Title insurance and squatter’s rights (adverse possession) – a shield, not a sword

Jan 21st, 2014 | By John Tracy

In a recent Toronto Star article titled “You can still lose land through squatter’s rights” he deals with the legal concept of adverse possession.” , the author – Mark Weisleder clearly and accurately sets out the rules for claiming adverse possession and poses a question about the interplay between adverse possession and title insurance that I will answer in this post.

Generally speaking courts are somewhat reluctant to grant orders giving title through adverse possession and will ensure strict compliance with the requirements but in the appropriate circumstances, these orders will be issued.

To understand the interplay between title insurance and adverse possession, it is best to consider the issue from both sides of the fence. We have to look at the issue from the point of view of the person claiming adverse possession and from the point of view of the person against whom adverse possession is being claimed. Let’s start with the person against whom adverse possession is being claimed. A title insurance policy insures that a person has title to a particular parcel of land. The specific legal description of the insured land is set out on a schedule attached to the title insurance policy. Where another person claims title by way of adverse possession he or she is claiming an interest in the parcel of land that is insured. In this case the title insurance policy will respond because it insures against losses that arise when someone else owns, or claims to own, an interest in the title that is insured. The policy can either cover the legal costs of defending the adverse possession claim or alternatively it could pay the insured the actual loss that would arise from the loss of the land that is the subject matter of the adverse possession claim.

Now, let’s look at the issue from the other side – from the point of view of the person claiming title by way of adverse possession. For the same reason that a title insurance policy will respond to assist a person against whom adverse possession is being claimed it will not respond to assist a person claiming adverse possession. Remember that a title insurance policy insures title to a specifically described parcel of land. The description of the land that is insured is set out on a schedule to the policy and coincides with the description in the insured’s deed. The title insurance policy has an exclusion for losses that arise from the lack of a right “to any land outside the area specifically described and referred to” in schedule attached to the policy. In the case of adverse possession a person is, by definition, claiming land not contained in their deed and not insured under the policy and because of this exclusion the policy will not respond to assist a person making a claim for adverse possession. A title insurance policy may offer some indirect coverage for people claiming adverse possession such as coverage for the forced removal of encroachments or survey coverage but there is no direct coverage for claiming land that is not insured under the policy.

So in effect title insurance protects an insured against claims of adverse possession (not in support of claims of adverse possession). Does that clarify the issues? What questions do you have?

9 Responses to “Title insurance and squatter’s rights (adverse possession) – a shield, not a sword”

  1. James says:

    Two part question:
    1. what if your insurance (in choosing to pay losses instead of to defend) ignores realistic valuation for the land and offers an unreasonably low compensation for your loss, is there recourse if you cannot come to agreement?
    2. Is your insurance liable for other damages and actual costs associated with your title being challenged, i.e. marketability of property (vs. simple land value lost), damages claimed against you for trespass on your title property, etc.

    • FCT says:

      Hi James,

      Each claim is settled based on the coverage and terms set out in the specific policy, so it’s hard to fully answer your questions, but we’ll do our best!

      1. A title insurance policy offers multiple ways to settle claims. One option that we offer is to pay the actual loss, and to get a realistic valuation of the loss, we generally rely on a professional, unbiased appraiser. If there is a difference of opinion, our customers always have recourse as outlined in our complaints policy. https://fct.ca/complaints/

      2. This question is particularly difficult to answer without knowing the details of the policy, but your title insurance policy should explain the limitation of liability.

      If you would like us to look into this further, you can email us the details at claims@fct.ca and our team would be happy to answer your questions!

  2. Dan says:

    If the policy excludes “Rights of or claims by parties in possession not shown by the public”/ . How would that affect an insurer’s duties in respect of an adverse possession claim asserted against the insured?

    • FCT says:

      Hi Dan,
      Your question doesn’t appear to match any exclusions currently in any of FCT’s policies. In some limited instances, you may see an exception (as opposed to an exclusion) for some claims not appearing in the public records. This exception to coverage is placed on a policy on a case-by-case basis depending upon the information gathered during the underwriting process. The courts tell us that all exclusions and exceptions have to be narrowly interpreted, but in some rare cases where there is an exclusion or exception to coverage for “rights of or claims by parties in possession not shown by the public (records)” then this could very well limit an insurer’s duty in respect of an adverse possession claim asserted against the insured. Keep in mind that coverage for each claim is dependent upon the facts and the specific wording of the policy including any exclusions and exceptions. Hope that helps!

  3. Sarah says:

    How does title insurance come into play with Prescriptive Easement rather then Adverse Posession?

    • FCT says:

      Hi Sarah,
      In general terms, a title insurance policy can be best thought of as a shield against claims for prescriptive easements and adverse possession. Covered Risk # 1 of FCT’s residential owner’s policy covers losses when “Someone else owns an interest in your Title” and Covered Risk # 5 insures against losses when “Someone else has an Easement on the Land”. The title insurance policy also has a “duty to defend” which provides that in the event of a lawsuit based on something covered under the policy, the legal fees for defending that lawsuit are covered under the policy. So, if someone is sued and the lawsuit is seeking adverse possession of some part of the person’s land or an easement over the person’s land, the title insurance policy will respond. Keep in mind that this is general information only. For specific coverage and exclusions, refer to the policy. Copies are available upon request.

  4. Monika Batics says:

    We purchased 2.5 acres from a friend in Feb 3 2005. We wrote up a contract that was labelled a gentlemans agreement. We would now like to sell the land & house, do not have title. The person we bought the land off of, says go ahead & sell, how do you sell without title, yet it is ours, & he has the rest up for sale & is living up to the aggrement to potential buyers….

    • FCT says:

      Hi Monika,

      This sounds like a legal problem and you should contact an experienced real estate lawyer. If you have title insurance, you should definitely submit a claim under your policy because a title insurance policy insures that you own the land described in the policy. If you do have a policy and it is with FCT you can find out how to submit a claim on at https://fct.ca/make-a-claim/.

  5. Lori Vittie says:

    I purchased my home in 1996 and not much work was done that year, my Father was dying and my time was spent with him.
    In 1997, the neighbour beside me, was caring for her Mother, who had Alzheimer’s, they would sit on their side yard, next to my driveway. Whenever I was entering my driveway to park in my garage, the Mother would always think her daughter was leaving her. I offered to put up a little fence, that would act as a partition. It was constructed of wood, I paid all costs, but it did cross the property line 3 inches.
    In 2008, I fenced in my property with white vinyl, I had the wood partition fence posts covered and replaced the wood with the white vinyl as well.
    Now, fast forward 24 years later and one hostile neighbour later, the 3 inches has become a problem. Mr. hostile neighbour, removed my survey pin to “recreate’ the property line, he saw cut my concrete curb next to my asphalt driveway, that is totally on my property. I have the original site plan from 1964. Due to the fact that he is so very aggressive, I notified the Police and they told him that he could not do that.

    Any suggestions that could help was be appreciated.

    Thanks

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