Fidelity’s Fact
Findings
To: Tennessee Fidelity Agents
From: Rhonda Bundy, Jerry Grand, and Bill Yarborough
Date: 5/16/2006
Subject: Continuation of Coverage after Quitclaim to Spouse
We have recently been asked whether policy coverage continues when an insured quitclaims
land to his/her spouse. The answer is that it depends on the facts.
First, consider the situation when the property is held by insured spouses as tenants by the
entirety and one spouse (A) quitclaims his or her interest in the land to the other spouse (B).
Under the long form ALTA Owners Policy, coverage continues in favor of an insured named in
Schedule A “so long as the insured retains an estate or interest in the land”. Because spouse
B is one of the named insureds, coverage of the full interest continues. Similarly, under an
enhanced ALTA Homeowners Policy, spouse B is a named insured in Schedule A and full
coverage continues “forever”.
Next, consider the situation when title is vested in insured spouse A who quitclaims an interest
in the property to spouse B in order to create a tenancy by the entirety. The entire tenancy
would be covered in full so long as spouse A: (1) lives and remains married; or (2) outlives
spouse B. However, upon spouse A‟s death prior to spouse B, the result is less clear. Should
spouse A die prior to spouse B, the interest of spouse B would arguably no longer remain
insured because spouse B is neither a named insured nor a defined insured under either the
ALTA Owners Policy or the ALTA Homeowners Policy. So the argument goes, spouse B„s
interest was acquired by conveyance from spouse A and not by operation of law or
inheritance.
The result is even less clear when the tenancy by the entirety (created by conveyance from
insured spouse A) is severed by a divorce. Unless the divorce decree specifies otherwise, a
tenancy in common would result from the severance. Once again, arguments can be made
under both policies that the interest of B is not insured because the interest was acquired by
conveyance and not by operation of law or dissolution of the marriage.
In order to remedy the possibility of no coverage when a tenancy by the entirety is created by
direct conveyance from a spouse insured by Fidelity, we strongly suggest that you recommend
an endorsement naming the non-originally vested spouse as an additional insured. The
endorsement can be purchased for $25.00.
Tennessee 2006