There is a lot of misconception as to what a title insurer’s liability is to an insured.  A title insurer’s liability is limited to the ALTA policy. When an attorney submits a claim, the policy jacket should be reviewed to understand the provisions that govern the title insurer’s liability to the insured claimant. Condition 14 of the 2021 ALTA Owner’s Title Insurance Policy (“policy”) provides in part as follows:          

1. This policy together with all endorsements, if any, issued by the Company is the entire policy and contract between the Insured and the Company. In interpreting any provision of this policy, this policy will be construed as a whole. This policy and any endorsement to this policy may be evidenced by electronic means authorized by law. 

 . . .

The main provision of the policy that discusses the extent of the title insurer’s liability is Condition 8 of the 2021 ALTA policy, which provides, in part: 

This policy is a contract of indemnity against actual monetary loss or damage sustained or incurred by the Insured Claimant who has suffered loss or damage by reason of matters insured against by this policy. This policy is not an abstract of the Title, report of the condition of the Title, legal opinion, opinion of the Title, or other representation of the status of the Title. All claims asserted under this policy are based in contract and are restricted to the terms and provisions of this policy. The Company is not liable for any claim alleging negligence or negligent misrepresentation arising from or in connection with this policy or the determination of the insurability of the Title. 

1. The extent of liability of the Company for loss or damage under this policy shall not exceed the lessor of 

i.    the Amount of Insurance; or

ii.    the difference between the value of the Title as insured and the value of the Title subject to the risk insured against by this policy.

. . . 

Insured claimants and their counsel are frequently surprised to learn that the amount of the title insurer’s loss is limited to the diminution in value between the value of the title with the defect and the value of the title without the defect. 

There are other conditions of the policy that address the amount of title insurer’s liability, but the above two are frequently surprising to insured claimants. If you have any questions regarding title insurance claims, contact the Advocus Claims Department at [email protected].