Title Insurer Underwriter Not Liable for Agent's Negligence Title Search

Title Insurer Underwriter Not Liable for Agent's Negligence Title Search

By Robert A. Scott

Title insurance companies can enforce exculpatory provisions in title insurance policies that exclude liability for tort claims based on a negligent title search performed by an agent, Maryland's highest court has ruled.

In 100 Investment LP v. Columbia Town Title, decided January 29, 2013, the Court of Appeals of Maryland ruled that a title insurance underwriter, Chicago Title Insurance Company, could not be held liable in tort for a negligent title search conducted by its alleged agent.

The Maryland court held that an exclusionary provision in the title insurance policy limited Chicago Title's liability to the terms of the policy. The trial court had ruled that Chicago Title could be held liable under the doctrine of respondeat superior for its agent's failure to discover a title defect.

The Court of Appeals, affirming the intermediate appellate court on this issue, ruled that the plain terms of the title insurance policy explicitly excluded a claim in negligence. Therefore, the insured property owner was limited to its contractual remedies under the policy.

However, the outcome was different for the title agent that conducted the search. The Court of Appeals ruled that a title agent could be held liable for negligence in conducting a title search, despite the existence of a contractual relationship. 

The court found that imposing a tort duty on a title agent conducting a title search was appropriate because the title agent knew that the purchaser would rely on the results of the search when it acquired the property. This created an "intimate nexus" between the parties that justified the imposition of a tort duty in addition to any contractual obligations the agent owed to the insured.

Ballard Spahr's lawyers have significant experience litigating title insurance claims, including substantial coverage matters. The firm's Litigation Department represents an impressive range of national and international clients in the public, private, and nonprofit sectors, across a number of areas. Attorneys in Ballard Spahr's Real Estate Department represent clients nationwide in acquisition, financing, leasing, sale, and restructuring transactions. For more information, contact Robert A. Scott at 410.528.5527 or scottr@ballardspahr.com. 

Copyright © 2013 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

For more information about LexisNexis products and solutions connect with us through our corporate site.