T-2 TX Loan Policy

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T-2 TX Loan Policy

Form Document

03/22/2012

V 4

LOAN POLICY OF TITLE INSURANCE (Form T-2)
Issued by

Blank Title Insurance Company

Any notice of claim and any other notice or statement in writing required to be given the Company under this Policy must be given to the Company at the address shown in Section 17 of the Conditions.

COVERED RISKS

SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B AND THE CONDITIONS, BLANK TITLE INSURANCE COMPANY, a Blank corporation (the “Company”) insures, as of Date of Policy and, to the extent stated in Covered Risks 11, 13 and 14, after Date of Policy, against loss or damage, not exceeding the Amount of Insurance, sustained or incurred by the Insured by reason of:

1. Title being vested other than as stated in Schedule A.

2. Any defect in or lien or encumbrance on the Title. This Covered Risk includes but is notlimited to insurance against loss from:

(a) A defect in the Title caused by:

(i) forgery, fraud, undue influence, duress, incompetency, incapacity orimpersonation;

(ii) failure of any person or Entity to have authorized a transfer or conveyance;

(iii) a document affecting Title not properly created, executed, witnessed, sealed,acknowledged, notarized or delivered;

(iv) failure to perform those acts necessary to create a document by electronicmeans authorized by law;

(v) a document executed under a falsified, expired or otherwise invalid power ofattorney;

(vi) a document not properly filed, recorded or indexed in the Public Recordsincluding failure to perform those acts by electronic means authorized by law; or

(vii) a defective judicial or administrative proceeding.

(b) The lien of real estate taxes or assessments imposed on the Title by a governmentalauthority due or payable, but unpaid.

(c) Any encroachment, encumbrance, violation, variation, or adverse circumstanceaffecting the Title that would be disclosed by an accurate and complete land survey ofthe Land. The term “encroachment” includes encroachments of existing improvementslocated on the Land onto adjoining land, and encroachments onto the Land of existingimprovements located on adjoining land.

3. Lack of good and indefeasible Title.

4. No right of access to and from the Land.

5. The violation or enforcement of any law, ordinance, permit, or governmental regulation(including those relating to building and zoning) restricting, regulating, prohibiting or relating to:

(a) the occupancy, use or enjoyment of the Land;

(b) the character, dimensions or location of any improvement erected on the Land;

(d) environmental protection

if a notice, describing any part of the Land, is recorded in the Public Records setting forth the violation or intention to enforce, but only to the extent of the violation or enforcement referred to in that notice.

6. An enforcement action based on the exercise of a governmental police power not coveredby Covered Risk 5 if a notice of the enforcement action, describing any part of the Land, isrecorded in the Public Records, but only to the extent of the enforcement referred to in thatnotice.

7. The exercise of the rights of eminent domain if a notice of the exercise, describing any partof the Land, is recorded in the Public Records.

8. Any taking by a governmental body that has occurred and is binding on the rights of apurchaser for value without Knowledge.

9. The invalidity or unenforceability of the lien of the Insured Mortgage upon the Title. ThisCovered Risk includes but is not limited to insurance against loss from any of the followingimpairing the lien of the Insured Mortgage:

(a) forgery, fraud, undue influence, duress, incompetency, incapacity or impersonation;

(b) failure of any person or Entity to have authorized a transfer or conveyance;

(d) failure to perform those acts necessary to create a document by electronic meansauthorized by law;

(e) a document executed under a falsified, expired or otherwise invalid power ofattorney;

(f) a document not properly filed, recorded or indexed in the Public Records includingfailure to perform those acts by electronic means authorized by law; or

(g) a defective judicial or administrative proceeding.

10. The lack of priority of the lien of the Insured Mortgage over any other lien or encumbrance.

11. The lack of priority of the lien of the Insured Mortgage

(a) as security for each and every advance of proceeds of the loan secured by theInsured Mortgage over any statutory or constitutional mechanic’s, contractor’s, ormaterialman’s lien for services, labor or material having its inception on or before Dateof Policy ; and

(b) over the lien of any assessments for street improvements under construction orcompleted at Date of Policy.

12. The invalidity or unenforceability of any assignment of the Insured Mortgage, provided theassignment is shown in Schedule A, or the failure of the assignment shown in Schedule A tovest title to the Insured Mortgage in the named Insured assignee free and clear of all liens.

13. The invalidity, unenforceability, lack of priority or avoidance of the lien of the InsuredMortgage:

(a) resulting from the avoidance in whole or in part, or from a court order providing analternative remedy, of any transfer of all or any part of the title to or any interest in theLand occurring prior to the transaction creating the lien of the Insured Mortgagebecause that prior transfer constituted a fraudulent or preferential transfer under federalbankruptcy, state insolvency or similar creditors’ rights laws; or

(b) because the Insured Mortgage constitutes a preferential transfer under federalbankruptcy, state insolvency or similar creditors’ rights laws by reason of the failure ofits recording in the Public Records:

(i) to be timely, or

(ii) to impart notice of its existence to a purchaser for value or a judgment or liencreditor.

14. Any defect in or lien or encumbrance on the Title or other matter included in Covered Risks1 through 13 that has been created or attached or has been filed or recorded in the PublicRecords subsequent to Date of Policy and prior to the recording of the Insured Mortgage in thePublic Records.

The Company will also pay the costs, attorneys' fees and expenses incurred in defense of any matter insured against by this Policy, but only to the extent provided in the Conditions.

[Witness clause optional]

BLANK TITLE INSURANCE COMPANY

By____________________________________________
President

By____________________________________________
Secretary

EXCLUSIONS FROM COVERAGE

The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damage, costs, attorneys' fees or expenses that arise by reason of:

1. (a) Any law, ordinance, permit, or governmental regulation (including those relating tobuilding and zoning) restricting, regulating, prohibiting or relating to:

(i) the occupancy, use, or enjoyment of the Land;

(ii) the character, dimensions or location of any improvement erected on theLand;

(iii) subdivision of land; or

(iv) environmental protection;

or the effect of any violation of these laws, ordinances or governmental regulations. This Exclusion 1(a) does not modify or limit the coverage provided under Covered Risk 5.

(b) Any governmental police power. This Exclusion 1(b) does not modify or limit thecoverage provided under Covered Risk 6.

2. Rights of eminent domain. This Exclusion does not modify or limit the coverage providedunder Covered Risk 7 or 8.

3. Defects, liens, encumbrances, adverse claims or other matters:

(a) created, suffered, assumed or agreed to by the Insured Claimant;

(b) not Known to the Company, not recorded in the Public Records at Date of Policy, butKnown to the Insured Claimant and not disclosed in writing to the Company by theInsured Claimant prior to the date the Insured Claimant became an Insured under thispolicy;

(d) attaching or created subsequent to Date of Policy (however, this does not modify orlimit the coverage provided under Covered Risk 11, 13 or 14); or

(e) resulting in loss or damage that would not have been sustained if the InsuredClaimant had paid value for the Insured Mortgage.

4. Unenforceability of the lien of the Insured Mortgage because of the inability or failure of anInsured to comply with applicable doing business laws of the state where the Land is situated.

5. Invalidity or unenforceability in whole or in part of the lien of the Insured Mortgage thatarises out of the transaction evidenced by the Insured Mortgage and is based upon usury orany consumer credit protection or truth in lending law.

6.Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similarcreditors’ rights laws, that the transaction creating the lien of the Insured Mortgage, is:

(a)a fraudulent conveyance or fraudulent transfer; or

(b)a preferential transfer for any reason not stated in Covered Risk 13(b) of this policy.

7. Any lien on the Title for real estate taxes or assessments imposed by governmentalauthority and created or attaching between Date of Policy and the date of recording of theInsured Mortgage in the Public Records. This exclusion does not modify or limit the coverageprovided under Covered Risk 11(b).

8. The refusal of any person to purchase, lease or lend money on the estate or interestcovered hereby in the land described in Schedule A because of Unmarketable Title.

SCHEDULE A

Name and Address of Title Insurance Company:

[File No.: ] Policy No.:

Loan No.:

[Address for Reference only:]

Amount of Insurance: $ [Premium: $ ]

Date of Policy: [at a.m./p.m.]

1. Name of Insured:

2. The estate or interest in the Land that is encumbered by the Insured Mortgage is:

3. Title is insured as vested in:

4. The Insured Mortgage, and its assignments, if any, are described as follows:

5. The Land referred to in this policy is described as follows:

6. This policy incorporates by reference those endorsements selected below:

 T-5 (Leasehold Loan Policy Endorsement)

 T-17 (Planned Unit Development)

 T-19 (Restrictions, Encroachments, Minerals)

 T-19.2 (Minerals and Surface Damage)

 T-19.3 (Minerals and Surface Damage)

 T-28 (Condominium)

 T-31 (Manufactured Housing) referring to manufactured housing unit serial number _______

 T-31.1 (Supplemental Coverage Manufactured Housing Unit)

 T-33 (Variable Rate)

 T-33.1 (Variable Rate--Negative Amortization)

 T-35 (Revolving Credit/Future Advance)

 T-36 (Environmental Protection Lien) Paragraph b refers to the following state statute(s):

 T-39 (Balloon Mortgage)

 T-42 (Equity Loan Mortgage) and subparagraph 2(f) of the Equity Loan MortgageEndorsement set forth in Procedural Rule P-44.C(2) __ is ___ is not added.

 T-42.1 (Supplemental Coverage Equity Loan Mortgage)

 T-43 (Texas Reverse Mortgage)

 Section 13 of the Conditions of this policy, which relates to Arbitration, is hereby deleted.

[The Company may insert or preprint all or part of paragraph 6 as applicable and may delete boxes or substitute lines for boxes. The Company also may substitute the following at the beginning of paragraph 6: “This policy incorporates by reference those endorsements shown below:”]

SCHEDULE B

File No. Policy No.

EXCEPTIONS FROM COVERAGE

This policy does not insure against loss or damage (and the Company will not pay costs, attorneys’ fees or expenses) that arise by reason of the terms and conditions of leases and easements, if any, shown in Schedule A, and the following matters:

1.The following restrictive covenants of record itemized below, but the Company insures thatany such restrictive covenants have not been violated so as to affect, and that future violationthereof will not affect, the validity or priority of the Insured Mortgage (insert specific recordingdata or delete this exception):

Form T-2 Sec. II Effective November 1, 2024

2. Any discrepancies, conflicts, or shortages in area or boundary lines, or any encroachments or protrusions, or any overlapping of improvements. Covered Risk 2(c) is hereby deleted.

 Item 2 of Schedule B is hereby amended to read: “shortages in area”.

3. Standby fees, taxes and assessments by any taxing authority for the year ___, andsubsequent years; and subsequent taxes and assessments by any taxing authority for prioryears due to change in land usage or ownership, but not those taxes or assessments for prioryears because of an exemption granted to a previous owner of the property under Section11.13, Texas Tax Code, or because of improvements not assessed for a previous tax year.

 Item 3 of Schedule B is hereby amended to delete: “and subsequent taxes andassessments by any taxing authority for prior years due to change in land usage orownership,”

 Item 3 of Schedule B is hereby amended to add the following: “Company insures thatstandby fees, taxes and assessments by any taxing authority for the year ____ are not yet dueand payable.”

4. Liens and leases that affect the Title, but that are subordinate to the lien of the InsuredMortgage.

5. (Insert here all other specific exceptions as to superior liens, easements, outstandingmineral and royalty interests, etc.)

[The Company may substitute lines for boxes or delete the boxes and incorporate any applicable change to the exception above in the exception.]

CONDITIONS

1. DEFINITION OF TERMS.

(a) “Amount of Insurance”: the amount stated in Schedule A, as may be increased ordecreased by endorsement to this policy, increased by Section 8(b), or decreased bySection 10 of these Conditions.

(b) “Date of Policy”: The date designated as “Date of Policy” in Schedule A.

(d) “Indebtedness”: The obligation secured by the Insured Mortgage including oneevidenced by electronic means authorized by law, and if that obligation is the paymentof a debt, the Indebtedness is the sum of:

(i) the amount of the principal disbursed as of Date of Policy;

(ii) the amount of the principal disbursed subsequent to Date of Policy;

(iii) construction loan advances made subsequent to Date of Policy for thepurpose of financing in whole or in part the construction of an improvement to theLand or related to the Land that the Insured was and continued to be obligated toadvance at Date of Policy and at the date of the advance;

(iv) interest on the loan;

(v) prepayment premiums, exit fees and other similar fees or penalties allowed bylaw;

(vi) expenses of foreclosure and any other costs of enforcement;

(vii) amounts advanced to assure compliance with laws or to protect the lien orthe priority of the lien of the Insured Mortgage before the acquisition of the estateor interest in the Title;

(viii) amounts to pay taxes and insurance; and,

(ix) reasonable amounts expended to prevent deterioration of improvements; butreduced by the total of all payments and by any amount forgiven by an Insured.

(e) “Insured": the Insured named in Schedule A.

(i) The term "Insured" also includes:

(A) the owner of the Indebtedness and each successor in ownership of theIndebtedness, whether the owner or successor owns the Indebtedness forits own account or as a trustee or other fiduciary, except a successor whois an obligor under the provisions of Section 12(c) of these Conditions;

(B) if the Indebtedness is evidenced by a “transferable record,” the personor Entity who has “control” of the “transferable record,” as these terms aredefined by applicable electronic transactions law;

(D) successors to an Insured by its conversion to another kind of Entity;

(E) a grantee of an Insured under a deed delivered without payment ofactual valuable consideration conveying the Title:

(1) If the stock, shares, memberships, or other equity interests ofthe grantee are wholly-owned by the named Insured,

(2) If the grantee wholly owns the named Insured, or

(3) If the grantee is wholly-owned by an affiliated Entity of thenamed Insured, provided the affiliated Entity and the namedInsured are both wholly-owned by the same person or Entity;

(F) any government agency or instrumentality that is an insurer orguarantor under an insurance contract or guaranty insuring orguaranteeing the Indebtedness secured by the Insured Mortgage, or anypart of it, whether named as an Insured or not;

(ii) With regard to (A), (B), (C), (D) and (E) reserving, however, all rights anddefenses as to any successor that the Company would have had against anypredecessor Insured, unless the successor acquired the Indebtedness as apurchaser for value without Knowledge of the asserted defect, lien, encumbranceor other matter insured against by this policy.

(f) "Insured Claimant": an Insured claiming loss or damage.

(g) “Insured Mortgage”: the Mortgage described in paragraph 4 of Schedule A.

(h) "Knowledge" or "Known": actual knowledge, not constructive knowledge or noticethat may be imputed to an Insured by reason of the Public Records or any other recordsthat impart constructive notice of matters affecting the Title.

(i) "Land": the land described in Schedule A, and affixed improvements that by lawconstitute real property. The term "Land” does not include any property beyond the lines

of the area described in Schedule A, nor any right, title, interest, estate or easement in abutting streets, roads, avenues, alleys, lanes, ways or waterways, but this does not modify or limit the extent that a right of access to and from the Land is insured by this policy.

(j) "Mortgage": mortgage, deed of trust, trust deed, or other security instrument,including one evidenced by electronic means authorized by law.

(k) "Public Records": records established under state statutes at Date of Policy for thepurpose of imparting constructive notice of matters relating to real property topurchasers for value and without Knowledge. With respect to Covered Risk 5 (d), "PublicRecords" shall also include environmental protection liens filed in the records of theclerk of the United States District Court for the district where the Land is located.

(l)“Title”: the estate or interest described in Schedule A.

(m) "Unmarketable Title”: Title affected by an alleged or apparent matter that wouldpermit a prospective purchaser or lessee of the Title or lender on the Title or aprospective purchaser of the Insured Mortgage to be released from the obligation topurchase, lease or lend if there is a contractual condition requiring the delivery ofmarketable title.

2. CONTINUATION OF INSURANCE.

The coverage of this policy shall continue in force as of Date of Policy in favor of an Insured after acquisition of the Title by an Insured or after conveyance by an Insured, but only so long as the Insured retains an estate or interest in the Land, or holds an obligation secured by a purchase money Mortgage given by a purchaser from the Insured, or only so long as the Insured shall have liability by reason of warranties in any transfer or conveyance of the Title. This policy shall not continue in force in favor of any purchaser from the Insured of either (i) an estate or interest in the Land, or (ii) an obligation secured by a purchase money Mortgage given to the Insured.

3. NOTICE OF CLAIM TO BE GIVEN BY INSURED CLAIMANT.

The Insured shall notify the Company promptly in writing (i) in case of any litigation as set forth in Section 5(a) below, or (ii) in case Knowledge shall come to an Insured of any claim of title or interest that is adverse to the Title or the lien of the Insured Mortgage, as insured, and that might cause loss or damage for which the Company may be liable by virtue of this policy. If the Company is prejudiced by the failure of the Insured Claimant to provide prompt notice, the Company's liability to the Insured Claimant under the policy shall be reduced to the extent of the prejudice.

Subject to the provisions of this policy, upon acquisition of all or any part of the Title pursuant to the provisions of Section 2 of these Conditions, when, after the Date of the Policy, the Insured notifies the Company as required herein of a lien, encumbrance, adverse claim or other defect in Title insured by this policy that is not excluded or excepted from the coverage of this policy, the Company shall promptly investigate the charge to determine whether the lien, encumbrance, adverse claim or defect or other matter is valid and not barred by law or statute. The Company shall notify the Insured in writing, within a reasonable time, of its determination as to the validity or invalidity of the Insured's claim or charge under the policy. If the Company concludes that the lien, encumbrance, adverse claim or defect is not covered by this policy, or was otherwise addressed in the closing of the transaction in connection with which this policy was issued, the Company shall specifically advise the Insured of the reasons for its determination. If the Company concludes that the lien, encumbrance, adverse claim or defect

is valid, the Company shall take one of the following actions: (i) institute the necessary proceedings to clear the lien, encumbrance, adverse claim or defect from the Title as insured; (ii)indemnify the Insured as provided in this policy; (iii) upon payment of appropriate premiumand charges therefor, issue to the Insured Claimant or to a subsequent owner, mortgagee orholder of the estate or interest in the Land insured by this policy, a policy of title insurancewithout exception for the lien, encumbrance, adverse claim or defect, said policy to be in anamount equal to the current value of the Land or, if a loan policy, the amount of the loan; (iv)indemnify another title insurance company in connection with its issuance of a policy(ies) oftitle insurance without exception for the lien, encumbrance, adverse claim or defect; (v) securea release or other document discharging the lien, encumbrance, adverse claim or defect; or(vi)undertake a combination of (i) through (v) herein.

4. PROOF OF LOSS.

In the event the Company is unable to determine the amount of loss or damage, the Company may, at its option, require as a condition of payment that the Insured Claimant furnish a signed proof of loss. The proof of loss must describe the defect, lien, encumbrance or other matter insured against by this policy that constitutes the basis of loss or damage and shall state, to the extent possible, the basis of calculating the amount of the loss or damage.

5. DEFENSE AND PROSECUTION OF ACTIONS.

(a) Upon written request by the Insured, and subject to the options contained in Sections 3 and7 of these Conditions, the Company, at its own cost and without unreasonable delay, shallprovide for the defense of an Insured in litigation in which any third party asserts a claimcovered by this policy adverse to the Insured. This obligation is limited to only those statedcauses of action alleging matters insured against by this policy. The Company shall have theright to select counsel of its choice (subject to the right of the Insured to object for reasonablecause) to represent the Insured as to those stated causes of action. It shall not be liable forand will not pay the fees of any other counsel. The Company will not pay any fees, costs orexpenses incurred by the Insured in the defense of those causes of action that allege mattersnot insured against by this policy.

(b) The Company shall have the right, in addition to the options contained in Sections 3 and 7,at its own cost, to institute and prosecute any action or proceeding or to do any other act thatin its opinion may be necessary or desirable to establish the Title or the lien of the InsuredMortgage, as insured, or to prevent or reduce loss or damage to the Insured. The Companymay take any appropriate action under the terms of this policy, whether or not it shall be liableto the Insured. The exercise of these rights shall not be an admission of liability or waiver ofany provision of this policy. If the Company exercises its rights under this subsection, it mustdo so diligently.

(c) Whenever the Company brings an action or asserts a defense as required or permitted bythis policy, the Company may pursue the litigation to a final determination by a court ofcompetent jurisdiction and it expressly reserves the right, in its sole discretion, to appeal fromany adverse judgment or order.

6. DUTY OF INSURED CLAIMANT TO COOPERATE.

(a) In all cases where this policy permits or requires the Company to prosecute or provide forthe defense of any action or proceeding and any appeals, the Insured shall secure to theCompany the right to so prosecute or provide defense in the action or proceeding, including

the right to use, at its option, the name of the Insured for this purpose. Whenever requested by the Company, the Insured, at the Company's expense, shall give the Company all reasonable aid (i) in securing evidence, obtaining witnesses, prosecuting or defending the action or proceeding, or effecting settlement, and (ii) in any other lawful act that in the opinion of the Company may be necessary or desirable to establish the Title, the lien of the Insured Mortgage, or any other matter as insured. If the Company is prejudiced by the failure of the Insured to furnish the required cooperation, the Company's obligations to the Insured under the policy shall terminate, including any liability or obligation to defend, prosecute, or continue any litigation, with regard to the matter or matters requiring such cooperation.

(b) The Company may reasonably require the Insured Claimant to submit to examination underoath by any authorized representative of the Company and to produce for examination,inspection and copying, at such reasonable times and places as may be designated by theauthorized representative of the Company, all records, in whatever medium maintained,including books, ledgers, checks, memoranda, correspondence, reports, e-mails, disks, tapes,and videos whether bearing a date before or after Date of Policy, that reasonably pertain to theloss or damage. Further, if requested by any authorized representative of the Company, theInsured Claimant shall grant its permission, in writing, for any authorized representative of theCompany to examine, inspect and copy all of these records in the custody or control of a thirdparty that reasonably pertain to the loss or damage. All information designated as confidentialby the Insured Claimant provided to the Company pursuant to this Section shall not bedisclosed to others unless, in the reasonable judgment of the Company, it is necessary in theadministration of the claim. Failure of the Insured Claimant to submit for examination underoath, produce any reasonably requested information or grant permission to secure reasonablynecessary information from third parties as required in this subsection, unless prohibited bylaw or governmental regulation, shall terminate any liability of the Company under this policyas to that claim.

7. OPTIONS TO PAY OR OTHERWISE SETTLE CLAIMS; TERMINATION OF LIABILITY.

In case of a claim under this policy, the Company shall have the following additional options:

(a) To Pay or Tender Payment of the Amount of Insurance or to Purchase the Indebtedness.

(i) to pay or tender payment of the Amount of Insurance under this policy together withany costs, attorneys' fees and expenses incurred by the Insured Claimant that wereauthorized by the Company up to the time of payment or tender of payment and that theCompany is obligated to pay; or

(ii) to purchase the Indebtedness for the amount of the Indebtedness on the date ofpurchase, together with any costs, attorneys' fees and expenses incurred by the InsuredClaimant that were authorized by the Company up to the time of purchase and that theCompany is obligated to pay.

When the Company purchases the Indebtedness, the Insured shall transfer, assign, and convey to the Company the Indebtedness and the Insured Mortgage, together with any collateral security.

Upon the exercise by the Company of either of the options provided for in subsections (a)(i) or (ii), all liability and obligations of the Company to the Insured under this policy,

other than to make the payment required in those subsections, shall terminate, including any liability or obligation to defend, prosecute, or continue any litigation.

(b) To Pay or Otherwise Settle With Parties Other than the Insured or With the InsuredClaimant.

(i) to pay or otherwise settle with other parties for or in the name of an Insured Claimantany claim insured against under this policy. In addition, the Company will pay any costs,attorneys' fees and expenses incurred by the Insured Claimant that were authorized bythe Company up to the time of payment and that the Company is obligated to pay; or

(ii) to pay or otherwise settle with the Insured Claimant the loss or damage provided forunder this policy, together with any costs, attorneys' fees and expenses incurred by theInsured Claimant that were authorized by the Company up to the time of payment andthat the Company is obligated to pay.

Upon the exercise by the Company of either of the options provided for in subsections (b)(i) or (ii), the Company's obligations to the Insured under this policy for the claimed loss or damage, other than the payments required to be made, shall terminate, including any liability or obligation to defend, prosecute or continue any litigation.

8. DETERMINATION AND EXTENT OF LIABILITY.

This policy is a contract of indemnity against actual monetary loss or damage sustained or incurred by the Insured Claimant who has suffered loss or damage by reason of matters insured against by this policy.

(a) The extent of liability of the Company for loss or damage under this policy shall not exceedthe least of:

(i) the Amount of Insurance;

(ii) the Indebtedness;

(iii) the difference between the value of the Title as insured and the value of the Titlesubject to the risk insured against by this policy; or

(iv) if a government agency or instrumentality is the Insured Claimant, the amount it paidin the acquisition of the Title or the Insured Mortgage in satisfaction of its insurancecontract or guaranty.

(b) If the Company pursues its rights under Section 3 or 5 and is unsuccessful in establishingthe Title or the lien of the Insured Mortgage, as insured,

(i) the Amount of Insurance shall be increased by 10%, and

(ii)the Insured Claimant shall have the right to have the loss or damage determinedeither as of the date the claim was made by the Insured Claimant or as of the date it issettled and paid.

(c) In the event the Insured has acquired the Title in the manner described in Section 2 ofthese Conditions or has conveyed the Title, then the extent of liability of the Company shallcontinue as set forth in Section 8(a) of these Conditions.

(d) In addition to the extent of liability under (a), (b) and (c), the Company will also pay thosecosts, attorneys' fees and expenses incurred in accordance with Sections 5 and 7 of theseConditions.

9. LIMITATION OF LIABILITY.

(a) If the Company establishes the Title, or removes the alleged defect, lien or encumbrance,or cures the lack of a right of access to or from the Land, or establishes the lien of the InsuredMortgage, all as insured, or takes action in accordance with Section 3 or 7, in a reasonablydiligent manner by any method, including litigation and the completion of any appeals, it shallhave fully performed its obligations with respect to that matter and shall not be liable for anyloss or damage caused to the Insured.

(b) In the event of any litigation, including litigation by the Company or with the Company'sconsent, the Company shall have no liability for loss or damage until there has been a finaldetermination by a court of competent jurisdiction, and disposition of all appeals, adverse tothe Title or to the lien of the Insured Mortgage, as insured.

(c) The Company shall not be liable for loss or damage to the Insured for liability voluntarilyassumed by the Insured in settling any claim or suit without the prior written consent of theCompany.

10. REDUCTION OF INSURANCE; REDUCTION OR TERMINATION OF LIABILITY.

(a) All payments under this policy, except payments made for costs, attorneys’ fees andexpenses, shall reduce the Amount of Insurance by the amount of the payment. However, anypayments made prior to the acquisition of Title as provided in Section 2 of these Conditionsshall not reduce the Amount of Insurance afforded under this policy except to the extent thatthe payments reduce the Indebtedness.

(b) The voluntary satisfaction or release of the Insured Mortgage shall terminate all liability ofthe Company except as provided in Section 2 of these Conditions.

11. PAYMENT OF LOSS.

When liability and the extent of loss or damage have been definitely fixed in accordance with these Conditions, the payment shall be made within 30 days.

12. RIGHTS OF RECOVERY UPON PAYMENT OR SETTLEMENT.

(a) The Company's Right to Recover.

Whenever the Company shall have settled and paid a claim under this policy, it shall be subrogated and entitled to the rights of the Insured Claimant in the Title or Insured Mortgage and all other rights and remedies in respect to the claim that the Insured Claimant has against any person or property, to the extent of the amount of any loss, costs, attorneys' fees and expenses paid by the Company. If requested by the Company, the Insured Claimant shall execute documents to evidence the transfer to the Company of these rights and remedies. The Insured Claimant shall permit the Company to sue, compromise or settle in the name of the Insured Claimant and to use the name of the Insured Claimant in any transaction or litigation involving these rights and remedies.

If a payment on account of a claim does not fully cover the loss of the Insured Claimant, the Company shall defer the exercise of its right to recover until after the Insured Claimant shall have recovered its loss.

(b) The Insured's Rights and Limitations.

(i) The owner of the Indebtedness may release or substitute the personal liability of anydebtor or guarantor, extend or otherwise modify the terms of payment, release a portionof the Title from the lien of the Insured Mortgage, or release any collateral security for

the Indebtedness, if it does not affect the enforceability or priority of the lien of the Insured Mortgage.

(ii) If the Insured exercises a right provided in (b)(i), but has Knowledge of any claimadverse to the Title or the lien of the Insured Mortgage insured against by this policy,the Company shall be required to pay only that part of any losses insured against bythis policy that shall exceed the amount, if any, lost to the Company by reason of theimpairment by the Insured Claimant of the Company's right of subrogation.

The Company’s right of subrogation includes the Insured’s rights against non-insured obligors including the rights of the Insured to indemnities, guaranties, other policies of insurance or bonds, notwithstanding any terms or conditions contained in those instruments that address subrogation rights. The Company's right of subrogation shall not be avoided by acquisition of the Insured Mortgage by an obligor (except an obligor described in Section 1(e)(i)(F) of these Conditions) who acquires the Insured Mortgage as a result of an indemnity, guarantee, other policy of insurance, or bond and the obligor will not be an Insured under this policy.

13. ARBITRATION.

Either the Company or the Insured may demand that the claim or controversy shall be submitted to arbitration pursuant to the Title Insurance Arbitration Rules of the American Land Title Association (“Rules”). Except as provided in the Rules, there shall be no joinder or consolidation with claims or controversies of other persons. Arbitrable matters may include, but are not limited to, any controversy or claim between the Company and the Insured arising out of or relating to this policy, any service in connection with its issuance or the breach of a policy provision, or to any other controversy or claim arising out of the transaction giving rise to this policy. All arbitrable matters when the Amount of Insurance is $2,000,000 or less shall be arbitrated at the option of either the Company or the Insured, unless the Insured is an individual person (as distinguished from an Entity). All arbitrable matters when the Amount of Insurance is in excess of $2,000,000 shall be arbitrated only when agreed to by both the Company and the Insured. Arbitration pursuant to this policy and under the Rules shall be binding upon the parties. Judgment upon the award rendered by the Arbitrator(s) may be entered in any court of competent jurisdiction.

14. LIABILITY LIMITED TO THIS POLICY; POLICY ENTIRE CONTRACT.

(a)This policy together with all endorsements, if any, attached to it by the Company is theentire policy and contract between the Insured and the Company. In interpreting any provisionof this policy, this policy shall be construed as a whole.

(b)Any claim of loss or damage that arises out of the status of the Title or lien of the InsuredMortgage or by any action asserting such claim, shall be restricted to this policy.

(c)Any amendment of or endorsement to this policy must be in writing and authenticated by anauthorized person, or expressly incorporated by Schedule A of this policy.

(d)Each endorsement to this policy issued at any time is made a part of this policy and issubject to all of its terms and provisions. Except as the endorsement expressly states, it doesnot (i) modify any of the terms and provisions of the policy, (ii) modify any prior endorsement,(iii)extend the Date of Policy or (iv) increase the Amount of Insurance. Each Commitment,endorsement or other form, or provision in the Schedules to this policy that refers to a termdefined in Section 1 of the Conditions shall be deemed to refer to the term regardless ofwhether the term is capitalized in the Commitment, endorsement or other form, or Schedule.

Each Commitment, endorsement or other form, or provision in the Schedules that refers to the Conditions and Stipulations shall be deemed to refer to the Conditions of this policy.

15. SEVERABILITY.

In the event any provision of this policy, in whole or in part, is held invalid or unenforceable under applicable law, the policy shall be deemed not to include that provision or such part held to be invalid and all other provisions shall remain in full force and effect.

16. CHOICE OF LAW; FORUM.

(a) Choice of Law: The Insured acknowledges the Company has underwritten the riskscovered by this policy and determined the premium charged therefor in reliance upon the lawaffecting interests in real property and applicable to the interpretation, rights, remedies orenforcement of policies of title insurance of the jurisdiction where the Land is located.

Therefore, the court or an arbitrator shall apply the law of the jurisdiction where the Land is located to determine the validity of claims against the Title or the lien of the Insured Mortgage that are adverse to the Insured, and in interpreting and enforcing the terms of this policy. In neither case shall the court or arbitrator apply its conflicts of laws principles to determine the applicable law.

(b) Choice of Forum: Any litigation or other proceeding brought by the Insured against theCompany must be filed only in a state or federal court within the United States of America or itsterritories having appropriate jurisdiction.

17. NOTICES, WHERE SENT. Any notice of claim and any other notice or statement in writingrequired to be given the Company under this Policy must be given to the Company at [fill in].

NOTE: Bracketed [ ] material optional

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