Escrow & TitleIntermediateCalifornia Exam

What is 'subrogation' in title insurance?

AThe substitution of one insurer for another, under standard California escrow and title practice, consistent with customary closing procedure

BThe right of the title insurer, after paying a claim, to step into the insured's shoes and pursue any legal claims against the party who caused the title defectCorrect

CThe process of adding additional coverage to a title policy, as typically handled by an escrow officer, under standard California escrow and title practice, consistent with customary closing procedure

DThe cancellation of a title policy, consistent with standard title insurance practice, under standard California escrow and title practice, consistent with customary closing procedure

Why The right of the title insurer, after paying a claim, to step into the insured's shoes and pursue any legal claims against the party who caused the title defect Is Correct

Answer B: The right of the title insurer, after paying a claim, to step into the insured's shoes and pursue any legal claims against the party who caused the title defect

Subrogation gives the title insurance company the right to pursue, in the name of the insured, any legal remedies against third parties who caused the loss. After paying a claim, the insurer 'steps into the shoes' of the insured to recover the payout.

Exam Tip: Escrow & Title

Escrow questions test the neutral third-party role and the sequence of closing events. Remember that the escrow agent acts as a dual agent for both buyer and seller and cannot advocate for either side.

Key Escrow & Title Terms in This Question

Title Insurance

Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.

Escrow

A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.

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Key Terms to Know

Title Insurance

Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.

Deed

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

Easement

A non-possessory right to use another person's land for a specific purpose.

Lien

A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.

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