Title Insurance

Dreibelbiss Title Co, Inc v MorEquity, Inc, 861 NE2d 1218 (Ind Ct App 2007).

Facts: In 1998, MorEquity, a mortgage lender, loaned Robert and Karen Young $133,450 and took a mortgage on their home as security for that loan. MorEquity contacted Dreibelbiss Title Company (Dreibelbiss) to obtain a title insurance policy on the mortgage. Dreibelbiss discovered that Keybank already held two mortgages on the Youngs' home. Dreibelbiss contacted Keybank to determine how to pay off those existing mortgages to give MorEquity's lien first priority. Keybank sent Dreibelbiss instructions stating that written authorization from the Youngs was necessary to release the lien in addition to a payoff. Although Dreibelbiss paid off the mortgages, it did not provide such authorization. However, Dreibelbiss issued a title insurance policy to MorEquity that stated that MorEquity's lien had first priority. The policy also stipulated that MorEquity would give Dreibelbiss prompt notice of any claim made against MorEquity's lien.

The Youngs defaulted on their loans from Keybank, and Keybank foreclosed on their home in 2000. MorEquity consented to a default judgment stating that it was a subordinate lienholder of the home. However, MorEquity did not inform Dreibelbiss of the foreclosure or the default judgment until months after the events. MorEquity lost its principal amount of $131,552.99 because the sale of the home at a sheriff's sale did not yield enough proceeds to payoff any of its mortgage. MorEquity sued Dreibelbiss for breach of the title insurance policy. The lower court found that Dreibelbiss breached the policy. It awarded MorEquity $131,552.99 in damages, even though the bank's liens were less than this amount.

Holding: Affirmed. The court reasoned that although Dreibelbiss and MorEquity each breached the title insurance policy, Dreibelbiss did so first because it did not ensure that MorEquity's lien had first priority. Dreibelbiss' breach relieved MorEquity of its duty to inform Dreibelbiss of any claims involving the lien. The lower court's damage award was proper because Dreibelbiss did not "exercise reasonable care, skill, and diligence in effecting the insurance" and is liable for any damage resulting from that failure.

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