CHAPTER 12 Title Insurance

• Jurisdiction: United States
• Publication year: 2019

CHAPTER 12

Title Insurance

§ 12.01 Overview

Title insurance is merely a subset of real property law because it involves title issues rather than insurance issues. Nonetheless, title insurance has become the financial instrument that allows lenders to lend on real property without the necessity of knowing the particular jurisdiction or locality at issue.

Entities that purchase real property or lend on the purchase of such property want to ensure that at the time of purchase the real property acquired is free of any unknown defects to title. In some states, real estate lawyers perform title searches. In others, title insurance is used to insure against these defects.

§ 12.02 Coverage

[1] Purpose

Unlike other forms of insurance, title insurance does not guarantee against future events. Rather it guarantees against events existing at the time of issuance of the insurance policy.¹ Title insurance protects against the existence of liens, encumbrances, or other items that interfere with free and clear title on real property but are not found on the title search or disclosed in the title report.² The insurance company does not guarantee perfect title but merely agrees to pay damages for or clear title to defects in title that were not disclosed or did not appear at the time of closing.³

[2] Duration of Coverage

The insurance coverage lasts for as long as the policyholder owns an interest in the property or, in some jurisdictions under some contract clauses, longer if the policyholder has given a warranty of title to a buyer.⁴

[3] Covered Defects in Title

Title insurance protects against a number of encumbrances to title, including liens (such as tax liens, judgment liens, and mechanics’ or contractors’ liens),⁵ mortgages,⁶ claims to real propery known as lis pendens,⁷ recorded easements,⁸ unmarketability of title,⁹ which is distinct from economic unmarketability,¹⁰ and encroachments.¹¹

[4] Common Exceptions

Usually excepted from coverage by title insurance are unrecorded encumbrances, such as claims based upon adverse possession or unrecorded options to purchase,¹² zoning, land use, or other governmental restrictions,¹³ and defects created by or known to the policyholder.¹⁴

Notes

^[1] See, e.g.:

California: Hovannisian v. First American Title Insurance Co., 14 Cal. App.5th 420, 221 Cal. Rptr.3d 883 (Cal. App. 2017).

Florida: Village Carver Phase 1, LLC v. Fidelity National Title Insurance Co., 128 So.3d 107 (Fla. App. 2013).

Maryland: Back Creek Partners, LLC v. First American Title Insurance Co., 75 A.3d 394 (Md. App. 2013).

Massachusetts: Deutsche Bank, N.A. v. First American Title Insurance Co., 991 N.E.2d 638 (Masss. 2013).

New Jersey: Princeton South Investors LLC v. First American Title Insurance Co., 97 A.3d 1190 (NJ. Super., App. Div. 2014).

^[2] See, e.g.:

Eighth Circuit: Associated Bank, N.A. v. Stewart Title Guaranty Co., 881 F. Supp.2d 1058 (D. Minn. 2012).

Eleventh Circuit: Regions Bank v. Commonwealth Land Title Insurance Co., 977 F. Supp.2d 1237 (S.D. Fla. 2013).

State Courts:

Arizona: First American Title Insurance Co. v. Johnson Bank, 372 P.3d 292 (Ariz. 2016).

California: Hovannisian v. First American Title Insurance Co., 14 Cal. App.5th 420, 221 Cal. Rptr.3d 883 (Cal. App. 2017).

Illinois: Wade v. Stewart Title Guaranty Co., 82 N.E.3d 763 (Ill. App. 2017).

Minnesota: Twin Cities Metro-Certified Development Co. v. Stewart Title Guaranty Co., 868 N.W.3d 713 (Minn. App. 2015).

Maryland: Back Creek Partners, LLC v. First American Title Insurance Co., 75 A.3d 394 (Md. App. 2013).

Massachusetts: Deutsch Bank, N.A. v. First American Title Insurance Co., 991 N.E.2d 638 (Masss. 2013).

New York: A. Gugliotta Development, Inc. v. First American Title Insurance Co., 976 N.Y.S.2d 172 (N.Y. Sup. Ct., App. Div. 2013).

Texas: McGonagle v. Stewart Title Guaranty Co., 432 S.W.3d 535 (Tex. App. 2014).

^[3] See, e.g.:

Eighth Circuit: Associated Bank, N.A. v. Stewart Title Guaranty Co., 881 F. Supp.2d 1058 (D. Minn. 2012).

State Courts:

Arizona: First American Title Insurance Co. v. Johnson Bank, 372 P.3d 292 (Ariz. 2016).

California: Hovannisian v. First American Title Insurance Co., 14 Cal. App.5th 420, 221 Cal. Rptr.3d 883 (Cal. App. 2017).

Idaho: Cummings v. Stephens, 336 P.3d 281 (Idaho 2014).

Illinois: Wade v. Stewart Title Guaranty Co., 82 N.E.3d 763 (Ill. App. 2017).

Minnesota: Twin Cities Metro-Certified Development Co. v. Stewart Title Guaranty Co., 868 N.W.3d 713 (Minn. App. 2015).

Massachusetts: Deutsch Bank, N.A. v. First American Title Insurance Co., 991 N.E.2d 638 (Masss. 2013).

New York: A. Gugliotta Development, Inc. v. First American Title Insurance Co., 976 N.Y.S.2d 172 (N.Y. Sup. Ct., App. Div. 2013).

Texas: McGonagle v. Stewart Title Guaranty Co., 432 S.W.3d 535 (Tex. App. 2014).

^[4] See:

Ninth Circuit: Londen Land Co. v. Title Resources Guaranty Co., 467 Fed. Appx. 706 (9th Cir. 2012).

State Courts:

California: Hovannisian v. First American Title Insurance Co., 14 Cal. App.5th 420, 221 Cal. Rptr.3d 883 (Cal. App. 2017); RNT Holdings, LLC v. United General Title Insurance Co., 179 Cal. Rptr.3d 175 (Cal. App. 2014).

Idaho: Bank of Idaho v. First American Title Insurance Co., 329 P.3d 1066 (Idaho 2014).

Maryland: Back Creek Partners, LLC v. First American Title Insurance Co., 75 A.3d 394 (Md. App. 2013).

New York: Soldiers’, Sailors’, Marines’ and Airmen’s Club, Inc. v. Carlton Regency

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