Title Insurance Revisited

In my practice, I frequently run across questions relating to title insurance coverage.  According to Black’s Law Dictionary, title insurance covers “loss or damage resulting from defects or failure of title to a particular parcel of realty, or from the enforcement of liens existing against it at the time of the insurance.”  In plain language, title insurance tells you who has an interest in your property, and provides you coverage in case the insurance company is wrong.

The big question regarding title insurance is just what does the specific policy cover?  The obvious place to start is with a copy of the policy itself.  Many people confuse the preliminary title report with the actual policy.  The preliminary title report is just that – preliminary.  It states, that as of a specific date and time, here is the status of the title to a particular piece of property.  It also acts as a commitment from the insurance company to issue a policy of insurance on the property at a future date.  Once the transaction closes, the insurance company will then issue its policy of insurance.

Reviewing your policy may seem such an obvious step, it doesn’t need to be repeated.  Unfortunately, most people have little understanding of what title insurance is, let alone what their policy states.  If you have a question, contact the title insurance company directly, or contact a knowledgeable attorney.

If you run into problems with your property and you believe the problem is covered by insurance, then contact your title insurance company about filing a claim.  In my experience, most title companies are willing to help you through the claims process.  Typically the local title company will forward your claim, and any supporting documentation to their main office for review by their legal counsel.  Their counsel will then review your claim and make a determination if your claim is covered.  If it is, the insurance company may pay for your loss, up to the policy limits.  In other cases, they may appear on your behalf, and take legal action to help defend you from any covered claims.  If they deny your coverage, you will get a polite, but firm note from the company’s attorney telling you why they believe your claim is not covered.

To give you an example of how this works in practice, take the case of Dickens v. Stiles, 81 Wn. App 670 (1996).  In Dickens, Ms. Stiles owned a piece of property in King County.  Access to her property was by an easement that crossed her neighbors’ land.  Ms. Stiles’ neighbors sued her for misusing her land and the easement.  Apparently, Ms. Stiles had rented her property for use as a corporate picnic site, for seminars, weddings, birthday parties, and harvest festivals.

When Ms. Stiles purchased her property, her Deed said the property must be used for agricultural and residential purposes only.  This restriction would remain in place until local zoning allowed different uses.

Ms. Stiles had title insurance.  The policy stated she had insurance except for loss or damage caused by the restrictions, conditions and covenants relating to this Deed.  Despite this clear language, Ms. Stiles sued her title insurer, saying the restriction against using the property for commercial use was ambiguous.  The court said, NO, the language was clear.  And because this potential problem was not covered by the insurance, the title insurer had no duty to defend her against her neighbors’ claim.

The moral of this story is simple.  Be familiar with the documents that may affect your property.  Carefully review the preliminary title report.  If you have questions after you purchase the property, read your policy.  Ask questions of your insurer.  File a claim if necessary.  Seek legal advice if you become confused, or if you feel the insurer is in error.

Published April 1997

This article contains information of general interest, and is not intended to be, nor should it be relied upon as a substitute for specific legal advice.