Stewart Water Information, a subsidiary of Stewart Title Insurance, is the only firm in the country that offers water rights title insurance to insure the ownership of a water supply. The company, which offers the insurance in Utah and Colorado, has recently made the product available in the Texas market.
"It takes the risk out of ownership," Joseph Knox, president of Stewart Water, tells GlobeSt.com, explaining that the water title insurance policy, which is similar to property title insurance, gives the policy holder the assurance of owning water rights that can be conveyed to other users.
But Douglas Heller, senior consumer advocate with the Foundation for Consumer and Taxpayer Rights, tells GlobeSt.com that water rights title insurance may very well be worthless. "It almost sounds like an Enron scheme to create a market where no market exists and to provide a product that isn't needed," said Heller.
"For a title company to insert itself into the legal ownership of water rights is bizarre and probably pushing the limits of a reasonable marketplace," Heller continued. "I think this is an attempt to exploit consumers by creating a fear that shouldn't exist. It probably deserves serious review by the respective department of insurance and how it interacts with state law to make sure this is not just a title company selling another bill of goods."
Knox, aware of his critics, explained the water title insurance does not "guarantee the wet side of water rights." In other words, buyers are not guaranteed that there will be water on their property.
What it does convey, Knox said, is ownership of a water source. "We insure the ownership of the water and not the physical supply of the water," he explained. "And we also insure that the owner of the water rights has the ability to convey those water rights."
Knox said the water insurance plan was launched in 1996. "We have the consensus of the majority of players who know water rights. They see a need. The people who need this, understand it and they're taking it," he said. Those signing up include real estate brokers, attorneys, appraisers, water districts and lending institutions, according to Knox.
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