Mineral Rights and Commercial Title Insurance

Andy Brownstein is CFO & General Counsel at GRS Group

Andy Brownstein
CFO & General Counsel
GRS Group
(804) 767-4590

Over the last three years, GRS | Title has been engaged by a national law firm on behalf of one of its international mining clients.  This particular client wished to both engage GRS | Title to search and underwrite leasehold title insurance policies on leasehold interests it intended to acquire for the purpose of mining for certain subsurface items in the future and GRS | Title has performed over 100 of these searches and issued a number of leasehold policies for this client.

Mineral rights pose a series of unusual issues for title companies.  These issues have become exacerbated in recent years with the boom in oil shale exploration in many states.  In a number of places around the country, the major title insurance underwriters have now specifically exempted mineral rights from the basket of affirmative coverages that they provide, and now specifically exclude such coverage from a standard title insurance policy.  When underwriters act in this fashion, it is usually in response to a determination of an increased level of risk in these types of coverages.

Why are these coverages deemed riskier and how has GRS | Title solved these problems for both its clients and the underwriters it works with?  The first problem is that mineral rights are not often described in a current property deed.  They may have been “severed”, i.e. split from other property rights, at some time further back in history than the time frame of even a conservative title search, which might be forty or sixty years.  In some cases, especially in older American states, these rights may have been severed at the time of the original land grant by the crown or by the federal government.

When a search needs to go back much further than the middle of the 20th century, a number of additional problems arise.  First, the legal descriptions are often poorly worded and hard to interpret, making it very difficult to establish a clear chain of title, especially in older American states.  These states use what is called a “metes and bounds” method of description (“twenty paces from the fence post to the poplar tree by the creek”).  Second, many older county records were destroyed or lost over time, perhaps by fire or in the Civil War.  This creates gaps in the chain of title that may not be solvable.  Third, counties were often split, and land that was in one county at one time, may now be in another county. Even if an end point of a search can be established with some level of certainty, the documents themselves may not definitively establish whether mineral rights had been severed at some time in the past.

GRS | Title has solved these problems for its clients by using very experienced personnel, both internal and external, to perform these searches.  In some cases, we have gotten the search personnel pre-approved by the underwriters.  We have also established a close working relationship with the proper underwriting personnel at the underwriters in the various jurisdictions where this work is being performed.  A number of these coverages have required extensive negotiation and drafting with the underwriters and our personnel have worked closely to accomplish our client’s goals. In some cases specific endorsement language was created with the underwriter’s approval to set the value of various policies and endorsements.  These projects are time consuming and complex and without the proper expertise, a successful resolution is unlikely.

Please contact us to discuss how we can help solve the peculiar issues mining rights can often cause.

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