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Source of Title Blog

A Reasonable Examination Of Title
by Robert Franco | 2008/05/02 |

I have often pondered why there is such a disparity between the search standards in Ohio for marketable title and the search standards promulgated by the underwriters for insurable title.  Title insurance insures against unmarketable title (among other things) which would lead a reasonable person to conclude that a proper title search would provide evidence of marketable title.  Clearly a determination as to the marketability of title cannot be gleaned from a "short search."  I have read the Ohio Title Standards and the relevant section of the Ohio Title Insurance Act and something doesn't quite make sense to me.  Ohio Revised Code § 3953.07, Underwriting title insurance; examination of title, is very vague and makes no mention of marketable title. 

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The Ohio Title Standards, OTS 2.2 Examination-Period, states that a period of examination made pursuant to the Ohio Marketable Title Act shall be sufficient. The Ohio Marketable Title Act operates to extinguish certain interest and claims existing prior to the effective date of the root title.  "Root title" is, perhaps over-simplistically, a deed conveying a full interest filed more than 40 years ago which has an unbroken chain of title to present.  This caused a misconception that a title search only needed to go back 40 years.

The Governors of the Real Property Section, Ohio State Bar Association, stated the following in a 1986 report:

This standard is commonly misread by title examiners. In fact the Marketable Title Act does not present any length of time for a search period. Since the Marketable Act does have several provisions which become operative over a period of 40 years, however, it has been commonly misconstrued as providing for such a search period. This misconstruction has caused the Standard to be more misleading than helpful, and its suspension, while seeking to develop a more accurate standard for this purpose, is recommended.

OTS 2.2 was suspended in 1986 and the following comment was added in its place: "There is nothing in the Ohio Marketable Title Act that entitles a title examiner to rely upon a simple forty year search period. He or she must be aware of the several exemptions in the Act that are not barred by the mere passage of 40 years."  This seems to indicate that the Ohio Bar Association recognizes that even 40 years is not a sufficient period for a search in all cases.  Unfortunately, the Bar has not yet developed a more clear standard to clarify the proper period for a title search.  I have seen requests for searches of anywhere from 40 to 100 years.  The difference seems to depend on the complexity and potential liability of the given transaction (residential city lot vs. commercial property) and knowledge of the local land records (knowing when there was a lot of oil and gas activity or when utility easement were granted).  Otherwise, it may be up to a prudent examiner to spot issues that might provide an indication that it would be wise to continue searching the chain of title (like intra-family transfers or unexplained names popping up in the chain of title). 

It is difficult to reconcile the Bar Association's comment, that 40 years may not be sufficient, with current title insurance practices, such as "do a current owner and get a copy of the plat. So, I what does the Ohio Title Insurance Act require for an examination of title?

ORC § 3953.07. Underwriting title insurance; examination of title

No policy or contract of title insurance shall be written unless it is based upon a reasonable examination of the title unless a determination of insurability of title has been made in accordance with sound underwriting practices for title insurance companies

Could our legislatures have been any more vague?? What is a "reasonable examination" of the title?  In my opinion, in light of Ohio's Marketable Title Act, it is unreasonable to fail to establish at least an unbroken chain of title extending back 40 years.  There is a statutory definition of marketable title and a title insurance policy insuring against the unmarketability of title should at least be based on that premise.  But, there is no reference to the Marketable Title Act, or any other definition of "reasonable examination" of title.  Furthermore, the Ohio Title Insurance Act doesn't even require a reasonable examination if "a determination of title has been made in accordance with sound underwriting practices for title insurance companies." 

So, it would seem that this section of the Title Insurance Act leaves the examination period of a search completely to the discretion of the title insurance companies.  Or put another way - the Act allows those who are being regulated to determine their own standards.  What is the point of this section of the Act??  It would seem that in order to violate it, a company would have to issue a policy without bothering to search the title at all - especially given what passes as "sound underwriting practices" today. 

It would have been very easy to draft a meaningful "examination of title" statute.  For example:

No policy or contract of title insurance shall be written unless it is based upon a search evidencing marketable title as defined by Section 5301.47(A) of the Ohio Marketable Title Act. 

A more skeptical person would be inclined to believe that the title insurance lobby had a hand in drafting the Ohio Title Insurance Act.  Only a lobbyist, with help from his attorney, of course, could draft legislation that sounds brilliant, but does absolutely nothing.  Let's be honest, who could ever argue with phrases like "reasonable examination" and "sound underwriting practices?" Nobody; because they are completely subjective!

It is really no wonder the Ohio Bar Association hasn't clarified OTS 2.2 since they found it misleading in 1986.  Most transaction involve title insurance and there really are no standards for the period of examination required.  Perhaps if the Ohio legislature ever decides to address the problem - and kick the fox out of the hen house - the Bar would have a meaningful purpose and it could get back to work on its title standards.  The Ohio Bar Association has done a pretty good job, but the title industry all but ignores them.  It would be nice to see the Bar get a little more involved with the regulation of title insurance in the state.

Robert A. Franco


Categories: Abstractors, Ohio Legislation, Title Industry, Title Standards

1597 words | 9596 views | 1 comments | log in or register to post a comment

"reasonable examination" and "sound underwriting practices?"


Our Colorado Revised Statutes contains a similar vague standard:

10-11-106. Determination of insurability required.

 (1) No policy or contract of title insurance shall be written unless and until the title insurance company has caused to be conducted a reasonable examination of the title and has caused to be made a determination of insurability of title in accordance with sound underwriting practices for title insurance companies.

Many states have similar statutory references to “reasonable examination of title.” In such circumstances it is often up to the courts to determine what is reasonable. “The [examination of] record title to real property is both an esoteric and a painstaking process. Evaluation of the status of title and title information requires considerable expertise.” D.S.C. of Newark 544 So2d 1070,1072 (Fl Dist. Ct. of App. 1989).  “Title insurance companies and their agents are required to exercise the degree of skill and knowledge possessed by members of the profession in the community.” Tess v. Lawyers Title Insurance Corp. 557 NW2d 696, 704-705 (Neb 1997).

Both Kansas and Missouri have legislatively parsed out the standard. Missouri's standard, which became effective January 1, 2008, provides: 381.071. 1. No title insurance policy shall be written unless and until the title insurer, title agent, or agency has:

1. Caused a search of title to be made from the evidence prepared from a title plant of the county where the property is located as herein defined, of if no such title plant of the county exists, or the owner of such plant refuses to furnish the title insurer, title agent, or agency desiring to insure, such title evidence at a reasonable charge and within a reasonable period of time, then such policy of title insurance shall be based upon the best title evidence available.
2. Except when allowed by regulations promulgated by the director, no title insurer, title agent, or agency shall knowingly issue any owner's title insurance policy or commitment to insure without showing all outstanding, enforceable recorded liens or other interests against the title which is to be insured. (emphasis added)
Missouri elaborates on “the best title evidence available” in their regulations. 20 CSR 500-7.20 (2)(D):The best title evidence available is that evidence which a reasonable and prudent personwould depend upon in the conduct of his/her own affairs as determined by the circumstancesin existence in the county where the subject property is located.

Our Colorado statutory language is somewhat clarified by our comprehensive title insurance regulation, known as 3-5-1. Section 7 (B) provides in part "Every title entity shall ensure that the title commitment, as may be amended or modified, fully discloses to all recipients of any title insurance commitment the impairments of record concerning the property to be insured..."

When looking for guidance from the Colorado Bar Association Standards of Title, the following is found in section 1.1.2 Examination of Title:"...The examining attorney determines title to such real property from a search of recorded documents affecting title to such real property from the date of the original source of title to the date of search..." We have a very determinable original source of title in Colorado, government patent deeds. (This title starting point is considerably easier here than when I practiced in Maine where source of title could have predated predated the government.)

by Samuel Humpert | 2008/05/21 | log in or register to post a reply
Source of Title Blog

Robert A. FrancoThe focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco



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