9. No right of action shall accrue hereunder to or for the use or benefit of any one other than the Obligee, and the Obligee'e rights hereunder may not be assigned without the written consent of the Surety.

IN WITNESS WHEREOF, this instrument has been executed by the duly authorized representatives of the Principal and the Surety.

CHAPTER XXX

TITLE INSURANCE

General Nature of the Protection Offered.-Known defects not assumed.-A title insurance policy promises to protect the owner of real estate, or the lender of money thereon, against loss or damage, not exceeding the amount stated in the policy, sustained by reason of any defect of title assumed under the policy and affecting the premises described in the policy, or because of the unmarketability of the title, or by reason of unknown liens or encumbrances against the property at the time the policy is issued. Such policies protect only against loss arising from defects in the title which existed prior to the issuance of the policy, and do not cover defects originating subsequent to the date in the contract. In other words, the title insurance policy relates essentially to the past; it protects the title as it stands when the policy is written, and is unique among all the various types of insurance. in that it "ends where other insurance begins, namely, at the date of the policy."

A title insurance policy is written by the company on the theory that no known risks are assumed. Before issuing the policy the company undertakes a careful examination of all the records and facts which may have a bearing upon the title to the premises which it is proposed to insure, with a view to discovering all defects that may exist. If any are found, they are carefully described in the policy, and then declared to be risks for which the company cannot be held liable. Title in

surance thus promises to pay only those losses which result from errors made in the examination of the title from the records, or from defects which were not discovered because they were not recorded. In this connection, it should be remembered, that there is always a possibility that records relating to real estate may be wrongly interpreted. Lawyers may differ as to the effect which certain instruments or court proceedings will have upon the legality of a title, and their conclusions may be either imperfect or mistaken.

Term of the contract.-A title insurance policy proves advantageous in that, unless special conditions to the contrary are inserted, it guarantees the title for all time to come. In this respect title insurance is again unique in that its term runs indefinitely into the future. With consent of the company, the holder may assign the policy to subsequent purchasers or creditors, who then are protected against any loss resulting from defects in the title prior to the original date of the policy. It must be distinctly understood, however, that such purchasers are not protected against defects which arise after the issuance of the policy and prior to the assignment.

The premium.—As the term of the policy runs indefinitely into the future, so the premium is paid but once when the policy is issued, and no further payment need ever be made so long as no change of title occurs. A great variety of premium charges exist in different sections of the country, depending chiefly upon the company, the kind of policy, and the conditions prevailing in the particular locality. For "owners' policies" the following insurance fees are probably fairly representative: $5 per thousand of the market value of the insured property up to $25,000, $4 per thousand over $25,000 to $50,000, $3 per thousand over $50,000 to $100,000, and $2.50 per thousand over $100,000. For "mortgagees' policies" a

fairly representative rate is $3.50 per thousand of the amount of the loan up to $50,000, and $2.50 per thousand over $50,000. To these insurance fees, however, there is added the cost of examining the title and certain other service items.

Realizing that the holder of a policy may, at the request of a purchaser or mortgagee, desire a new policy to cover the title to the date of sale or loan, the companies grant such policies in certain localities at a reduced rate. The policy provision with respect to this feature usually reads: "Whenever the holder of a policy of this company, provided the estate or interest insured thereby is a fee or leasehold, shall within seven years from the date of that policy, sell or mortgage any or all of the real estate therein described, and shall within thirty days thereafter apply for a new policy on the same title, to be issued to the grantee or mortgagee, then if the risk be again accepted by this company, the former policy shall be surrendered and canceled and the new policy will be issued upon payment of the then scheduled reissue rate therefor." Where allowed, such reduction in premium on the new policy is usually 40 or 50 per cent.

Examination of Titles by Title Insurance Companies. -Formerly it was necessary for the owner of property, who desired the title to be examined, to engage a lawyer to search the records and to make an abstract thereof. If in his opinion, the title was good, certification would be made to that effect on the abstract, and this opinion constituted the certificate of title. The shortcomings of such a method are apparent, especially when we reflect that the records of many counties, affecting titles, involve several hundred different kinds of legal instruments, extend over many decades and sometimes over a century, and often require thousands of volumes for their recording. Even assuming that the party making the search is

diligent, there may be important facts not disclosed by the record at all. There is also always the possibility that existing records may involve forgeries or inaccurate entries. Moreover, the legal opinion of the lawyer supporting abstracts and searches is simply an unsupported expression of opinion as to the validity of the title, and may prove entirely wrong.

At present, in the larger cities, where real estate transactions are numerous and where the records have become very complex and voluminous, nearly all of the abstracting of titles is done by large title or guarantee companies, which have prepared elaborate "tract" or "abstract plants" covering practically all real estate in a given county or other geographic section. These plants, constituting the chief asset of most title insurance companies and usually prepared at great expense, are so arranged that the company has a classified index of all records with respect to practically every tract of land within a given area. The companies usually have employees in the various record offices so that their abstract plants are kept strictly up to date. They also have expert legal departments which examine all court proceedings as well as points of law affecting titles, and which advise the searching and examining departments. It should also be added that most title insurance companies limit their operations to a particular locality, although in recent years a few companies have undertaken the assumption of risks throughout most of the country. Such a national service, it is clear, proves of benefit to life insurance and other investing companies whose real estate investments are also national in their distribution.

Losses Paid by Title Insurance Companies.-Title insurance, as previously stated, is based upon the theory that no insurance is granted against known defects, and that the companies write such policies on the assumption