Title insurance policies do not guarantee that the title is without errors, and a title company can take legal action to fix any issues. If the title company’s action causes a delay or financial loss, it was unclear who would be responsible for covering those costs, but recent court cases have clarified this issue. In the Synergism case, an insured person bought some land and found out that the neighboring property owner claimed part of it. They asked their title insurance company to help, but when negotiations failed, the insurance company sued the neighbor to settle the claim. The policy says the insurance company can do this at their own cost, and they can appeal if they lose. Lawyers Title sued to confirm the ownership of a 70-foot strip of land for their client. During the legal process, the client suffered financial losses and had to pay for various expenses. After almost three years, Lawyers Title finally won the case. The client asked Lawyers Title to pay for the losses, but Lawyers Title refused, saying that they were not responsible for any losses until a court made a final decision. Lawyers Title thought they were not responsible for any losses to the insured, even after winning the case. The insured disagreed, saying they shouldn’t have to suffer while waiting for the case to be resolved. The court agreed with the insured, saying that the insurance company had to fix the title issue within a reasonable time, even during the lawsuit. The court looked at a similar case from another state for guidance and ruled in favor of the insured, awarding them about $545,000. The Fourth District Court of Appeal ruled in favor of Lawyers Title, stating that because the title company successfully resolved a title defect in court, they were not liable for damages to the insured. The Second District Court of Appeal also rejected the argument of Commonwealth Land Title Company, ruling that they were still liable for losses suffered by the insured, even though they ultimately cleared the title. The South Carolina Court of Appeals decided a case called First Federal Savings Bank of Brunswick v. Stewart Title Guaranty Company and adopted the Synergism and Commonwealth rules. In this case, the insured had a title issue and the title company took a long time to fix it. The court ruled in favor of the title company, saying that it did not have to pay for any damages because the title defect was eventually fixed. However, a Massachusetts federal court later disagreed with this decision in a case called Hatch v. First American Title Insurance Company. In this case, the insured homeowners had a title issue and the title company took five years to fix it. The court said that the title company had to pay for the damages the homeowners suffered during the long litigation. The Massachusetts court found that parts of the insurance policy were unclear, and that previous court decisions had conflicting conclusions. They decided that the title company must fix any problems with the title in a reasonable amount of time, based on the situation of the person who has the insurance. They looked at a California case for support. In 1996, a Maryland court made a decision that went against previous rulings in Florida and South Carolina. The court said that if a title company admits a known title defect is “adverse to the title” when a claim is submitted, then the title company can’t go to court to argue about it later. This was different from what other courts had said before. So now, the Fifth District Court of Appeals had to take a look at the issue. In 1993, Huntleigh Park bought a piece of land in Florida and got an insurance policy from Stewart Title Guaranty Company. In 1994, they tried to sell the land but found out there were rules and limits on it that weren’t mentioned in the insurance policy. They told the insurance company about it, and then the insurance company said they would sue to remove the rules and limits from the land. Huntleigh Park sold a property to a buyer but had to lower the price because of title issues. They asked Stewart Title for reimbursement, but Stewart Title refused. Huntleigh Park sued Stewart Title when they couldn’t come to an agreement. The trial got postponed while Stewart Title dealt with a class action lawsuit to remove the title issues. The class action lawsuit ended with the title issues being removed, and both parties filed motions for summary judgment. The trial court ruled in favor of Stewart Title. Huntleigh Park appealed, arguing that the title policy was unclear and that Stewart Title didn’t act quickly enough to fix the title issues. Huntleigh Park argued to the court that they should consider a new interpretation of certain legal rules in their case. They used examples from other court cases to support their argument. They also said that the title company should have to take action on the title defect reasonably and diligently, and that the same standard should apply if the title company decides to bring a lawsuit. Stewart Title argued that the case against them was different from other cases because they tried to fix the title issue, while the other party disagreed and said there was still a problem. The court ultimately agreed with Stewart Title. In Florida, if a title insurance company takes legal action to fix a problem with the property title and wins, they aren’t responsible for any damages. But if they take a gamble and lose, they have to pay for any problems that arise during the legal process. It seems that Florida courts won’t consider how long a lawsuit takes once it’s filed in a situation involving a title insurance policy. The question is still unanswered about what happens if a title company takes years to file a lawsuit after promising to fix a title defect. The policy is a contract to pay for damages, not a guarantee of the title’s condition. According to the law, the insured can only make a claim once a court makes a decision, and the court’s decision must be in their favor. In a specific case, a lawsuit was filed against the title company in a county where the insured lives, and a class action lawsuit was filed in the county where the insured’s property is located. In a different case, the policy’s clauses were renumbered, but the main idea is that the policy doesn’t mention anything about going to court.
Source: https://www.floridabar.org/the-florida-bar-journal/the-interpretation-of-7a-and-7b-of-title-policies-under-florida-law-synergism-revisited/
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