TITLE INSURANCE
Determining an Insured’s Loss and Calculating Damages
T
itle insurance is the most misunderstood, yet one of the most valuable, forms of insurance in America. Even the most prudent attorney or layperson cannot inspect and discover each and every title defect or claim that might affect a specific property. Property purchasers buy title insurance to protect against this inherent risk of property ownership or defects in ownership. “A title insurance policy is a contract by which the title insurer agrees to indemnify its insured for loss Adam Leitman Bailey is the founding partner of Adam Leitman Bailey, P.C., in New York, New York. Joshua M. Filsoof is an associate at Rosenberg & Estis, P.C., in New York, New York.
occasioned by a defect in title.” E.C.I. Fin. Corp. v First Am. Tit. Ins. Co. of N.Y., 121 A.D.3d 833, 834 (N.Y. App. Div. 2d Dep’t 2014). This is fundamentally different from other forms of insurance, as the policyholder need not prove fault. Automotive insurance, for example, might protect a car owner in the event that their car breaks down or is damaged in an accident after the policy is issued. Title insurance, on the other hand, looks backwards. For a single payment made at closing, it protects the insured against hidden defects encumbering the property for as long as the insured retains an interest in that property. The policy also protects the insured’s successors who succeed to the protections of the policy either under the definition of “insured” or the provisions for the continuation of coverage
in the Rate Manual. The Title Insurance Rate Service Association (TIRSA), licensed by the N.Y. Department of Financial Services, proposes rules for its member title insurance companies. TIRSA’s Rate Manual includes the rates and rules of policies and endorsements issued by its member insurers. For a detailed discussion of other facets of title insurance, see Adam L. Bailey & Michael J. Berey, Real Estate Title: The Practice of Real Estate Law in New York (2020). In that way, title insurance looks “back to the future”—meaning that it insures title defects, such as adverse possession, that existed before the transfer of the property. Unfortunately, this is often misunderstood by both legal practitioners and purchasers. Although a title company might be found negligent in failing
Published in Probate & Property, Volume 36, No 3 © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
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May/June 2022
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By Adam Leitman Bailey and Joshua M. Filsoof
