Anybody who has bought a house in Grand Prairie, Arlington, Fort Worth, Dallas, Mansfield, Weatherford, or anywhere else in Texas has probably had to buy a title insurance policy on the house. This is always a requirement when a house is financed and only cash purchasers sometimes do not buy this coverage.
Texas Lawyer magazine publishes a book called Texas Insurance Law Digest. A lot of attorneys who practice insurance law will have this book in their library for quick reference. The book is over 800 pages and the pages are 8 1/2 by 11. In other words a lot of information. The section dealing with Title Insurance is only two pages and cites a total of four cases.
For someone interested in what can be done when a title insurance company does something wrong the first case listed is probably a good example. This case is, Chicago Title Insurance Company v. McDaniel. The case was decided in 1994 by the Texas Supreme Court.
Here are the facts: The McDaniels purchased a home from Couch Mortgage and a title insurance policy from Chicago Title Insurance Company (Chicago) at the time of the home purchase. The policy guaranteed that the McDaniels had “good and indefeasible title to the estate or interest in land described.” Later, the McDaniels received notice from the Bankruptcy Trustee of Couch Mortgage telling the McDaniels that the home was subject to a pre-existing lien. The McDaniels sued Chicago for violations of the Texas Deceptive Trade Practices Act (DTPA) based upon Chicago’s representations regarding title to the home. Chicago asserted that it had discharged its obligations under the title insurance policy by paying the McDaniels losses and that it could not be liable under the DTPA because it made no misrepresentations regarding the status of title.
The Court ruled that Chicago had made no misrepresentations. They said the title insurance policy is a contract to indemnify the insured and the only duty imposed is to indemnify the McDaniels against losses caused by defects in title. In other words, pay the money they lost. Issuance of a title policy does not constitute a representation regarding the status of the property’s title. Rather, it constitutes an agreement to indemnify against losses caused by any defects. The Court stated, there were no allegations of affirmative representations or breach of duty under the contract. As a result, Chicago wins and the case was ruled against the McDaniels.
This case does not mean that the McDaniels got nothing. It means the McDaniels got nothing beyond being reimbursed for the losses they incurred in purchasing the property that had a lien on it. A person is going to be required to get an experienced Insurance Law Attorney involved when there is a problem with a title policy. Even though the claim may be limited against the title policy that does not mean there are not other ways to make a recovery, depending on the facts.
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