Non-Imputation on a Loan Policy: Read the Jacket

A national lender asked for a non-imputation endorsement on its loan policy in a multi-million dollar assignment and assumption. Non-imputation is an owner’s-policy tool. Here is why the request was unusual, and why the answer is in the jacket.

We recently represented an incoming investor in a joint-venture recapitalization. In outline, the deal was clean. An institutional investor was purchasing an interest in a newly formed joint venture that would step into ownership of a stabilized commercial portfolio, financed by a multi-million dollar assignment and assumption of an existing loan held by a national lender and secured by a multi-property portfolio. The lender consented to the assignment and assumption, and it was set to receive the customary package on its existing loan policy: an assignment-and-assumption (modification) endorsement to carry the policy over to the new borrower, plus a date-down.

Then lender’s counsel asked for one more thing. They requested that the title company issue a non-imputation endorsement (an ALTA 15) on the lender’s loan policy, or, in the alternative, that non-imputation language be added to the ALTA 11 mortgage-modification endorsement. The concern, as framed, was that after the borrower substitution the title company might attribute to the lender knowledge held only by the incoming borrower parties, and rely on it to narrow coverage under the policy’s knowledge-and-conduct exclusions. The request was presented as preserving existing coverage rather than adding new coverage. Reasonable on its face, and offered in good faith. As counsel for the investor, we still objected, on cost and on the unusual nature of the request.

I. Why the Request Is Unusual

Non-imputation endorsements are creatures of the owner’s policy. The ALTA 15 series (15, full equity transfer; 15.1, additional insured; 15.2, partial equity transfer) exists to solve an owner-side problem. When a new investor buys into an entity that owns insured real estate, the title insurer might later deny the new owner’s claim by imputing to the venture the knowledge or conduct of the continuing sponsor or principals, triggering the policy’s knowledge-and-conduct exclusions. The endorsement removes that defense for the incoming equity, up to its percentage interest, as a purchaser for value.¹ That is a capital-partner protection, not a lender protection.

Here, the lender was not buying equity in anything. It was a secured creditor whose loan was being assumed, and it was already receiving an endorsement for the assignment and assumption: the modification endorsement and date-down that carry its existing loan policy forward to the new borrower. Layering a non-imputation endorsement onto a loan policy, on top of the assumption endorsement it was already getting, is the part that does not fit the form. The title company’s own underwriter made the same point, noting that the ALTA 15 accompanies an owner’s policy and asking what coverage the lender believed it was getting on a loan policy.

II. The Cost Objection

Non-imputation is neither free nor cheap. The endorsement generally runs 15% to 20% of the basic premium, and the underwriter will not issue it on a handshake. It conditions issuance on non-imputation affidavits and, typically, an indemnity from the sponsor or a creditworthy backer.² On a multi-million dollar, multi-state portfolio, that is real money and real underwriting friction, added to a closing that already had a defined endorsement package. Asking the investor’s side to fund and backstop an endorsement that protects only the lender, against a risk the lender did not actually bear, was the first reason to push back.

III. The Answer Is in the Jacket

This is not a well-developed area of the law. There is no tidy line of cases holding that a borrower’s knowledge is not imputed to its lender, and that absence is itself telling. The question does not get litigated because, for an arm’s-length loan, the answer is built into the policy. You do not need a case on point. You need to read the jacket.

A. The exclusions run to the “Insured Claimant,” and the borrower is not one. Exclusions 3(a) and 3(b) withhold coverage only for matters created, suffered, assumed, or agreed to by the Insured Claimant, and matters known to the Insured Claimant.³ On a loan policy, the Insured is the lender and the owner of the indebtedness. The borrower is an Obligor, and the 2021 jacket says so in terms: the Obligor is not an Insured under the policy. A borrower’s knowledge, then, is not the knowledge of the Insured Claimant. It falls outside the exclusion by definition.

B. “Created or suffered” reaches the insured’s own conduct, not a stranger’s. Courts confine the 3(a) exclusion to the insured’s own culpable conduct. Applying Missouri law, the Eighth Circuit held that the insurer can escape liability only if the defect resulted from “some intentional misconduct or inequitable dealings by the insured,” or the insured “expressly or impliedly assumed or agreed to” it, and not where the insured was “innocent of any conduct causing the loss or was simply negligent.”⁴ A borrower’s act is not the lender’s act, and a lender does not assume a borrower’s title defects by consenting to an assumption.

C. Imputation is an agency doctrine, and the borrower is not the lender’s agent. Knowledge is imputed from agent to principal, and that presupposes an agency relationship.⁵ In an arm’s-length loan the borrower is the lender’s debtor and, on title, an adverse party, not its agent. There is no conduit through which the borrower’s knowledge travels to the lender. The one place imputation does reach a lender is through the lender’s own agent. In one New York case, a lender wired payoff funds to the borrower’s attorney with closing instructions; the court held the attorney had become the lender’s settlement agent and imputed the agent’s misappropriation to the lender under Exclusion 3(a).⁶ The trigger was the agency the lender created, not the borrower’s status as borrower. Absent that, borrower-side knowledge stays on the borrower’s side.

Together, the text and the doctrine point one way. The assumption does not expose the lender to imputation of the new borrower’s knowledge, and the lender’s existing coverage is preserved by the assumption endorsement and date-down it was already receiving. The non-imputation concern, to the extent it exists at all here, belongs on the incoming investor’s owner’s policy, where the ALTA 15 lives, not on the lender’s loan policy.

IV. Bottom Line

The jacket answers the question on its own terms. Exclusions 3(a) and 3(b) apply only to the Insured Claimant. On a loan policy the Insured is the lender, and the borrower is an Obligor that the policy expressly says is not an Insured. The created-or-suffered exclusion reaches the insured’s own conduct, and imputation requires an agency relationship the borrower does not have. A clear reading of the jacket shows that borrower knowledge is not imputed to the lender.

Citations / Footnotes

Footnotes

1. ALTA 15, 15.1, and 15.2 (Non-Imputation) endorsements; see Foremost Constr. Co. v. Killam, 399 S.W.2d 593 (Mo. Ct. App. 1966); Ariz. Title Ins. & Trust Co. v. Smith, 519 P.2d 860 (Ariz. Ct. App. 1974); Laabs v. Chicago Title Ins. Co., 241 N.W.2d 434 (Wis. 1976); Annotation, 87 A.L.R.3d 515 (1978). ↩

2. Roger Bond Choquette, Real Estate Non-Imputation Endorsements: A Primer for Capital Partners (Mayer Brown, May 13, 2026) (non-imputation coverage “generally 15% to 20% of the cost of the basic premium”; underwriter requires affidavits and an indemnity from the sponsor or a creditworthy backer). ↩

3. ALTA Loan Policy of Title Insurance (6-17-06; rev. 07-01-2021), Exclusions from Coverage § 3 and Conditions (definitions of “Insured,” “Insured Claimant,” “Knowledge/Known,” and “Obligor”; Condition 12.b. (“The Obligor is not an Insured under this policy.”)). ↩

4. Brown v. St. Paul Title Ins. Corp., 634 F.2d 1103, 1107 n.8 (8th Cir. 1980) (applying Missouri law); see also Bankers Trust Co. v. Transamerica Title Ins. Co., 594 F.2d 231 (10th Cir. 1979); First Nat’l Bank of Minneapolis v. Fidelity Nat’l Title Ins. Co., 572 F.2d 155, 161 (8th Cir. 1978) (exclusions construed against the insurer; insurer bears the burden). ↩

5. Restatement (Third) of Agency §§ 5.03, 5.04 (Am. Law Inst. 2006). ↩

6. Plaza Home Mortg., Inc. v. Fidelity Nat’l Title Ins. Co., 2016 WL 7444886 (N.Y. App. Div. 2d Dep’t Dec. 28, 2016). ↩