As a lawyer I often encourage clients to put cash into insurance and here is why:1.

What does your lawyer say?

Title companies have lawyers, but they are not your friend’s lawyer. 

Will run this past my lawyer and proceed immediately.

the issue with sub 2 wrap goes deeper than just monetary loss.. your risking the people you bought the house from as well.. and I will say one more time.. if you buggar their credit because you cant refi if  gets called or cant make payments for them.. then this goes way past you lost a little money and it ends up with lawyer letters  complaints to the AG  etc etc..

You don't make enough to pay lawyers, fines or anything else from your cash flow. 

First time ended in a lawsuit that cost me close to $40,000 and the second time we had to get the banks lawyers involved to sort out removing someone from a mortgage.

You could discuss with your lawyer to determine if this avenue is viable for your situation.However, it's also worth considering the value of having reliable tenants.

I recently established an ownership structure similar to you with the help of a lawyer.

They all used the same the tactic, money.I would offer a generous buyout, which I know will be hard on principle, but you'll spend just as much on lawyers and preserve your sanity in the long run, wishing you the best of luck.