A California buyer purchased property via grant deed from a seller who had acquired title through a tax sale. The buyer obtained a CLTA standard title insurance policy at closing. Five years later, the original owner challenges the tax sale, alleging defective proceedings that are evidenced by irregularities in the recorded tax sale documents. Under a CLTA standard policy, what is the title insurer's obligation?

Correct Answer

D) Coverage applies, because a CLTA standard policy insures against title defects that are discoverable from an examination of the public record, including irregularities in recorded tax sale proceedings

A CLTA standard title insurance policy covers losses arising from defects, liens, or encumbrances that are discoverable through an examination of the public record. When defects in a tax sale proceeding — such as procedural irregularities — are reflected in or ascertainable from the recorded instruments (e.g., the recorded tax deed, the tax collector's affidavit, or the notice of sale), those defects fall within the scope of CLTA standard coverage. The insurer is obligated to defend the insured's title or indemnify the insured for covered losses under California Insurance Code §12340 et seq. and standard CLTA policy terms.