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Title News - May/June, 2007

May/June, 2007 - Volume 87 Number 3

ALTA® History
The Future of the Title Insurance Policy

by James E. Sheridan

ALTA®’s first executive vice president offered his predictions in 1956 on the future of the title industry and specifically the important role the title policy would play. See if his predictions came true.

How do I dope out our future? Not the future tomorrow morning before breakfast; but just as sure as day follows night, I truly believe the future will come into our field of endeavor. My predictions will come by voluntary action on our own part. They will come as the result of public demand.

1. THE EXTINGUISHMENT OF THE ABSTRACT AS WE KNOW IT TODAY?
Note please I close this with a question mark not a period. It is not a statement. It is a question. I wish I could completely resolve my own thinking on this point.

There are many facets in the diamond of our profession. Some are pure white as for instance the complete title plant -- an absolute necessity, in my judgment, or its equivalent, in the economic life of any community.

But that is only one facet. There are others. One is on the discolored side. It is the slowness of service made necessary by the preparation of the abstract itself and intensified by the constantly increasing size of the abstract, both in the number of pages and the material to be covered in the entries.

Another is the inability or the unwillingness of the abstracter in some localities to do much toward speeding up service of abstracts. I could cite -- but will not -- plenty of instances to prove where poor service by the abstracter accomplished results that were dire to the future of his own business. One is the appearance in the field of a competing abstract company. Another is the entrance of the title insurance more and more into community life.

In other words, I presume that the extinguishment of the abstract of title as we know it today will be affected, will be retarded or postponed, or will be speeded up exactly in proportion to the good or poor service the abstracter gives to the public.

2. THE GROWTH AND EXPANSION OF THE USE OF TITLE INSURANCE
First of all I want to emphasize that I work for you who make abstracts only; I work for you who make abstracts and also have a title insurance connection; I work for the title insurance companies. Our job in national headquarters is to be of service to all. I am no proponent for one method as against another. We try to report our observations based upon facts and without any coloring of personal affection for or against any other.

Only he who buries his head in the sands would deny, the growth of title insurance is phenomenal. This has been notably so in case of mortgage policies. I shall not dwell here for the reasons for the demand. Suffice it to say the demand is there, and there are companies able and willing to fill the demand.

The next great forward step in the further extension of title insurance, in my judgment, will occur in the owner’s policy. It is under way now. I do not expect it to be stopped or slowed down. There are too many buyers from too many localities who call for it. No matter what the condition may be today or may be tomorrow, I believe the abstract office is and will continue to be the fountainhead of title evidencing. There are rough spots between various factions or segments within our profession. That is admitted by all. There are obstacles to be overcome. That, too, is admitted. But the ingenuity of the American businessman I predict will solve, will surmount these obstacles.

As I see the future of our profession, the modern, up-to-date local abstract office will be as necessary to the title insurer, to the local examining attorney for said title insurer, and also to the general public as are the five senses of the body are necessary to the continuance of life itself.

Here below I outline my own personal thinking of the future of the title insurance policy; and it will be clearly seen I interweave the local title plant, the abstract office, the local examining attorney agent of the title insurance company and the title insurance company itself into mosaic -- each of necessity vital to the other.

The title policy of the future, as I visualize it, will differ from the title policy of today to the point that the information contained in the local abstract and title plant is vital to the proper issuance of the policy.

Or, put another way, conceivably the abstracter of titles could survive in a market which consists of abstracts of title plus the opinion of the examination attorney. The insurer of titles will find it necessary to procure, by means available to him, information necessary to the issuance of his policy in the form desired by the public.

The owner’s policy of title insurance of the future will cover, I believe, points of information and indemnity not now therein contained. Some of these are already in the cards. Still others undoubtedly are in the remote future. But come they will through a wedding of the title insurer and a local agent who is in possession of a plant or who can procure the necessary data from a plant; and the local office can become a headquarters of realty transactions.

Let me emphasize here and now this point: Assuming title insurance -- owner’s policies as well as mortgage policies -- continues at the phenomenal growth witnessed in the last ten to fifteen years outside the large urban centers into the medium-sized towns and then down to the rural areas, it becomes rather obvious that the insurer will need the information contained in the title plant, or its equivalent, in the form of an adequate search of the public records. Each complements the other. One is necessary to the other. There should be a full partnership working agreement.

The reverse is equally true. The relationship can not function successfully if it is a wedding of convenience, a stopgap arrangement. It can not and must not be a shotgun wedding. It should not be viewed by the abstracter as a necessary evil, which, reluctantly, he has accepted. Nor should it be considered by the title insurer as one step in a campaign, long or short, to take over the office of the abstracter and operate it as a branch office.

If the policy of the future does come into fruition, it will include numerous items of coverage not now contemplated by either the insurer or his agent. It will mean additional exposure for the insurer and his agents; it will mean additional work and additional expense. And it will mean additional revenue.

This then is my conception of the all-inclusive policy of title insurance, owner’s form -- a comprehensive policy it might be termed.

A - In the ATA form the insurer covers materialmen’s liens and labor liens. I expect this to be extended to the owner’s policy.
B - There is an ever increasing request for an owner’s policy that carries protection against rights of parties in possession and questions of survey.

Requests for both, at the moment, seem to stem largely from great industries seeking to invest pension funds in real estate. Associate counsel of one large industrialist takes the position that pension monies are trust monies and he wants in the way of protection for that trust money anything and everything that, in the nature of protection, he can buy. More lately he has extended his thinking to investments by his company in industrial property owned by his company per se.

B1 - For the title insurer this means more inspection and greater care in inspection.
B2 - In the case of the agent it means exactly the same type of inspection. Thus to both it means increased operating expenses. B3. In the matter of survey coverage it means both will have to use much greater care in selecting engineers to do the survey work. I would not be surprised to see many title insurer companies be concerned enough to maintain their own engineering department rather than rely on outside engineers, particularly engineers about whose ability they have some doubts, and engineers from whom recovery for loss occasioned to the title insurer by engineering errors might be remote.
B4 - In the case of the agent I do not foresee company-employed engineers necessary except in a few spots where the size of the community might warrant such employment. But I do believe the abstracter agent will have an extremely close business relationship with a few -- not many -- engineers whose work he will be willing to accept-and none others.

Perhaps it might even shape up to the organization of a wholly-owned subsidiary operated by a firm of engineers.

C - A death-record plant.
D - Federal liens; an index of federal liens. Requests for coverage against the above are steadily on the increase. Such additional service to the beneficiary means in turn the call will move down into the locality of his agent. Yes, it means additional expense -- increased service -- but it also means increased revenue.
It is exactly in the same category as is the extension by the abstracter to cover probate and court back in the old days. E - Zoning Ordinance. There is an ever increasing request on the part of owners of real estate for information on this. It applies both to abstracts and title insurance policies. It comes from the large, medium-size, and small incorporated towns. For anyone to build a record of zoning ordinances admittedly is a monumental job. I do not believe the demand for this will come in the immediate future, but I do suspect it will come.

In other words, ladies and gentlemen, I expect the calls upon us to ever be on the increase and never on the decrease.

F - Future physical improvements authorized by the governing body of a political subdivision but with respect to which no lien as yet has been spread.

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James E. Sheridan was executive vice president of ALTA® from 1931-1959 when it was headquartered in Detroit. This article was originally printed in the November 1956 Title News as part of the proceedings from ALTA®’s 50th Annual Convention that year in Miami Beach, FL.

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