If they took out the loan in order to pay the delinquent taxes that brings up quite another issue. Even an owner's policy would not cover a claim in that respect.
The following matters are expressly excluded from the coverage of this policy, and the Company will not pay loss or damage, costs, attorneys' fees, or expenses that arise by reason of:
...
3. Defects, liens, encumbrances, adverse claims, or other matters
(a) created, suffered, assumed, or agreed to by the Insured Claimant
(b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed in writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy;
I think the taxes would fall into the category of a lien created, suffered, assumed, or agreed to by the insured claimant. If the borrower knew of the obligation to pay the taxes and didn't mention them, then they would be out of luck trying to make a claim on their owner's policy. Thus, why should you be responsible for them?
Robert A. Franco
SOURCE OF TITLE
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