Brief Fact Summary. The Plaintiff, Transamerica Title Insurance Co. (Plaintiff), in this subrogation suit is a title insurance company and the Defendant, Johnson (Defendant), is the seller-grantor of three parcels of land and the insureds were the purchasers-grantees. The Plaintiff failed to except from coverage a sewer assessment lien on each parcel. The Plaintiff paid the three assessments and then sued the Defendant under subrogation rights, which simply means that any rights, which the purchaser-grantees might have against the Defendant, are subrogated to the Plaintiff.
Synopsis of Rule of Law. A title insurance company is liable on a duty to search and disclose only when the non-insured (Defendant herein) has shown foreseeable reliance upon the preliminary commitment or upon the representation of the title insurance company.
A duty of care is defined as an obligation, to which the law will give recognition and effect, to conform to a particular standard of conduct toward another.View Full Point of Law
Issue. Does the Plaintiff have any liability to the Defendant for its negligence in not disclosing the assessments?
Held. No. Judgment affirmed.
The Court found that the Defendant was urging the Court to impose liability on the insurance company beyond that contained in the policy. The Defendant was seeking to have the Court impose an abstracter’s duty on the title insurance company and would extend that duty to the seller-applicant. The Court found that the Defendant’s claim was sounding in tort rather than contract.
The Court noted that some jurisdictions have held that no duty is owed to vendors who pay title insurance premiums for the protection of the insured vendees and that any search actually undertaken was for the protection of the insurance company. Where no duty is owed the vendor, there is no liability extending to the vendor.
Other jurisdictions have recognized a duty on the part of the title insurance company extending to other than the insured. However, this Court declined to rule in favor of the Defendant, even if there were such a duty recognized here.
A title insurance company is liable on a duty to search and disclose only when the non-insured (Defendant herein) has shown foreseeable reliance upon the preliminary commitment or upon the representation of the title insurance company. In this case the Defendant could show no such reliance, insofar as Defendant knew about the preliminary sewer assessments to the property.
The Court also ruled that Defendant’s statutory claim against the title insurance company failed due to the lack of a showing of public interest, necessary to proceed in the absence of privity.
Discussion. The Court perhaps found the conduct of the Defendant to be persuasive as to the lack of reliance on the preliminary commitment of the Plaintiff title insurer. Note that the Defendant had actual knowledge of the assessments prior to the issuance of the policy herein and that Defendant initially listed the property as being sold subject to the sewer assessments, but later deleted that portion. The Court seemed to find a pattern of avoiding the assessment by any possible means on the part of the Defendant.