Defense Endorsements in Title Insurance

Ideally a legal representative will ensure that a client has included in their title insurance policy one of the most basic of tenets to do with title insurance - that of the indemnity in regard to cost incurred in defense of the title.

Apart from the policy itself specifically endorsing this privilege, there exists a common law duty on the part of the insurer to defense the subject matter of the policy – the title, in the claimant’s stead.

Adverse Possession

As part of ordinary title insurance claims, typically, defense of a property will be required when another individual claims that they own your property through adverse possession which includes having a lien over the property or an easement for the use of the land. Sometimes claims may be based on alleged inheritance rights or even boundary disputes.

Without title insurance these sought of claims would present a formidable challenge to the owner of a property, who would be then required to engage the services of a legal representative and then participate in what sometimes can be protracted legal proceedings.

Usually the duty to defend the claimant’s title does not increase the premium payable, but many would agree that it is difficult to evaluate what premium would be oppressive when regard is had to the potentially astronomical costs of litigation in defending ones property tile against challengers.

Instituting Proceedings Immediately

The institution of title insurance is most vividly seen in the instance of defending a claimant’s title, as being essentially an ongoing relationship based on reliance.

In the situation of a claimant who is after purchase challenged on any ground affecting title, the insurer will bear this cost even for the most obtuse and vexatious of claims which carry with them no proper justification.

For example, a developer who has acquired land from a council or municipality, if uninsured would have to defend an action alleging the contract price had not been paid. However, as a claimant, this is deemed a challenge to the title of the property and so the litigation costs are absorbed by the insurer.

Further, a commercial property owner who has acquired an easement allowing access for employees to a private car park, if challenged by physical obstruction of the easement during peak periods of trade such as Christmas, may find themselves the victim of some sort of extortion.

However, while insured, the owner receives prompt and efficient resolution to the dilemma as the insurer would not hesitate in bringing proceedings against the offender, and performing the obligatory duty to defend that is imposed through the title insurance policy and also the common law.

Of course the insurer already is burdened with the risk of litigation being necessary and if it elects not to litigate the matter the obligation to the claimant remains unchanged. If the insurer deems it more worthwhile compensating the claimant for defect to title, provided that this is accordance with the terms of the policy the claimant will be compensated as far as money is able for the detriment incurred.

This may not always be the most preferable alternative for the claimant but it is sometimes one driven by commercial necessity.

Resources:

http://lenderama.com/2007/12/refining-defense-of-title-insurance/

http://mlshomequest.com/content/view/12/27/

http://www.firsttitle.eu/Press/news/title-insurance-managing-risk-on-slovak-property-transactions.aspx