Legal Boundaries

What many surveyors might not know about title insurance and boundary surveys is they are intricately intertwined, due primarily to the unilateral efforts of the title companies issuing title insurance policies. Unilateral in the sense that the title company can issue a title policy with what is refers to as “survey coverage,” on any boundary survey map proffered by the landowner in conjunction with the issuance of a title policy.

This could be without the input of the land surveyor and regardless of the surveyor’s willingness to be the guarantor of the survey results. This usually happens through an ALTA/NSPS Land Title Survey, but the title policy only specifies that the survey be “complete and accurate,” an ALTA survey is not required. 

What I mean by “survey results” is the on-the-ground location of the property lines as represented on the map of survey being underwritten by the title company. Rest assured, if the title company provides “survey coverage” and there is something wrong with the location of the property lines as represented by the surveyor, the insurance company will presumably pay out on the policy and will then seek indemnification from the surveyor for any mistakes in that representation.

This is what insurance companies are supposed to do—payout on colorable claims and seek indemnification from those who caused the policy coverage to be invoked. In such a situation involving a boundary survey, the surveyor will be the ultimate guarantor of the property lines. In other words, what we are talking about here is “boundary insurance.”  

Most landowners do not understand the importance of these two documents (especially the survey) or why they are significant. To be sure, most buyers of real property will purchase a title insurance policy, because they will be required to buy, at the very least, a “Lender’s Policy” of title insurance for the mortgage company. Simply put, the mortgage company isn’t going to lend the money without having its interest protected at the expense of the borrower.

Presumably, most homeowners will also obtain an “Owner’s Policy” of title insurance, but that is not a foregone conclusion or a requirement of the transaction.   

If landowners truly understood the dynamic between the owner’s title policy and the boundary survey, it is hard to image why, for the price of a survey and some additional premium, they wouldn’t also opt for “survey coverage,” resulting in both title insurance and boundary insurance. This would be akin to Torrens Title. 

In the commercial context the word is out on boundary insurance, which could help explain the explosion in the requests for ALTA surveys over the past several years. Sophisticated clients are being advised to pay an extra premium to purchase “survey coverage.” Actually, under the default coverage on page one of a standard Owner’s Policy, “Covered Risks” includes: “Any encroachment, encumbrance, violation variation, or adverse circumstance affecting the Title that would be disclosed by a complete and accurate survey of the land.” [Emphasis added.] 

For “survey coverage” not to be included under the policy, the title company must specifically exclude it in Schedule B, through what is commonly referred to as the “survey exception.” The survey exception counteracts and otherwise excludes the survey coverage offered on page one. 

This is the whole purpose of the ALTA/NSPS Land Title Survey, to provide a complete and accurate survey to the title company whereby the company will cover the survey under the policy. Whether you know it or not, when you perform an ALTA survey you are in the insurance business. Congratulations. 

I’m not sure too many surveyors fully understand the relationship between the insurance policy and the boundary survey. There are at least two factors that make me think this. 

First, is the wide-eyed, deer-in-the-headlights look I get from surveyors when I explain this insurance-survey relationship in a live seminar. Second, is the relatively low fees surveyors continue to charge for ALTA surveys. This tells me that surveyors do not know that they are providing insurance coverage as well as surveying services. You might want to reconsider your fees for ALTA surveys. Paying out on a policy may be in your future.  

The purpose of this column is to encourage your questions on boundary surveying issues that we will address in future installments. As such, you are invited to send your questions to the Editor of xyHt.