Significant claims can occur when outstanding rights to minerals and other substances are not taken exception to in title insurance policies, especially in those areas of the state where there are known resources that are actively being harvested or may be harvested in the future as technological capabilities are developed and become commercially viable. These claims and their resulting losses can occur when the search of title doesn't include and/or disclose the severance(s) of rights in minerals and other substances, or mineral lease(s), or the title records relied upon (including title plant records) did not accurately reflect these matters, or the starters and/or prior title insurance policy did not reflect the severance(s) or lease(s).
ALL PRELIMINARY REPORTS (REGARDLESS OF THE TYPE OF POLICY COVERAGE TO BE ISSUED), TITLE COMMITMENTS, BINDERS, AND TITLE INSURANCE POLICIES MUST INCLUDE, IN THE SCHEDULE B EXCEPTIONS, BOTH THE GENERAL MINERAL EXCEPTION AND THE GENERAL WATER EXCEPTION DESCRIBED.
GENERAL MINERAL EXCEPTION:
Ownership of, or rights to, minerals or other substances, subsurface and surface, of whatsoever kind, including, but not limited to coal, ores, metals, lignite, oil, gas, geothermal resources, brine, uranium, clay, rock, sand and gravel in, on, under and that may be produced from the Land, together with all rights, privileges, and immunities relating thereto, whether the ownership or rights arise by lease, grant, exception, conveyance, reservation or otherwise, and whether or not appearing in the Public Records or listed in Schedule B. Stewart Title Guaranty Company and its issuing agent make no representation as to the present ownership of any such interests. There may be leases, grants, exceptions, or reservations of interests that are not listed.
This General Mineral Exception (GME) may only be eliminated by the Title Officer if all of the following conditions are met:
- there is a written request by the proposed insured to remove the GME;
- the Land is a residential 1-4 family;
- the Land is within the boundaries of a city or town, or within a residential subdivision created on or after 1964;
- you are not aware of any minerals or other substances actively being harvested within one mile of the Land; and
- you obtain and review a fully completed STG Owner's Affidavit and Indemnity.
Any other elimination or modification of the GME requires prior written approval from a Stewart Title Guaranty Company (STG) Underwriter.
SEVERED INTERESTS IN MINERALS OR OTHER SUBSTANCES
In addition to the above GME requirement, when the legal description reflects a specific severance of interest in minerals or other substances, including those severed in a patent, whether 100% or some lesser interest, you must comply with all of the following requirements:
- include a corresponding (nearly identical) exception in Schedule B for all specific reservations or grants that are identified, e.g., “A reservation of …” or “A grant of…”);
- include any leases of these minerals or other substances as an additional exception in Schedule B;
- include as an exception in Schedule B, any specific reservations or grants newly created in the current transaction to be insured. The language creating the specific reservations or grants must be drafted and agreed to by the parties or their respective counsel and the draft deed(s) submitted to the Title Officer for review prior to recording. If the mineral severance is by a deed reservation, there should also be an escrow instruction executed by the parties acknowledging the additional language in the deed; and
- include the following language at the end of any specific minerals or other substances exception, and/or any lease exception reflected in Schedule B:
Stewart Title Guaranty Company and its issuing agent make no representation as to the present ownership of any such interests. There may be leases, grants, assignments, exceptions, or reservations of interests that are not listed.
The elimination of any leases of minerals or other substances as an exception in Schedule B requires prior written approval from an STG Underwriter.
Note: Rights to, or interests in, severed minerals or other substances shall not be separately insured.
GENERAL WATER EXCEPTION (GWE):
Water rights, claims, or title to water in, on, or under the Land, whether or not shown by the Public Records.
Note: Rights to, or interests in water shall not be insured.
REMINDER: THE GME AND THE GWE MUST BE SHOWN AS SCHEDULE B EXCEPTIONS EVEN WHEN ISSUING AN ALTA OR CLTA STANDARD COVERAGE POLICY. THE GME MAY BE ELIMINATED IN ACCORDANCE WITH THIS BULLETIN; HOWEVER, THE GWE MUST ALWAYS REMAIN AS AN EXCEPTION.
PATENT AND WATER EXCEPTION / WESTERN REGIONAL EXCEPTION 5:
A patent and water rights exception is an affirmative exception in the standard coverage policies and is located in Western Regional Exception (WRE) number 5, which reads as follows:
(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.
Elimination of the water rights provision in WRE number 5 is prohibited; any other elimination of WREs is subject to STG Underwriting guidelines.
Please see Sections 2.15 and 3.13 of the STG Schedule of Charges and Forms for Title Insurance in the State of California for additional information related to the charges associated with deleting specified WREs from standard coverage policies.
ENDORSEMENTS RELATING TO MINERALS AND OTHER SUBSTANCES
The foregoing does not affect the potential availability of endorsements that provide coverage for damage to buildings or improvements on the Land resulting from the future exercise of any right to use the surface of the Land for the extraction or development of minerals or other substances, such as the CLTA 100 series (ALTA 9-06 series) and the CLTA 140-06 series (ALTA 35-06 series), pursuant to applicable STG Underwriting Guidelines and STG Underwriter approval requirements.
If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.
For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.