While the title industry largely lacks the front-page lawsuits that the accounting and legal profession face, this does not mean that the title profession is without risks. We are going to begin a series of posts designed to illuminate some of the relevant lawsuits that title agents, title abstractors and escrow agents need to be aware of while they operate their own company. While the cases highlighted may only be relevant in a particular state, the precedence could certainly have a ripple effect into other geographies and court decisions. As a title firm monitors their risk management system, it is important to note these cases and how they develop.
Whitlock Vs. Stewart Title Guaranty Company
In the case of Whitlock Vs. Stewart Title Guaranty Company, this South Carolina abstracting firm discovered that the date when a title defect was discovered is not always the date that the damages are calculated.
In 2006, an individual purchased land along the coast in South Carolina. Stewart Title Guaranty Company (Stewart Title) performed the title search and issued a title policy with no encumbrances. This proved to be untrue in 2010. Whitlock went to build a home on the property in 2010 and discovered that there was a spoilage easement allowing for the construction and maintenance of the intracoastal waterway on the land. Whitlock sued Stewart Title for issuing a title that failed to note this easement. Whitlock argued that she never would have purchased the land in 2006 had she known about the easement and inability to build on the land.
Whitlock pursued damages based on the 2006 price and value of the land. Stewart Title argued that the discovery of the error in 2010 should be used to calculated damages. The South Carolina Supreme Court held that the 2006 date had to be used. One reason stated was that the title policy did not provide a date for measuring the damages or provide a methodology for calculating the value lost. This ambiguity meant that the court sided with the plaintiff.
Most states hold that the discovery of the error or omission is the date to be used when calculating damages. This case highlights the need for firms to be cognizant of any ambiguity in the title insurance contract and make changes the firm may deem necessary.
Contact us to discuss ways to further protect your title firm.