Title Insurance Policy 27 0219 107 00002824AMERICAN LAND TITLE ASSOCIATION
LOAN POLICY
(10-17-92)
27 0219 107 00002824
CHICAGO TITLE INSURANCE COMPANY
SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE
CONTAINED IN SCHEDULE B AND THE CONDITIONS AND STIPULATIONS, CHICAGO TITLE
INSURANCE COMPANY, a Missouri corporation, herein called the Company, insures, as of Date of Policy shown
in Schedule A, against loss or damage, not exceeding the Amount of Insurance stated in Schedule A, sustained or
incurred by the insured by reason of:
l . Title to the estate or interest described in Schedule A being vested other than as stated therein;
2. Any defect in or lien or encumbrance on the title;
3. Unmarketability of the title;
4. Lack of a right of access to and from the land;
5. The invalidity or unenforceability of the lien of the insured mortgage upon the title;
6. The priority of any lien or encumbrance over the lien of the insured mortgage;
7. Lack of priority of the lien of the insured mortgage over any statutory lien for services, labor or material:
(a) arising from an improvement or work related to the land which is contracted for or commenced
prior to Date of Policy; or
(b) arising from an improvement or work related to the land which is contracted for or commenced
subsequent to Date of Policy and which is financed in whole or in part by proceeds of the
indebtedness secured by the insured mortgage which at Date of Policy the insured has advanced or
is obligated to advance;
8. The invalidity or unenforceability of any assignment of the insured mortgage, provided the assignment
is shown in Schedule A, or the failure of the assignment shown in Schedule A to vest title to the insured
mortgage in the named insured assignee free and clear of all liens.
The Company will also pay the costs, attorneys' fees and expenses incurred in defense of the title or the lien of the
insured mortgage, as insured, but only to the extent provided in the Conditions and Stipulations.
In Witness Whereof, CHICAGO TITLE INSURANCE COMPANY has caused this policy to be signed and sealed as
of Date of Policy shown in Schedule A, the policy to become valid when countersigned by an authorized signatory.
Issued by:
STERLING TITLE SERVICES
211 SOUTH MAIN STREET-P.O. BOX 73
KALISPELL, MT 59903
PHONE: (406) 752-7000
FAX: (406) 752-7207 (TITLE)
FAX: (406) 257-5663 (ESCROW)
CHICAGO TITLE INSURANCE COMPANY
By:
Presiders
By:
Secretary
ALTA Loan Policy (10-17-92)
1.
2.
Office File Policy Number
Number
CG-24598A 27-0219-107-02824
1. Name of Insured:
LOAN
SCHEDULE A
3.
S.
Date of Policy Amount of Insurance Premium
August 8, 1997 $10,000.00 $40.00
at 4:42 p.m.
CITY OF KALISPELL
2. The estate or interest in the land which is covered by the insured
mortgage is:
FEE SIMPLE ESTATE
3. Title to the estate or interest in the land is vested in:
H & H ENTERPRISES
a Business Trust UAD 5/11/96
4. The insured mortgage and assignments thereof, if any, are described as
follows:
Trust Indenture dated August 8, 1997, executed by H & H Enterprises, to C.
Mark Hash, attorney, as Trustee; and City of Kalispell, as Beneficiary; to
secure payment of $10,000.00, according to promissory note of even date,
recorded August 8, 1997, as Document t199722016420, records of Flathead
County, Montana.
5. The land referred to in this policy is described as follows:
SEE EXHIBIT "A" ATTACHED HERETO....
Authorized Sig atory
SCHEDULE B
File No: CG-24598A
Policy Number: 27-0219-107-02824
EXCEPTIONS FROM COVERAGE
This policy does not insure against loss or damage (and the Company will not
pay costs, attorneys' fees or expenses) which arise by reason of:
GENERAL EXCEPTIONS:
(1) Rights or claims of parties in possession not shown by the public records.
(2) Encroachments, overlaps, boundary line disputes, and any other matter
which would be disclosed by an accurate survey or inspection of the
premises including, but not limited to, insufficient or impaired access or
matters contradictory to any survey plat shown by the public records.
(3) Easements, or claims of easement, not shown by the public records.
(4) Any lien, or right to a lien, for services, labor, or material heretofore
or hereafter furnished, imposed by law and not shown by the public
records.
(5) (a) Unpatented mining claims; (b) reservations or exceptions in patents
or in Acts authorizing the issuance thereof; (c) water rights, claims or
title to water, whether or not the matters excepted under (a), (b), or (c)
are shown by the public records.
(6) Taxes or special assessments which are not shown as existing liens by the
records of any taxing authority that levies taxes or assessments on real
property or by the public records. Proceedings by a public agency which
may result in taxes or assessments, or notices of such proceedings,
whether or not shown by the records of such agency or by the public
records.
SPECIAL EXCEPTIONS:
1. Property taxes, including any assessments collected with the taxes, for the
year 1997.
2. Delinquent water and sewer charges of the City of Kalispell, if any.
3. Mineral rights, claims or title to minerals, including but not limited to
metals, oil, gas, coal, hydrocarbons, sand, gravel, stone, or rights relating
thereto.
4. Water Right, recorded August 31, 1885 in Book 16, page 4; and recorded April
12, 1889 in Book 36, page 24, all records of Flathead County, Montana.
5. Notice of Appropriation of Water and creation of reservoir for the storage of
said appropriated water, recorded May 3, 1941 in Book 243, page 180, records
of Flathead County, Montana.
6. Agreement recorded May 5, 1944 in Book 257, page 92, records of Flathead
County, Montana.
7. Easement recorded May 5, 1944 in Book 257, page 92, records of Flathead
County, Montana.
8. Agreement executed by and between Manuel V. Bauska, et al, and The City of
Kalispell, recorded November 24, 1976 under Recorder's Fee #13346, in Book
608, page 216, records of Flathead County, Montana.
9. Resolution No. 3091 recorded November 24, 1976 under Recorder's Fee #13347,
in Book 608, page 221, records of Flathead County, Montana.
10. Ordinance No. 865 recorded November 24, 1976 under Recorders' Fee #13348, in
Book 608, page 222, records of Flathead County, Montana.
11. Declaration of Conditions, Covenants, and Restrictions and any rights,
provisions, powers, obligations, liens or charges as provided therein, but
omitting any covenant or restriction based on race, color, religion, sex,
handicap, familial status or national origin, unless and only to the extent
that said covenant (a) is exempt under Chapter 42, Section 3607 of the United
States Code or (b) relates to handicap but does not discriminate against
handicapped persons, recorded November 24, 1976 under Recorder's Fee #13349,
in Book 608, page 226, records of Flathead County, Montana, and any
amendments thereto, including but not limited to the following amendments:
Amendment recorded June 9, 1977 under Recorder's Fee #7327, in Book 618, page
206, and recorded October 1, 1980 under Recorder's Fee #13972, in Book 702,
page 317, records of Flathead County, Montana.
12. Ten foot Drainage and Utility Easement as shown on the plats of Porta Villa
Subdivision No. 2 and Porta Villa Subdivision No. 3 and on the plat of Teton
Terrace.
13. Five foot Landscape Buffer Strip as shown on the plat of Porta Villa
Subdivision No. 3.
14. Easement for drainage easement and related purposes granted to the public
recorded November 24, 1976 under Recorder's Fee #13350, in Book 608, page
232, records of Flathead County, Montana.
15. Easement for transmission line and related purposes granted Pacific Power &
Light Company, a corporation, recorded September 15, 1978 under Recorder's
Fee #14052, in Book 651, page 395, records of Flathead County, Montana.
16. Easement for Ingress, Egress and Utilities granted to H & F Enterprises,
recorded June 20, 1985 as Document #8517112120, records of Flathead County,
Montana.
17. Grant of Conditional Use granted to City of Kalispell, recorded January 12,
1996 as Document #9601208440, records of Flathead County, Montana.
18. Five foot Drainage and Utility Easement as shown on the plat of Teton
Terrace.
19. Single lot utility service easements as shown on the plat of Teton Terrace.
20. Certificate of Utilities as set out on the plat of Teton Terrace.
21. Declaration of Conditions, Covenants, and Restrictions and any rights,
provisions, powers, obligations, liens or charges as provided therein, but
omitting any covenant or restriction based on race, color, religion, sex,
handicap, familial status or national origin, unless and only to the extent
that said covenant (a) is exempt under Chapter 42, Section 3607 of the United
States Code or (b) relates to handicap but does not discriminate against
handicapped persons, recorded February 27, 1997 as Document #199705815060,
records of Flathead County, Montana, and any amendments thereto, including
but not limited to the following amendments: None
22. Rylaws of Teton Terrace Homeowners Association, recorded February 27, 1997 as
Document #199705815070, records of Flathead County, Montana.
23. Deed of Trust dated August 8, 1997, executed by H & H Enterprises, Randy
Beavers, trustee, to Sterling Title Services, as Trustee; and First Security
Bank, as Beneficiary; to secure payment of $100,000.00, together with
interest and any other obligations secured thereby, recorded August 8, 1997
as Document #199722016400, records of Flathead County, Montana.
SCHEDULE B
File No: CG-24598A
Policy Number: 27-0219-107-02824
EXCEPTIONS FROM COVERAGE
In addition to the matters set forth in Part I of this Schedule, the title to the
estate or interest in the land described or referred to in Schedule A is subject
to the following matters, if any be shown, but the Company insures that these
matters are subordinate to the lien or charge of the insured mortgage upon the
estate or interest.
PART II
Special Exceptions:
P'L-��ta
End of Schedule B
EXHIBIT "A"
The land referred to in this Policy is described as follows:
Lot 22 of TETON TERRACE, according to the map or plat thereof on file and of
record in the office of the Clerk and Recorder of Flathead County, Montana.
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 which arise by reason of:
1. (a) Any law, ordinance or governmental regulation (including but not limited to building and zoning laws, ordinances, or regulations) restrict-
ing, regulating, prohibiting or relating to (i) the occupancy, use, or enjoyment of the land; (ii) the character, dimensions or location of any
improvement now or hereafter erected on the land; (iii) a separation in ownership or a change in the dimensions or area of the land or any
parcel of which the land is or was a part; or (iv) environmental protection, or the effect of any violation of these laws, ordinances or
governmental regulations, except to the extent that a notice of the enforcement thereof or a notice of a defect, lien or encumbrance
resulting from a violation or alleged violation affecting the land has been recorded in the public records at Date of Policy.
(b) Any governmental police power not excluded by (a) above, except to the extent that a notice of the exercise thereof or a notice of a defect, lien
or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at Date of Policy.
2. Rights of eminent domain unless notice of the exercise thereof has been recorded in the public records at Date of Policy, but not excluding from
coverage any taking which has occurred prior to Date of Policy which would be binding on the rights of a purchaser for value without knowledge.
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, but known to the insured claimant and not disclosed in
writing to the Company by the insured claimant prior to the date the insured claimant became an insured under this policy;
(c) resulting in no loss or damage to the insured claimant;
(d) attaching or created subsequent to Date of Policy (except to the extent that this policy insures the priority of the lien of the insured
mortgage over any statutory lien for services, labor or material); or
(e) resulting in loss or damage which would not have been sustained if the insured claimant had paid value for the insured mortgage.
4. Unenforceability of the lien of the insured mortgage because of the inability or failure of the insured at Date of Policy, or the inability or failure of
any subsequent owner of the indebtedness, to comply with applicable doing business laws of the state in which the land is situated.
5. Invalidity or unenforceability of the lien of the insured mortgage, or claim thereof, which arises out of the transaction evidenced by the insured
mortgage and is based upon usury or any consumer credit protection or truth in lending law.
6. Any statutory lien for services, labor or materials (or the claim of priority of any statutory lien for services, labor or materials over the lien of the
insured mortgage) arising from an improvement or work related to the land which is contracted for and commenced subsequent to Date of Policy
and is not financed in whole or in part by proceeds of the indebtedness secured by the insured mortgage which at Date of Policy the insured has
advanced or is obligated to advance.
7. Any claim, which arises out of the transaction creating the interest of the mortgagee insured by this policy, by reason of the operation of federal
bankruptcy, state insolvency, or similar creditors' rights laws, that is based on:
(i) the transaction creating the interest of the insured mortgagee being deemed a fraudulent conveyance or fraudulent transfer; or
(ii) the subordination of the interest of the insured mortgagee as a result of the application of the doctrine of equitable subordination; or
(iii) the transaction creating the interest of the insured mortgagee being deemed a preferential transfer except where the preferential transfer
results from the failure:
(a) to timely record the instrument of transfer; or
(b) of such recordation to impart notice to a purchaser for value or a judgment or lien creditor.
r • •
The following terms when used in this policy mean:
(a) "insured": the insured named in Schedule A. The term "insured" also
includes
(i) the owner of the indebtedness secured by the insured mortgage and
each successor in ownership of the indebtedness except a successor who is
an obligor under the provisions of Section 12(c) of these Conditions and
Stipulations (reserving, however, all rights and defenses as to any successor
that the Company would have had against any predecessor insured, unless
the successor acquired the indebtedness as a purchaser for value without
knowledge of the asserted defect, lien, encumbrance, adverse claim or other
matter insured against by this policy as affecting title to the estate or interest in
the land);
(ii) any governmental agency or governmental instrumentality which is an
insurer or guarantor under an insurance contract or guaranty insuring or
guaranteeing the indebtedness secured by the insured mortgage, or any part
thereof, whether named as an insured herein or not;
(iii) the parties designated in Section 2(a) of these Conditions and Stipula-
tions.
(b) "insured claimant": an insured claiming loss or damage
(c) "knowledge" or "known": actual knowledge, not constructive knowl-
edge or notice which may be imputed to an insured by reason of the public
records as defined in this policy or any other records which impart construc-
tive notice of matters affecting the land.
(d) "land": the land described or referred to in Schedule A, and improve-
ments affixed thereto which by law constitute real property. The term "land"
does not include any property beyond the lines of the area described or
referred to in Schedule A, nor any right, title, interest, estate or easement in
abutting streets, roads, avenues, alleys, lanes, ways or waterways, but noth-
ing herein shall modify or limit the extent to which a righ` of access to and from
the land is insured by this policy.
(e) "mortgage": mortgage, deed of trust, trust deed, or other security
instrument.
(f) "public records": records established under state statutes at Date of
Policy for the purpose of imparting constructive notice of matters relating to
real property to purchasers for value and without knowledge. With respect to
Section 1(a)(iv) of the Exclusions From Coverage, "public records" shall also
include environmental protection liens filed in the records of the clerk of the
United States district court for the district in which the land is located.
(g) "unmarketability of the title": an alleged or apparent matter affecting
the title to the land, not excluded or excepted from coverage, which would
entitle a purchaser of the estate or interest described in Schedule A or the
insured mortgage to be released from the obligation to purchase by virtue of a
contractual condition requiring the delivery of marketable title.
2. CONTINUATION OF INSURANCE
(a) After Acquisition of Title. The coverage of this policy shall continue in
force as of Date of Policy in favor of (i) an insured who acquires all or any part of
the estate or interest in the land by foreclosure, trustee's sale, conveyance in
lieu of foreclosure, or other legal manner which discharges the lien of the
insured mortgage; (ii) a transferee of the estate or interest so acquired from an
insured corporation, provided the transferee is the parent or wholly -owned
subsidiary of the insured corporation, and their corporate successors by oper-
ation of law and not by purchase, subject to any rights or defenses the Com-
pany may have against any predecessor insureds; and (iii) any governmental
agency or governmental instrumentality which acquires all or any part of the
estate or interest pursuant to a contract of insurance or guaranty insuring or
guaranteeing the indebtedness secured by the insured mortgage.
(b) After Conveyance of Title. The coverage of this policy shall continue
in force as of Date of Policy in favor of an insured only so long as the insured
retains an estate or interest in the land, or holds an indebtedness 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 covenants of warranty
made by the insured in any transfer or conveyance of the estate or interest.
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 indebtedness
secured by a purchase money mortgage given to the insured.
(c) Amount of Insurance. The amount of insurance after the acquisition or
after the conveyance shall in neither event exceed the least of:
(i) the Amount of Insurance stated in Schedule A;
(ii) the amount of the principal of the indebtedness secured by the insured
mortgage as of Date of Policy, interest thereon, expenses of foreclosure,
amounts advanced pursuant to the insured mortgage to assure compliance
with laws or to protect the lien of the insured mortgage prior to the time of
acquisition of the estate or interest in the land and secured thereby and
reasonable amounts expended to prevent deterioration of improvements, but
reduced by the amount of all payments made; or
(iii) the amount paid by any governmental agency or governmental instru-
mentality, if the agency or instrumentality is the insured claimant, in the acqui-
sition of the estate or interest in satisfaction of its insurance contract or guar-
anty.
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 4(a) below, (ii) in case knowledge shall come to
an insured hereunder of any claim of title or interest which is adverse to the
title to the estate or interest or the lien of the insured mortgage, as insured, and
which might cause loss or damage for which the Company may be liable by
virtue of this policy, or (iii) if title to the estate or interest or the lien of the
insured mortgage, as insured, is rejected as unmarketable. If prompt notice
shall not be given to the Company, then as to the insured all liability of the
Company shall terminate with regard to the matter or matters for which prompt
notice is required; provided, however, that failure to notify the Company shall
in no case prejudice the rights of any insured under this policy unless the
Company shall be prejudiced by the failure and then only to the extent of the
prejudice.
4. DEFENSE AND PROSECUTION OF ACTIONS; DUTY OF INSURED
CLAIMANT TO COOPERATE
(a) Upon written request by the insured and subject to the options con-
tained in Section 6 of these Conditions and Stipulations, the Company, at its
own cost and without unreasonable delay, shall provide for the defense of an
insured in litigation in which any third party asserts a claim adverse to the title
or interest as insured, but only as to those stated causes of action alleging a
defect, lien or encumbrance or other matter insured against by this policy. The
Company shall have the right to select counsel of its choice (subject to the
right of the insured to object for reasonable cause) to represent the insured as
to those stated causes of action and shall not be liable for and will not pay the
fees of any other counsel. The Company will not pay any fees, costs or
expenses incurred by the insured in the defense of those causes of action
which allege matters not insured against by this policy.
(b) The Company shall have the right, at its own cost, to institute and
prosecute any action or proceeding or to do any other act which in its opinion
may be necessary or desirable to establish the title to the estate or interest or
the lien of the insured mortgage, as insured, or to prevent or reduce loss or
damage to the insured. The Company may take any appropriate action under
the terms of this policy, whetheror not it shall be liable hereunder, and shall not
thereby concede liability or waive any provision of this policy. If the Company
shall exercise its rights under this paragraph, it shall do so diligently.
(c) Whenever the Company shall have brought an action or interposed a
defense as required or permitted by the provisions of this policy, the Company
may pursue any litigation to final determination by a court of competent juris-
diction and expressly reserves the right, in its sole discretion, to appeal from
any adverse judgment or order.
(d) In all cases where this policy permits or requires the Company to prose-
cute or provide for the defense of any action or proceeding, the insured shall
secure to the Company the right to so prosecute or provide defense in the
action or proceeding, and all appeals therein, and permit the Company 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 Com-
pany all reasonable aid (i) in any action or proceeding, securing evidence,
obtaining witnesses, prosecuting or defending the action or proceeding, or
effecting settlement, and (ii) in any other lawful act which in the opinion of the
Company may be necessary or desirable to establish the title to the estate or
interest or the lien of the insured mortgage, 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, includ-
ing any liability or obligation to defend, prosecute, or continue any litigation,
with regard to the matter or matters requiring such cooperation.
5. PROOF OF LOSS OR DAMAGE
In addition to and after the notices required under Section 3 of these Condi-
tions and Stipulations have been provided the Company, a proof of loss or
damage signed and sworn to by the insured claimant shall be furnished to the
Company within 90 days after the insured claimant all ascertain the facts
giving rise to the loss or damage. The proof of loss or damage shall describe
the defect in, or lien or encumbrance on the title, or other matter insured
against by this policy which 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. If the Company is prejudiced by the failure of the insured claimant to
provide the required proof of loss or damage, the Company's obligations to
the insured under the policy shall terminate, including any liability or obliga-
tion to defend, prosecute, or continue any litigation, with regard to the matter
or matters requiring such proof of loss or damage.
In addition, the insured claimant may reasonably be required to submit to
examination under oath by any authorized representative of the Company
and shall produce for examination, inspection and copying, at such reason-
able times and places as may be designated by any authorized representative
of the Company, all records, books, ledgers, checks, correspondence and
memoranda, whether bearing a date before or after Date of Policy, which
reasonably pertain to the loss or damage. Further, if requested by any author-
ized representative of the Company, the insured claimant shall grant its per-
mission, in writing, for any authorized representative of the Company to exam-
ine, inspect and copy all records, books, ledgers, checks, correspondence
and memoranda in the custody or control of a third party, which reasonably
pertain to the loss or damage. All information designated as confidential by
the insured claimant provided to the Company pursuant to this Section shall
not be disclosed to others unless, in the reasonable judgment of the Com-
pany, it is necessary in the administration of the claim. Failure of the insured
claimant to submit for examination under oath, produce other reasonably
requested information or grant permission to secure reasonably necessary
information from third parties as required in this paragraph, unless prohibited
by law or governmental regulation, shall terminate any liability of the Company
under this policy as to that claim.
6. 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 with any costs, attorneys' fees and expenses incurred by the insured
claimant, which were authorized by the Company, up to the time of payment or
tender of payment and which the Company is obligated to pay; or
(ii) to purchase the indebtedness secured by the insured mortgage for the
amount owing thereon together with any costs, attorneys' fees and expenses
incurred by the insured claimant which were authorized by the Company up to
the time of purchase and which the Company is obligated to pay.
If the Company offers to purchase the indebtedness as herein provided, the
owner of the indebtedness shall transfer, assign, and convey the indebted-
ness and the insured mortgage, together with any collateral security, to the
Company upon payment therefor.
Upon the exercise by the Company of either of the options provided for in
paragraphs a(i) or (ii), all liability and obligations to the insured under this
policy, other than to make the payment required in those paragraphs, shall
terminate, including any liability or obligation to defend, prosecute, or con-
tinue any litigation, and the policy shall be surrendered to the Company for
cancellation.
(b) To Pay or Otherwise Settle With Parties Other than the Insured or
With the Insured Claimant.
(i) to pay or otherwise settle with other parties for or in the name of an
insured claimant any claim insured against under this policy, together with any
costs, attorneys' fees and expenses incurred by the insured claimant which
were authorized by the Company up to the time of payment and which the
Company is obligated to pay; or
(ii) to pay or otherwise settle with the insured claimant the loss or damage
provided for under this policy, together with any costs, attorneys' fees and
expenses incurred by the insured claimant which were authorized by the
Company up to the time of payment and which the Company is obligated to
pay.
Upon the exercise by the Company of either of the options provided for in
paragraphs (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, prose-
cute or continue any litigation.
a' M s °, r � •'.
This policy is a contract of indemnity against actual monetary loss or dam-
age sustained or incurred by the insured claimant who has suffered loss or
damage by reason of matters insured against by this policy and only to the
extent herein described.
(a) The liability of the Company under this policy shall not exceed the least
of:
(i) the Amount of Insurance stated in Schedule A, or, if applicable, the
amount of insurance as defined in Section 2 (c) of these Conditions and
Stipulations;
(ii) the amount of the unpaid principal indebtedness secured by the
insured mortgage as limited or provided under Section 8 of these Conditions
and Stipulations or as reduced under Section 9 of these Conditions and
Stipulations, at the time the loss or damage insured against by this policy
occurs, together with interest thereon; or
(iii) the difference between the value of the insured estate or interest as
insured and the value of the insured estate or interest subject to the defect,
lien or encumbrance insured against by this policy.
(b) In the event the insured has acquired the estate or interest in the manner
described in Section 2(a) of these Conditions and Stipulations or has con-
veyed the title, then the liability of the Company shall continue as set forth in
Section 7(a) of these Conditions and Stipulations.
(0) The Company will pay only those costs, attorneys' fees and expenses
incurred in accordance with Section 4 of these Conditions and Stipulations.
8. 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
cures the claim of unmarketability of title, or otherwise establishes the lien of
the insured mortgage, all as insured, in a reasonably diligent manner by any
method, including litigation and the completion of any appeals therefrom, it
shall have fully performed its obligations with respect to that matter and shall
not be liable for any loss or damage caused thereby.
(b) In the event of any litigation, including litigation by the Company or with
the Company's consent, the Company shall have no liability for loss or dam-
age until there has been a final determination by a court of competent jurisdic-
tion, and disposition of all appeals therefrom, adverse to the title or to the lien
of the insured mortgage, as insured.
(c) The Company shall not be liable for loss or damage to any insured for
liability voluntarily assumed by the insured in settling any claim or suit without
the prior written consent of the Company.
(d) The Company shall not be liable for: (i) any indebtedness created subse-
quent to Date of Policy except for advances made to protect the lien of the
insured mortgage and secured thereby and reasonable amounts expended to
prevent deterioration of improvements; or (ii) construction loan advances
made subsequent to Date of Policy, except construction loan advances made
subsequent to Date of Policy for the purpose of financing in whole or in part the
construction of an improvement to the land which at Date of Policy were
secured by the insured mortgage and which the insured was and continued to
be obligated to advance at and after Date of Policy.
9. REDUCTION OF INSURANCE; REDUCTION OR TERMINATION OF
LIABILITY
(a) All payments under this policy, except payments made for costs, attor-
neys' fees and expenses, shall reduce the amount of the insurance pro tanto.
However, any payments made prior to the acquisition of title to the estate or
interest as provided in Section 2(a) of these Conditions and Stipulations shall
not reduce pro tanto the amount of the insurance afforded under this policy
except to the extent that the payments reduce the amount of the indebtedness
secured by the insured mortgage.
(b) Payment in part by any person of the principal of the indebtedness, or
any other obligation secured by the insured mortgage, or any voluntary partial
satisfaction or release of the insured mortgage, to the extent of the payment,
satisfaction or release, shall reduce the amount of insurance pro tanto. The
amount of insurance may thereafter be increased by accruing interest and
advances made to protect the lien of the insured mortgage and secured
thereby, with interest thereon, provided in no event shall the amount of insur-
ance be greater than the Amount of Insurance stated in Schedule A.
(c) Payment in full by any person or the voluntary satisfaction or release of
the insured mortgage shall terminate all liability of the Company except as
provided in Section 2(a) of these Conditions and Stipulations.
10. LIABILITY NONCUMULATIVE
If the insured acquires title to the estate or interest in satisfaction of the
indebtedness secured by the insured mortgage, or any part thereof, it is
expressly understood that the amount of insurance under this policy shall be
reduced by any amount the Company may pay under any policy insuring a
mortgage to which exception is taken in Schedule B or to which the insured
has agreed, assumed, or taken subject, or which is hereafter executed by an
insured and which is a charge or lien on the estate or interest described or
referred to in Schedule A, and the amount so paid shall be deemed a payment
under this policy.
11. PAYMENT OF LOSS
(a) No payment shall be made without producing this policy for endorse-
ment of the payment unless the policy has been lost or destroyed, in which
case proof of loss or destruction shall be furnished to the satisfaction of the
Company.
(b) When liability and the extent of loss or damage has been definitely fixed
in accordance with these Conditions and Stipulations, the loss or damage
shall be payable within 30 days thereafter.
12. SUBROGATION UPON PAYMENT OR SETTLEMENT
(a) The Company's Right of Subrogation.
Whenever the Company shall have settled and paid a claim under this
policy, all right of subrogation shall vest in the Company unaffected by any act
of the insured claimant.
The Company shall be subrogated to and be entitled to all rights and
remedies which the insured claimant would have had against any person or
property in respect to the claim had this policy not been issued. If requested by
the Company, the insured claimant shall transfer to the Company all rights
and remedies against any person or property necessary in order to perfect
this right of subrogation. 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 or remedies.
If a payment on account of a claim does not fully cover the loss of the
insured claimant, the Company shall be subrogated to all rights and remedies
of the insured claimant after the insured claimant shall have recovered its
principal, interest, and costs of collection.
(b) The Insured's Rights and Limitations.
Notwithstanding the foregoing, the owner of the indebtedness secured by
the insured mortgage, provided the priority of the lien of the insured mortgage
or its enforceability is not affected, may release or substitute the personal
liability of any debtor or guarantor, or extend or otherwise modify the terms of
payment, or release a portion of the estate or interest from the lien of the
insured mortgage, or release any collateral security for the indebtedness.
When the permitted acts of the insured claimant occur and the insured has
knowledge of any claim of title or interest adverse to the title to the estate or
interest or the priority or enforceability of the lien of the insured mortgage, as
insured, the Company shall be required to pay only that part of any losses
insured against by this policy which shall exceed the amount, if any, lost to the
Company by reason of the impairment by the insured claimant of the Compa-
ny's right of subrogation.
(c) The Company's Rights Against Non-insured Obligors.
The Company's right of subrogation against non-insured obligors shall
exist and shall include, without limitation, the rights of the insured to indem-
nities, guaranties, other policies of insurance or bonds, notwithstanding any
terms or conditions contained in those instruments which provide for subroga-
tion rights by reason of this policy.
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(a)(ii) of these Conditions and Stipulations) who acquires the insured mort-
gage as a result of an indemnity, guarantee, other policy of insurance, or bond
and the obligor will not be an insured under this policy, notwithstanding Sec-
tion 1(a)(i) of these Conditions and Stipulations.
13. ARBITRATION
Unless prohibited by applicable law, either the Company or the insured may
demand arbitration pursuant to the Title Insurance Arbitration Rules of the
American Arbitration Association. 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 of the Company in connec-
tion with its issuance or the breach of a policy provision or other obligation. All
arbitrable matters when the Amount of Insurance is $1,000,000 or less shall
be arbitrated at the option of either the Company or the insured. All arbitrable
matters when the Amount of Insurance is in excess of $1,000,000 shall be
arbitrated only when agreed to by both the Company and the insured. Arbitra-
tion pursuant to this policy and under the Rules in effect on the date the
demand for arbitration is made or, at the option of the insured, the Rules in
effect at Date of Policy shall be binding upon the parties. The award may
include attorneys' fees only if the laws of the state in which the land is located
permit a court to award attorneys' fees to a prevailing party. Judgment upon
the award rendered by the Arbitrator(s) may be entered in any court having
jurisdiction thereof.
The law of the situs of the land shall apply to an arbitration under the Title
Insurance Arbitration Rules.
A copy of the Rules may be obtained from the Company upon request.
14. LIABILITY LIMITED TO THIS POLICY; POLICY ENTIRE CONTRACT
(a) This policy together with all endorsements, if any, attached hereto by the
Company is the entire policy and contract between the insured and the Com-
pany. In interpreting any provision of this policy, this policy shall be construed
as a whole.
(b) Any claim of loss or damage, whether or not based on negligence, and
which arises out of the status of the lien of the insured mortgage or of the title
to the estate or interest covered hereby or by any action asserting such claim,
shall be restricted to this policy.
(c) No amendment of or endorsement to this policy can be made except by
a writing endorsed hereon or attached hereto signed by either the President, a
Vice President, the Secretary, an Assistant Secretary, or validating officer or
authorized signatory of the Company.
15. SEVERABILITY
In the event any provision of this policy is held invalid or unenforceable
under applicable law, the policy shall be deemed not to include that provision
and all other provisions shall remain in full force and effect.
16. NOTICES, WHERE SENT
All notices required to be given the Company and any statement in writing
required to be furnished the Company shall include the number of this policy
and shall be addressed to the Company at the issuinq office or to:
Reorder Form No. 8257 (Rev. 10-17-92)
Chicago Ti,' isurance Company
Claims Dep, rent
171 North Clark Street