Patricia purchases a vacant lot in Napa County, California. Her CLTA title insurance policy was issued for $300,000. Five years later, she builds a home on the lot, increasing the property value to $800,000. A title defect from before her purchase is then discovered. What is the maximum amount Patricia can recover from her title insurance company?
Correct Answer
A) $300,000, because the CLTA policy pays up to the face amount at the time of issuance
A CLTA title insurance policy pays up to the face amount of the policy, which is typically the purchase price at the time of issuance. Patricia's policy was issued for $300,000, so that is her maximum recovery regardless of the property's current value. To protect against increased value, property owners can purchase inflation endorsements or additional coverage.
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