Maryland High Court's Finding of Tort Liability for Deficient Title Search has Implications for Title Companies and Underwriters

by Saul Ewing Arnstein & Lehr LLP


A recent decision by the Maryland Court of Appeals makes it clear that title companies and underwriters may now be susceptible to tort liability for negligence under Maryland common law.

On January 29, 2013, the Maryland Court of Appeals issued an opinion holding a title company liable to a third party who later relied upon its title search for negligence in performing the search on an encumbered property. This decision opens title companies up to burdens beyond contractual liability. However, the Court refused to find the underwriter in the case vicariously liable for the title company's negligence, and the rationale used by the Court may assist both underwriters and title companies in avoiding future tort liability.

The case, 100 Investment Limited Partnership v. Columbia Town Center Title Company 1, involved a tract of land in Howard County originally owned by an elderly couple. The couple sold the land to an investor, and this sale was reported in the county records office. Several years later, the couple sold a larger tract of land to developers that erroneously included the portion of land previously sold to the investor. The title company hired by the developers failed to report the previous sale in its title commitment. The title was underwritten by a title insurance company, and was subsequently sold and developed. When the oversight was discovered, the developer incurred over $190,000 in costs in order to obtain free title from the original buyer. The developer brought suit against the title company and the title insurance company, claiming the title company was negligent in conducting its title search, and that the title insurance company was vicariously liable for the title company's error. On appeal, Maryland's highest court found that title companies may be found liable to their clients not just for contract violations, but also in tort for negligent performance of their obligations under the contract.

The rule in Maryland has long been that, where the risk of loss contemplated in a contract is solely economic in nature, no tort liability will be imposed without an intimate nexus linking the parties involved. This case makes clear that if such a connection is established, tort damages may be pursued. The court stressed that providing a thorough title search "went to the core" of the relationship between the title company and its clients, and it was foreseeable to the title company in this case that the developer would rely on the accuracy of the search to facilitate the land contract. Additionally, because title companies provide a professional service requiring specialized skills, these "professional 'suppliers of information'" may incur tort liability for negligence in performing their services. Therefore, the title company had a duty to provide reasonable care in providing its service, and this duty was breached when the title company failed to perform a thorough title search.

However, the Court of Appeals declined to find the underwriter in this case vicariously liable to the developer as a result of the title company's negligent title search. The court found that an exculpatory provision in the underwriter's title insurance policy shielded the insurer from liability. The provision expressly exempted the underwriter from liability for "any claim of loss or damage, whether or not based on negligence, and which arises out of the status of the title to the estate." Though the court noted that such provisions may sometimes be found invalid, no invalidating circumstances were present in this case. Because the clause was found to preclude liability, the court did not address whether an underwriter could be found vicariously liable for a title company's negligence due to an agency relationship where such a provision was not present in the title insurance policy.

The Court's decision raises several matters for Maryland title companies and underwriters to consider. First, without action by the Maryland legislature to reverse the Court's decision, title companies are now clearly susceptible to tort liability for negligence under Maryland common law. The Court did not reach the issue of whether, absent an exculpatory clause, title insurance companies may also be held liable, either vicariously or directly in instances where the title insurance company is the party who performed the title search. Therefore, underwriters may also face the risk of tort liability in Maryland courts.

However, the Court's opinion provides a clear solution for underwriters to avoid vicarious tort liability. Underwriters should be sure to include in their policies a well-drafted exculpatory clause. Additionally, the Court's upholding of the underwriter's contractual provision may also provide title companies with a solution for limiting liability for negligence in performing title searches. Although the court did not address whether such clauses may be utilized by title companies to shield themselves from liability, it stated that "[i]t is well settled in Maryland that exculpatory clauses are generally valid" because of "the public policy rationale of freedom to contract."

Challenges to such provisions may be successful where a company engages in intentional conduct or extreme forms of negligence, utilizes grossly unequal bargaining power, or violates a public policy consideration. Therefore it is important for such provisions to be carefully drafted. In light of this recent decision, both underwriters and title companies should consider reviewing their policies to ensure that effective exculpatory clauses are included in client agreements.

Please contact the authors or anyone from Saul Ewing's Consumer Financial Services Practice to assist with this process.

1. No. 29, 2013 WL 322663 (Md., Jan. 29, 2012).

View Document(s):

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Saul Ewing Arnstein & Lehr LLP | Attorney Advertising

Written by:

Saul Ewing Arnstein & Lehr LLP

Saul Ewing Arnstein & Lehr LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.