CONDITIONS AND STIPULATIONS
<br />1. DEFINITION OF TERMS
<br />The following terms when used in this policy mean:
<br />(a) "insured": the insured named in Schedule A, and,
<br />subject to any rights or defenses the Company may have
<br />had against the named insured, those who succeed to the
<br />interest of such insured by operation of law as distinguished
<br />from purchase including, but not limited to, heirs, distribu-
<br />tees, devisees, survivors, personal representatives, next of
<br />kin, or corporate or fiduciary successors. The term "in-
<br />sured" also includes (i) the owner of the indebtedness nse-
<br />cured by the insured mortgage and each successor in ower-
<br />ship of such indebtedness (reserving, however, all rights
<br />and defenses as to any such successor who acquires the in-
<br />debtedness by operation of law as described in the first
<br />sentence of this sub -paragraph (a) that the company would
<br />have had against the successor's transferor) , and further in-
<br />cludes (ii) any governmental agency or instrumentality
<br />which is an insurer or guarantor under an insurance con-
<br />tract or guaranty insuring or guaranteeing said indebted-
<br />ness, or any part thereof, whether named as an insured
<br />herein or not, and (iii) the parties designated in paragraph
<br />2 (a) of these Conditions and Stipulations.
<br />(b) "insured claimant": an insured claiming loss or
<br />damage hereunder.
<br />(c) "insured lender": the owner of an insured mort-
<br />gage.
<br />(d) "insured mortgage": a mortgage shown in Sched-
<br />ule B, the owner of which is named as an insured in Sched-
<br />ule A.
<br />(e) "knowledge": actual knowledge, not constructive
<br />knowledge or notice which may be imputed to an insured by
<br />reason of any public records.
<br />(f) "land": the land described, specifically or by ref-
<br />erence in Schedule C, and improvements affixed thereto
<br />which by law constitute real property; provided, however,
<br />the term "land" does not include any area excluded by
<br />Paragraph No. 6 of Part One of Schedule B of this Policy.
<br />(g) "mortgage": mortgage, deed of trust, trust deed,
<br />or other security instrument.
<br />(h) "public records": those records which by law im-
<br />part constructive notice of matters relating to the land.
<br />2(a). CONTINUATION OF INSURANCE AFTER
<br />ACQUISITION OF TITLE BY INSURED LENDER
<br />If this policy insures the owner of the indebtedness
<br />secured by the insured mortgage, this policy shall continue
<br />in force as of Date of Policy in favor of such insured who
<br />acquires all or any part of the estate or interest in the land
<br />described in Schedule C by foreclosure, trustee's sale, con-
<br />veyance in lieu of foreclosure, or other legal manner which
<br />discharges the lien of the insured mortgage, and if such
<br />insured is a corporation, its transferee of the estate or inter-
<br />est so acquired, provided the transferee is the parent or
<br />wholly owned subsidiary of such insured; and in favor of
<br />any governmental agency or instrumentality which acquires
<br />all or any part of the estate or interest pursuant to a con-
<br />tract of insurance or guaranty insuring or guaranteeing the
<br />indebtedness secured by the insured mortgage. After any
<br />such acquisition the amount of insurance hereunder, exclu-
<br />sive of costs, attorneys' fees and expenses which the Com-
<br />pany may be obligated to pay, shall not exceed the least of:
<br />(i) the amount of insurance stated in Schedule A;
<br />(ii) the amount of the unpaid principal of the in-
<br />debtedness plus interest thereon, as determined under
<br />paragraph 6 (a) (iii) hereof, expenses of foreclosure
<br />and amounts advanced to protect the lien of the insured
<br />mortgage and secured by said insured mortgage at the
<br />time of acquisition of such estate or interest in the
<br />land; or
<br />(iii) the amount paid by any governmental agency
<br />or instrumentality, if such agency or instrumentality is
<br />the insured claimant, in acquisition of such estate or
<br />interest in satisfaction of its insurance contract or
<br />guaranty.
<br />(b). CONTINUATION OF INSURANCE AFTER
<br />CONVEYANCE OF TITLE
<br />The coverage of this policy shall continue in force as of
<br />Date of Policy, in favor of an insured so long as such in-
<br />sured retains an estate or interest in the land, or owns an
<br />indebtedness secured by a purchase money mortgage given
<br />by a purchaser from such insured, or so long as such in-
<br />sured shall have liability by reason of covenants of war-
<br />ranty made by such insured in any transfer or conveyance
<br />of such estate or interest; provided, however, this policy
<br />shall not continue in force in favor of any purchaser from
<br />such insured of either said estate or interest or the indebt-
<br />edness secured by a purchase money mortgage given to
<br />such insured.
<br />3. DEFENSE AND PROSECUTION OF ACTIONS —
<br />NOTICE OF CLAIM TO BE GIVEN BY AN
<br />INSURED CLAIMANT
<br />(a) The Company, at its own cost and without undue
<br />delay, shall provide for the defense of an insured in litiga-
<br />tion to the extent that such litigation involves an alleged
<br />defect, lien, encumbrance or other matter insured against
<br />by this policy.
<br />(b) The insured shall notify the Company promptly
<br />in writing (i) in case of any litigation as set forth in (a)
<br />above, iii) in case knowledge shall come to an insured here-
<br />under of any claim of title or interest which is adverse to
<br />the title to the estate or interest or the lien of the insured
<br />mortgage, as insured, and which might cause loss or damage
<br />for which the Company may be liable by virtue of this
<br />policy, or (iii) if title to the estate or interest or the lien of
<br />the insured mortgage, as insured, is rejected as unmarket-
<br />able. If such prompt notice shall not be given to the Com-
<br />pany, then as to such insured all liability of the Company
<br />shall cease and terminate in regard to the matter or mat-
<br />ters for which such prompt notice is required; provided,
<br />however, that failure to notify shall in no case prejudice
<br />the rights of anyy such insured under this policy unless the
<br />Company shall be prejudiced by such failure and then only
<br />to the extent of such prejudice.
<br />(c) The Company shall have the right at its own cost
<br />to institute and without undue delay prosecute any action
<br />or proceeding or to do any other act which in its opinion
<br />may be necessary or desirable to establish the title to the
<br />estate or interest or the lien of the insured mortgage, as
<br />insured- and the Company may take any appropriate ac-
<br />tion, whether or not it shall be liable under the terms of
<br />this policy, and shall not thereby concede liability or waive
<br />any provision of this policy.
<br />(d) Whenever the Company shall have brought any
<br />action or interposed a defense as required or permitted by
<br />the provisions of this policy, the Company may pursue
<br />any such litigation to final determination by a court of
<br />competent jurisdiction and expressly reserves the right, in
<br />its sole discretion, to appeal from any adverse judgment
<br />or order.
<br />(e) In all cases where this policy permits or requires
<br />the Company to prosecute or provide for the defense of any
<br />action or proceeding, the insured hereunder shall secure to
<br />the Company the right to so prosecute or provide defense
<br />in such action or proceeding, and all appeals therein, and
<br />permit the Company to use, at its option, the name of such
<br />insured for such purpose. Whenever requested by the Com-
<br />pany, such insured shall give the Company, at the Com-
<br />pany's expense, all reasonable aid (1) in any such action
<br />or proceeding in effecting settlement, securing evidence,
<br />obtaining witnesses, or prosecuting or defending such action
<br />or proceeding, and (2) in any other act which in the
<br />opinion of the Company may be necessary or desirable to
<br />establish the title to the estate or interest or the lien of the
<br />insured mortgage, as insured, including but not limited to
<br />executing corrective or other documents.
<br />4. PROOF OF LOSS OR DAMAGE —
<br />LIMITATION OF ACTION
<br />In addition to the notices required under Paragraph 3
<br />(b) of these Conditions and Stipulations, a proof of loss or
<br />damage, signed and sworn to by the insured claimant shall
<br />be furnished to the Company within 90 days after the in-
<br />sured claimant shall ascertain or determine the facts giving
<br />rise to such loss or damage. Such proof of loss or damage
<br />shall describe the defect in, or lien or encumbrance on the
<br />title, or other matter insured against by this policy which
<br />constitutes the basis of loss or damage, and, when appro-
<br />Priate, state the basis of calculating the amount of such oaa or damage.
<br />Should such proof of loss or damage fail to state facts
<br />sufficient to enable the Company to determine its liability
<br />hereunder, insured claimant, at the written request of Com-
<br />pany, shall furnish such additional information as may
<br />reasonably be necessary to make such determination.
<br />No right of action shall accrue to insured claimant
<br />until 30 days after such proof of loss or damage shall have
<br />been furnished.
<br />Failure to furnish such proof of loss or damage shall
<br />terminate any liability of the Company under this policy
<br />as to such loss or damage.
<br />5. OPTIONS TO PAY OR OTHERWISE SETTLE
<br />CLAIMS AND OPTIONS TO PURCHASE
<br />INDEBTEDNESS
<br />The Company shall have the option to pay or other-
<br />wise settle for or in the name of an insured claimant any
<br />claim insured against, or to terminate all liability and obli-
<br />gations of the Company hereunder by paying or tendering
<br />payment of the amount of insurance under this policy to-
<br />gether with any costs, attorneys' fees and expenses incurred
<br />up to the time of such payment or tender of payment by the
<br />insured claimant and authorized by the Company. In case
<br />loss or damage is claimed under this policy by the owner
<br />of the indebtedness secured by the insured mortgage, the
<br />Company shall have the further option to purchase such
<br />indebtedness for the amount owing thereon together with
<br />all costs, attorneys' fees and expenses which the Company
<br />is obligated hereunder to pay. If the Company offers to
<br />purchase said indebtedness as herein provided, the owner
<br />of such indebtedness shall transfer and assign said indebt-
<br />edness and the mortgage and any collateral securing the
<br />same to the Company upon payment therefor as herein
<br />provided. Upon such offer being made by the Company, all
<br />liability and obligations of the Company hereunder to the
<br />owner of the indebtedness secured by said insured mort-
<br />gage, other than the obligation to purchase said indebted-
<br />ness pursuant to this paragraph, are terminated.
<br />S. DETERMINATION AND PAYMENT OF LOSS
<br />(a) The liability of the Company under this policy
<br />shall in no case exceed the least of:
<br />(i) the actual loss of the insured claimant; or
<br />iii) the amount of insurance stated in Schedule
<br />A, or, if applicable, the amount of insurance as de-
<br />fined in paragraph 2 (a) hereof; or
<br />(iii) if this policy insures the owner of the in-
<br />debtedness secured by the insured mortgage, and. pro-
<br />vided said owner is the insured claimant, the amount
<br />of the unpaid principal of said indebtedness, plus in-
<br />terest thereon, provided such amount shall not include
<br />any additional principal indebtedness created subse
<br />quent to Date of Policy, except as to amounts ad-
<br />vanced to protect the lien of the insured mortgage and
<br />secured thereby.
<br />(b) The Company will pay, in addition to any loss
<br />insured against by this policy, all costs imposed upon an
<br />insured in litigation carried on by the Company for such
<br />insured, and all costs, attorneys' fees and expenses in liti-
<br />gation carried on by such insured with the written authori-
<br />zation of the Company.
<br />(c) When the amount of loss or damage has been
<br />definitely fixed in accordance with the conditions of this
<br />policy, the loss or damage shall be payable within 30 days
<br />thereafter.
<br />7. LIMITATION OF LIABILITY
<br />No claim shall arise or be maintainable under this
<br />policy (a) if the Company, after having received notice of
<br />an alleged defect, lien or encumbrance insured against here -
<br />tinder, by litigation or otherwise, removes such defect, lien
<br />or encumbrance or establishes the title, or the lien of the
<br />insured mortgage, as insured, within a reasonable time after
<br />receipt of such notice; (b) in the event of litigation until
<br />there has been a final determination by a court of compe-
<br />tent jurisdiction, and disposition of all appeals therefrom,
<br />adverse to the title or to the lien of the insured mortgage,
<br />as insured, as provided in paragraph 3 hereof; or (c) for
<br />liability voluntarily admitted or assumed by an insured
<br />without prior written consent of the Company.
<br />8. REDUCTION OF INSURANCE;
<br />TERMINATION OF LIABILITY
<br />All payments under this policy, except payment made
<br />for costs, attorneys' fees and expenses, shall reduce the
<br />amount of the insurance pro tanto; provided, however, if
<br />the owner of the indebtedness secured by the insured mort-
<br />gage is an insured hereunder, then such payments, prior to
<br />the acquisition of title to said estate or interest as provided
<br />in paragraph 2 (a) of these Conditions and Stipulations,
<br />shall not reduce pro tanto the amount of the insurance
<br />afforded hereunder as to any such insured, except to the
<br />extent that such payments reduce the amount of the indebt-
<br />edness secured by such mortgage.
<br />Payment in full by any person or voluntary satisfac-
<br />tion or release of the insured mortgage shall terminate all
<br />liability of the Company to an insured owner of the indebt-
<br />edness secured by the insured mortgage, except as provided
<br />in paragraph 2 (a) hereof.
<br />9. LIABILITY NONCUMULATIVE
<br />It is expressly understood that the amount of insur-
<br />ance under this policy, as to the insured owner of the estate
<br />or interest covered by this policy, shall be reduced by any
<br />amount the Company may pay under any policy insuring
<br />(a) a mortgage shown or referred to in Schedule B hereof
<br />which is a lien on the estate or interest covered by this
<br />policy, or (b) a mortgage hereafter executed by an insured
<br />which is a charge or lien on the estate or interest described
<br />or referred to in Schedule A. and the amount so paid shall
<br />be deemed a payment under this policy. The Company
<br />shall have the option to apply to the payment of any such
<br />mortgage any amount that otherwise would be payable
<br />hereunder to the insured owner of the estate or interest
<br />covered by this policy and the amount so paid shall be
<br />deemed a payment under this policy to said insured owner.
<br />The provisions of this paragraph 9 shall not apply to
<br />an owner of the indebtedness secured by the insured mort-
<br />gage, unless such insured acquires title to said estate or
<br />interest in satisfaction of said indebtedness or any part
<br />thereof.
<br />10. SUBROGATION UPON PAYMENT OR SETTLEMENT
<br />Whenever the Company shall have paid or settled a
<br />claim under this policy, all right of subrogation shall vest
<br />in the Company unaffected by any act of the insured claim-
<br />ant, except that the owner of the indebtedness secured by
<br />the insured mortgage may release or substitute the personal
<br />liability of any debtor or guarantor, or extend or otherwise
<br />modify the terms of payment, or release a portion of the
<br />estate or interest from the lien of the insured mortgage, or
<br />release any collateral security for the indebtedness, pro-
<br />vided such act occurs prior to receipt by such insured of
<br />notice of any claim of title or interest adverse to the title to
<br />the estate or interest or the priority of the lien of the insured
<br />mortgage and does not result in any loss of priority of the
<br />lien of the insured mortgage. The Company shall be sub-
<br />rogated to and be entitled to all rights and remedies which
<br />such insured claimant would have had against any person
<br />or property in respect to such claim had this policy not
<br />been issued, and the Company is hereby authorized and
<br />empowered to sue, compromise or settle in its name or in
<br />the name of the insured to the full extent of the loss sus-
<br />tained by the Company. If requested by the Company, the
<br />insured shall execute any and all documents to evidence
<br />the within subrogation. If the payment does not cover the
<br />loss of such insured claimant, the Company shall be subro-
<br />gated to such rights and remedies in the proportion which
<br />said payment bears to the amount of said loss, but such
<br />subrogation shall be in subordination to an insured mort-
<br />gage. If loss should result from any act of such insured
<br />claimant, such act shall not void this policy, but the Com-
<br />pany, in that event, shall as to such insured claimant be
<br />required to pay only that part of any losses insured against
<br />hereunder which shall exceed the amount, if any, lost to the
<br />Company by reason of the impairment of the right of
<br />subrogation.
<br />11. LIABILITY LIMITED TO THIS POLICY
<br />This instrument together with all endorsements and
<br />other instruments, if any, attached hereto by the Company
<br />is the entire policy and contract between the insured and
<br />the Company.
<br />Any claim of loss or damage, whether or not based on
<br />negligence, and which arises out of the status of the lien
<br />of the insured mortgage or of the title to the estate or inter-
<br />est covered hereby, or any action asserting such claim,
<br />shall be restricted to the provisions and conditions and
<br />stipulations of this policy.
<br />This policy shall not be valid until countersigned
<br />by a Vice President or an Assistant Vice President of
<br />the Company. No amendment of or endorsement to this
<br />policy can be made except by writing endorsed hereon
<br />or attached hereto signed by either the President, a
<br />Vice President, an Assistant Vice President or the Sec-
<br />retary of the Company.
<br />No payment shall be made without producing this
<br />policy for endorsement of such payment unless the policy
<br />be lost or destroyed, in which case proof of such loss or
<br />destruction shall be furnished to the satisfaction of the
<br />Company.
<br />12. NOTICES, WHERE SENT
<br />All notices required to be given the Company and any
<br />statement in writing required tr be furnished the Com-
<br />pany shall be addressed to it at its Home Office, 100 Mis-
<br />sion Street, San Francisco, California 94105.
<br />13. THE FEE SPECIFIED IN SCHEDULE A IS THE
<br />ENTIRE CHARGE FOR TITLE SEARCH, TITLE
<br />EXAMINATION AND TITLE INSURANCE.
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