Izynski v Chicago Title Ins. Co. (IN)

Summary: Title companies can have liability for negligent misrepresentation to buyers who relied on the commitment despite not having been named a proposed insured.

Izynski v Chicago Title Ins. Co., 963 NE2d 592 (Ind. Ct. App., 2012).

Facts: Patrick McLane contracted to buy property from Charles Ashton (Ashton).  Chicago Title Insurance Company (Chicago Title) issued two title commitments for this transaction.  Ronald and Linda Izynski (Izynski) entered into a purchase agreement with Ashton to buy the above property.  Ashton promised to provide the Izynskis with a commitment for title insurance.  Chicago Title issued a third commitment the day after the Izynskis entered into a purchase agreement, which had a few hand written changes, including changing the Izynskis as the buyers.  Chicago Title issued a fourth revision to the title commitment.  None of the four commitments included a fifty foot wide easement running across the property providing access for dam repair and maintenance. All four commitments did include an “Agreement for Exchange of Land and for Granting Flowing Easement” between Ashton and the Shorewood Corporation.  This agreement stated that Ashton would “provide or permit some reasonable access” to the dam “if [Shorewood] shall require such access in the future.” 

On September 22, 2003, Ronald Izynski learned of the 1979 easement.  Ronald Izynski informed the real estate agent that he would not close until he learned more about the easement.  Ashton threatened to sue if Izynski delayed the closing.  Ashton, the Izynskis, and the property owner’s association agreed to move the easement so that the existing buildings would no longer encroach upon it.  Ashton also reduced to price by $5,000.  Chicago Title issued a fifth policy which stated that they would “insure over the encroachment.” The Izynskis sued Chicago Title for breach of contract and negligence.  The trial court found for Chicago Title. Izynski appealed.

Holding: Reversed and remanded.  The trial court held that the Izynskis and Chicago Title had contractual privity because of the preliminary title commitment and the final policy.  The court of appeals held that the Izynskis’ complaint did not address the final policy and therefore should not be considered when determining privity.  The court also held that the Izynskis did not have contractual privity when they entered into the agreement to buy the property from Ashton because the first three title commitments were issued to a different person, namely Patrick McLane.  It wasn’t until the day after the Izynksis signed the purchase agreement that Chicago Title changed the commitment to reflect that the Izynksis were the buyer.  The court held that because there was no contractual relationship, that Chicago title was not liable for contractual damages. 

However, the Indiana Supreme Court had held that the duty of a title commitment issuer extends further than the contractual obligations. U.S. Bank, N.A. v. Integrity Land Title Corp., 929 N.E.2d at 746 (Ind., 2010).   Furthermore, the buyer or lender who receives a clear preliminary title commitment during negotiation often relies on it as a showing of clear title. While no action for negligent misrepresentation can exist if there is contractual privity, the court remanded for a determination of whether there is an action for negligent misrepresentation based upon the Izynskis’ reliance on the title commitments before there was privity.

The court reversed the trial court’s holding that there was no action for negligence based upon the notion that the Izynskis were on notice of the easement per the 1972 agreement.  The court reasoned that the 1972 agreement did not create an easement or provide notice of an easement that later came into being, it merely showed that there was an agreement to create one in the future if Shorewood required it.

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By: ATG Underwriting Department | Posted on: Fri, 06/08/2012 - 4:36pm