Real Property & Title Insurance Update: Weeks Ending May 13 & May 20, 2016

by Carlton Fields



  • Arbitration: an insured is required to arbitrate its claims against title insurers when the claims relate to coverage under the title insurance policy and amount of insurance was under $2,000,000 as mandated by arbitration provision in policy - Perdue Properties, LLC v. USA, No. 15-CV-47 (DCB) (MTP) (S.D. Miss. May 16, 2016) (Memorandum Opinion compelling arbitration and dismissing third-party claims against title insurers)
  • Coverage: title insurer did not breach policy when insured sought defense and indemnity based upon quiet title action insured initiated to assert ownership over lot that was not included in description of property insured under policy - Krajewski v. Fidelity Nat’l Ins. Co., No. 1350 EDA 2015 (Pa. Super. Ct. May 11, 2016) (memorandum opinion affirming summary judgment in favor of title insurer)
  • Coverage: title insurer entitled to summary judgment on breach of contract claim when insured’s claim is based upon sewer easement that was expressly listed as exception on policy even if it may affect marketability of title and even if legal description in deed incorporates map by reference that conflicts with sewer easement - Cusumano v. Chicago Title Ins. Co., No. 155983-2013, (NY Sup. Ct. May 17, 2016) (memorandum opinion granting summary judgment in favor of title insurer)
  • CPL: If closing agent’s compliance with closing instructions would have caused lender not to make loan then losses would fall within scope of paragraph 1(c) of closing protection letter relating to collection and payment of funds due to lender - Fifth Third Mortg. Co. v. Kaufman, No. 12 C 4693 (N.D. Ill. May 14, 2016) (Memorandum Opinion)
  • CPL: closing agent’s alleged failure to comply with instruction to suspend transaction and notify lender that properties would not be owner-occupied if it had knowledge of facts, could trigger liability under paragraph 1(c) of closing protection letter relating to collection and payment of funds due to lender - Fifth Third Mortg. Co. v. Kaufman, No. 12 C 4693 (N.D. Ill. May 14, 2016) (Memorandum Opinion)
  • CPL: lender is required to show that claimed losses arose from closing agent’s conduct and a reasonable fact finder could find that closing agent’s failures resulted in lender making loans to straw buyers who defaulted and that lender would not have made loans because owner-occupancy was condition for subsequent sale of loans to Freddie Mac or Fannie Mae - Fifth Third Mortg. Co. v. Kaufman, No. 12 C 4693 (N.D. Ill. May 14, 2016) (Memorandum Opinion)
  • CPL: title insurer may contend at trial that market conditions are actual cause of lender’s losses on loans but it is insufficient basis for summary judgment when lender presented affidavits setting forth payments made to Freddie Mac in response to repurchase demands made to lender - Fifth Third Mortg. Co. v. Kaufman, No. 12 C 4693 (N.D. Ill. May 14, 2016) (Memorandum Opinion denying summary judgment)
  • Agency Agreement: An underwriter has no fiduciary duty to an agent and is not prevented from hiring the agent’s employees if the agency agreement between the agent and underwriter is mutually non-exclusive – Stewart Title Guar. Co. v. Kelley, 89 Mass. App. Ct. 1121 (2016) (memorandum and order affirming summary judgment, unpublished)
  • Agent/Attorney: Investigation of a property’s records is commonly performed by non-lawyers for real estate attorneys, but in Massachusetts the determination of marketable title is the practice of law and must be performed by an attorney – Stewart Title Guar. Co. v. Kelley, 89 Mass. App. Ct. 1121 (2016) (memorandum and order affirming summary judgment, unpublished)
  • Malpractice/Negligence: A law firm that conducts real estate closings in its capacity as a limited agent for an underwriter pursuant to an agency agreement is not relieved of its duty to use reasonable and appropriate care during title examination and issuance of a title policy, even if the firm retained a reputable title examiner to conduct the title review – Stewart Title Guar. Co. v. Kelley, 89 Mass. App. Ct. 1121 (2016) (memorandum and order affirming summary judgment, unpublished)
  • Negligence: An agent who submitted sufficient funds to satisfy an open line of credit was negligent by failing to maintain a copy of a letter directing the lender to close out the line of credit, where the borrower subsequently withdrew additional funds on the line of credit and the underwriter suffered a loss – Stewart Title Guar. Co. v. Kelley, 89 Mass. App. Ct. 1121 (2016) (memorandum and order affirming summary judgment, unpublished)

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.

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