On January 29, 2013, the Maryland Court of Appeals handed down its decision in the 100 Investment Limited Partnership v. Columbia Town Center Title Company Case;
The opinion can be found here
The Maryland Land Title Association (MLTA) has issued comments on this case advising that this case may have far-reaching consequences for title agents in Maryland.
The court held that a title insurance agent who conducts a title search or provides a title commitment in a negligent fashion can be held liable for damages by those who reasonably rely on the search or commitment. The Court stressed that the customer's reasonable reliance on the the title commitment was foreseeable, and that, because the commitment erronouesly indicated good title to a parcel previously sold off, the title agent could be held accountable for damages for failing to discover the problem.
What does this mean to Maryland Title Agents?
Agents must be careful in how they define the scope of their work for their customers. In the ordinary course title agents rely upon the title search and examination solely for their use in evaluating whether or not title will be insurable; and it is not intended for use by the consumer for their own purposes. The commitment, on the other hand, is a product that provides the terms and conditions under which the title policy may be issued and is not intended as an opinion of title for the customer's own purposes. This case now makes it necessary for us to educate our consumers as to the purposes of the title search and our commitment to insure. Over the years I have debated with those of you on this forum as well in other forums whether or not the title commitment should be given to the consumer at or prior to closing. I still believe that the consumer has a right to review the title commitment, but now, with this opinion it will become necessary to come to a written agreement with the customer, prior to delivery of the commitmment, as to the purposes of the title search and examination and the commitment to insure.
Suggestions I have heard:
- Confirm in writing that the only product your provide is title insurance and that the only services your provide are closing services
- Have the customer sign a simple acknoweldgement of these facts and to confirm that, in the event of a title problem, the customer will seek recourse solely through the title policy and not against the agent.
- Suggest, in writing, that should more specific title review be required, the customer should hire counsel or other title professionals themselves.
- Communicate IN ADVANCE of closing the scope of your undertaking with the customer so that the customer will have the opportunity to engage the appropriate counsel, if desired. (engagement letters and contracts being strongly recommended)
Written communication will be an important part of the documentation in our files from here out as it relates to the way in which we receive orders for, and deliver, title and closing services for our customers. Agents should consider adding exculpatory language in communications and title orders.
I think that all title companies and abstractors doing business in Maryland should pay close attention to this case. Its impact on our liability is HUGE. It is up to you to protect yourself by putting in place some additional safe-guards; some of which are suggested above. I have no doubt that this issue will be discussed at great length in the board rooms of underwriters and title agencies state-wide and that more suggestions will be made.
I will keep my eye on this issue and will offer more insights and possible suggestions to limit liability as it becomes available.