A buyer purchases a home in Orange County, California, and receives a CLTA standard title insurance policy. Three years later, the buyer discovers that a deed in the chain of title was forged 20 years ago, potentially voiding the buyer's ownership. The buyer files a claim with the title insurance company. How will the title insurance company MOST likely respond?
Correct Answer
C) Pay the claim because forgery is a covered risk under a CLTA standard title insurance policy
Forgery is one of the fundamental risks covered by a CLTA standard title insurance policy. Title insurance protects against defects that existed at the time the policy was issued, regardless of when the defect originated. A forged deed in the chain of title is a covered risk, and the title company would be obligated to defend the insured's title or compensate for losses up to the policy amount.
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Key Terms:
Related Concepts
Constructive notice is the legal presumption that a person has knowledge of information that is available through public records or visible inspection of the property, regardless of whether they actually knew about it.
A deed is a written legal document that conveys (transfers) ownership of real property from one party to another. It must be delivered to and accepted by the grantee to be effective.
For a deed to be valid, it must contain several essential elements including a competent grantor, identifiable grantee, consideration, legal description, granting clause, signature of the grantor, and delivery and acceptance.
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