Opinion ID: 1358888
Heading Depth: 2
Heading Rank: 1

Heading: Excepting a Restriction from ALTA 9 Endorsement Coverage

Text: The title insurance policy that Commonwealth issued to Nationwide is a 1992 ALTA Loan Policy with an ALTA 9 Endorsement. Like all such policies, it contains six sections: (1) the Insuring Provisions stating the basic coverage terms; (2) the Exclusions from Coverage, which list standard coverage exclusions; (3) the Conditions and Stipulations that define relevant terms and note the parties' responsibilities; (4) Schedule A, which describes the Property and amount of insurance; (5) Schedule B, which lists, in two parts, coverage exceptions specific to the Property; and (6) the ALTA 9 Endorsement (also referred to hereinafter as the Endorsement), which, for an additional price, insures over certain exceptions in Schedule B. See Joyce D. Palomar, 1 Title Insurance Law §§ 5.17-9.4 (2005); Amy W. Beatie & Arthur R. Kleven, The Devil in the Details: Water Rights and Title Insurance, 7 U. Denver Water L.Rev. 381, 398-400 (2004); Charles B. DeWitt, III, Title Insurance: A Primer, 3 Tenn. J. Prac. & Proc. 15, 18-19 (2001). We read these sections together, giving effect to all their provisions. See Western United Life Assur. Co. v. Hayden, 64 F.3d 833, 837 (3d Cir.1995); Eric Holmes, 4 Holmes' Appleman on Insurance § 20.1 (2d ed.1998). The Insuring Provisions of the policy state: SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B AND THE CONDITIONS AND STIPULATIONS, COMMONWEALTH LAND TITLE INSURANCE COMPANY, a Pennsylvania corporation, herein called the Company, insures, as of Date of Policy shown in Schedule A, against loss or damage, not exceeding the Amount of Insurance stated in Schedule A, sustained or incurred by the insured by reason of: 1. Title to the estate or interest described in Schedule A being vested other than as stated therein; 2. Any defect in or lien or encumbrance on the title; 3. Unmarketability of the title; ... 6. The priority of any lien or encumbrance over the lien of the insured mortgage;.... Together with Schedule A, which identifies the Property and sets a $3.5 million amount of insurance, these provisions obligate Commonwealth to insure Nationwide's interest in the Property against loss from any restriction not stated in the Exclusions from Coverage or listed as an exception in Schedule B. Schedule B, which is captioned EXCEPTIONS FROM COVERAGE, lists a number of instruments that affect the Property. Part I of Schedule B sets out matters excepted from coverage that might cause loss to Nationwide. Part II of Schedule B lists matters affecting the Property that are subordinate to Nationwide's interest. The Declaration containing the restrictions giving rise to Nationwide's loss is listed in Part I of Schedule B: This policy does not insure against loss or damage ... which arise by reason of: .... 5. Declaration of Restrictions between Liberty Mills Limited Partnership and PMI Associates dated August 15, 1988 and recorded in Deed Book FHS 1155, page 206, and First Amendment to Declaration of Restrictions between Franklin Mills Associates Limited Partnership and PMI Associates dated December 5, 1989 and recorded December 21, 1989 in Deed Book FHS 1518, page 541. (The PMI Declaration). The Declaration is thus an exception from coverage contained in Schedule B. The Declaration's listing as an exception, however, does not necessarily exempt from coverage all losses stemming from it. As noted, the ALTA 9 Endorsement brings back into play coverage for restrictions contained in instruments listed in Schedule B unless those restrictions themselves are set out in that Schedule. See James L. Gosdin, Title Insurance: A Comprehensive Overview 257 (3d ed.2007); Holmes, supra, § 20.1. Paragraph 1(b)(2) of the Endorsement reads: The Company insures the owner of the indebtedness secured by the insured mortgage against loss or damage sustained by reason of: 1. The existence at Date of Policy of any of the following: .... (b) Unless expressly excepted in Schedule B .... (2) Any instrument referred to in Schedule B as containing covenants, conditions or restrictions on the land which, in addition, (i) establishes an easement on the land; (ii) provides a lien for liquidated damages; (iii) provides for a private charge or assessment; (iv) provides for an option to purchase, a right of first refusal or the prior approval of a future purchaser or occupant. App. at 39 (emphases added). Accordingly, because the Declaration is an instrument referred to in Schedule B as containing... restrictions on the land which ... provides for an option to purchase, a right of first refusal or the prior approval of a future purchaser or occupant, loss arising from it is covered under paragraph 1(b)(2) of the ALTA 9 Endorsement [u]nless expressly excepted in Schedule B. As one might expect, Commonwealth argues that loss arising from the Declaration is expressly excepted in Schedule B, and therefore is not covered by paragraph 1(b)(2) of the ALTA 9 Endorsement. Nationwide contends otherwise. No provision of the policy or Endorsement, however, explains how to determine whether loss from the Declaration is expressly excepted. Commonwealth asserts that Schedule B's two-part structure provides the framework that distinguishes the Declaration as expressly excepted from ALTA 9 Endorsement coverage. Looking first to what Schedule B excepts from the Insuring Provisions of the policy, Commonwealth alleges that only Part I of Schedule B contains exemptions from policy coverage, whereas Part II of Schedule B contains not exemptions from coverage (like Part I) but rather the prioritization of liens. Commw.'s Br. at 3. It states that the respective lead-in language in Parts I and II of Schedule B removes any doubt about this important difference between the two Parts. Id. at 10. The caption to Part I, it notes, states: