Certificate of Title Top Up Insurance
During a property acquisition, re-financing or development, purchasers and lenders rely on a Certificate of Title in order to ensure that all matters relating to the property are acceptable and that there is a good and marketable title.
Generally the lawyer producing this will be liable for any mistakes, errors or omissions and in the event that this happens, the owner of the land would seek to recoup damages and any financial losses from the law firm. This would be claimed under their Professional Indemnity (PI) Insurance.
During a large transaction, at times, the solicitor preparing the Certificate of Title (CoT) seeks to limit their liability. This is because they would need to secure additional professional indemnity insurance and the costs of this has increased significantly over the last few years. The cost of this additional insurance can be prohibitive to the transaction and therefore the choice is to either accept the limit of liability or pay a significant amount of premium to top up the level of PI cover. Lenders can request the full limit of liability but the premium payment would be the responsibility of the borrower. In accepting the limit of liability cap, there is a risk that an issue could cause a significant loss as title ownership is generally binary.
Most of the statements and issues covered by a CoT fall within the risk appetite of the title insurance market and we are seeing insurers provide “top up” cover to these CoTs up to the full value. The risk from an insurer perspective is good as there is usually a large buffer or excess where the solicitor has their level of PI in place, keeping premiums low in comparison to PI.
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These policies, while new, are becoming wider in terms of coverage and insurers are looking to widen their offering to cover almost all of the statements. The amount of cover we can procure is significant and in the hundreds of millions to a billion pounds. Though the market for this type of cover is embryonic, more insurers are starting to be able to provide this type of policy.
Get in touch with Anna Beadsmoore Jessica Cook or Holly Hamer to find out more.