California Escrow Practice Exam

When a CLTA title insurance policy is issued, it protects the insured from monetary loss caused by defects in title or encumbrances, but it excludes certain situations. First, defects or encumbrances created by the insured themselves are not covered, because the policy addresses risks affecting the title that originate outside the insured’s own actions. Second, if the insured knows about a defect but fails to disclose that knowledge in writing to the underwriter, that defect is not covered—the policy relies on accurate disclosure to assess and insure the title risk. Third, coverage is triggered by actual loss or damage resulting from a covered defect; if a defect exists but causes no loss to the insured, there isn’t a covered claim. Since each of these scenarios would fall outside what the CLTA policy covers, the correct choice is that all of these conditions would NOT be covered.