On February 3, 2010 the board of the American Land Title Association (ALTA) voted to officially decommission or withdraw the creditors’ rights endorsement (ALTA Form 21/21/06) from use.  This action is a response to the concerns of title insurers and their re-insurers due to the downturn of the economy and several recent bankruptcy court decisions. Also many state regulators are questioning whether creditors’ rights coverage is even within the scope of concern of title insurance. 

Prior to the last 18 months creditors’ rights coverage was fairly common and easy to obtain on commercial property.  The endorsement to the lender or owner’s title policy provides coverage against challenges to a transfer of title as a result of a fraudulent conveyance, fraudulent transfer or preferential transfer or certain other federal and state bankruptcy and insolvency laws.  However, recently title insurers have been very reluctant to provide the coverage, and when they did provide it, it has come at a substantial cost of additional title premium.

Shortly after ALTA withdrew the endorsement national title insurance companies issued instructions to their agents that they would no longer provide a creditors’ rights endorsement or any form of creditors’ rights coverage.