
2. If a title insurance policy contains an exception for "any state of facts an accurate survey might show", will New York law require that the policyholder be covered for a recorded title defect that the insurer failed to discover even if the defect would have been discovered in the record during the course of an accurate survey?
1. No. N.Y Ins. Law § 2307(b) (McKinney 2000) provides that no policy form shall be delivered or issued for delivery until it is filed with the superintendent and has been approved or thirty days has elapsed and it has not been disapproved.
2. This is a matter of policy language interpretation not addressed by the New York Insurance Law or the regulations promulgated pursuant thereto.
An entity is acquiring a tract of land in New York State before having the land surveyed and is purchasing a title insurance policy as a means to obtain a reliable search for defects in the title record before the acquisition. The entity is reviewing the policy to determine whether the title search is adequate to protect the investment in the property. The survey exception that the insurer proposes to use is "any state of facts an accurate survey might show." This differs from a commonly used exception in that it is not qualified by the phrase "not shown by the public records." The entity is therefore concerned by the possibility that, under this exception, an undisclosed defect would not be covered if it could have been discovered in the record by a surveyor in the course of conducting a survey. The entity asked the insurer if the commonly used survey exception could be substituted for the exception language in its policy. The insurer stated that it could not vary the exception language in its policy because that language had been filed with and approved by this Department.
N.Y. Ins. Law § 2307(b) (McKinney 2000) provides:
Except as otherwise provided herein, no policy form shall be delivered or issued for delivery unless it has been filed with the superintendent and either he has approved it, or thirty days have elapsed and he has not disapproved it as misleading or violative of public policy.
Thus, the insurers assertion that it can not vary the exception language in its policy because this is the language included in the Title Insurance Rate Service Associations Title Insurance Rate Manual approved by the Superintendent is correct. The insurer would have to file the new language with the Superintendent, in accordance with the above provision, before a policy with the new language could be delivered or issued for delivery.
Whether, under the New York exclusion, a policyholder would be covered for a recorded title defect that the insurer failed to discover, even if the defect would have been discovered in the record during the course of an accurate survey, is a matter of policy language interpretation that is not addressed by the New York Insurance Law or the regulations promulgated pursuant thereto.
For further information you may contact Supervising Attorney Joan Siegel in the New York City Office.