The United States District Court for the Eastern District of New York decided in the case of Commonwealth Land Title Ins Co. v. American Signature Services, Inc that a Title Insurer could not directly sue the errors & omissions insurer of one of it’s agents.
American Signature, a title agent, was facing lawsuits from two title insurers over alleged errors. It’s E&O insurer, Alterra, had declined coverage and attempted to rescind the policy. The two title insurers attempted to directly bring an action against Alterra, but the United States District Court for the Eastern District of New York found that they did not have standing to do so.
The case highlights the need to read defense provisions in a Title Agent Professional Liability Policy closely. Many, but not all policies, contain “duty to defend” language. This is much broader than “duty to pay” provisions many insurers slip in to lower premiums. Under a true duty to defend policy an insurer must provide a defense for the insured until the point that the claim is settled or facts are presented that allow the claim to be denied. Under a duty to pay policy, the opposite applies and the insurer has the ability to reserve their rights and not defend an insured until it is proven that the claim is covered.
Title agents should understand the insurance they are purchasing, contact an expert broker today to discuss your coverage options.