What are Common E & O Claims Title Agencies Face?
Title agents are particularly vulnerable to lawsuits. With high-value properties, multiple details to uncover, and a long list of clients to serve, a simple mistake can have significant financial implications and potential damage to the agent’s reputation. That being said, having knowledge of the common errors and omissions claims title agents face can help limit your exposure and risks. It’s also important to protect your business with the right Title E&O insurance coverage.
Here are the most common errors and omissions claims filed against title agents:
One of the more common title E&O insurance claims is related to errors made during the title search, in which some important information is missed due to simple oversight or narrow search parameters. The risk of missing items in the search is usually exacerbated in periods when real estate transaction volume is favorably higher and mortgage rates are low.
Examples of title search errors include:
- missed judgments
- clerical, filing, or spelling error
- ignored or missed judgment liens
- missed second mortgages
- name misspellings
- missing heirs
- unpaid taxes
- partial owners
- easements held by third parties
- incorrect legal description
- undiscovered wills
If you failed to conduct a thorough title search or to disclose important information to the buyer or seller, you could be held liable for any losses incurred before or after the deal is finalized.
Breach of Duty
Title agents have a duty to act in the best interests of their clients. A fiduciary duty involves a higher level of trust and reliance on the title agent to employ their expertise and exercise their discretion in representing the client. As a title agent, you’re held to a high standard of honesty and full disclosure and must not use your position to benefit yourself. You have to act with all of your skill, care, and diligence when serving your clients.
Failure to act in the client’s best interests may result in a claim alleging breach of fiduciary duty from a negligent or intentional action. A breach of duty claim may be based on an intentional or negligent act.
Breach of Contract
Details and timeframes are crucial in real estate transactions. A client may take legal action against a title agent if the agent violates the conditions in their contractual agreement. Some title agents do not perform their duties as specified in the contract. This could cause conflicts and/or financial loss for the buyer or seller.
One of the most common reasons for breach of contract claims is failure to comply with deadlines stated in the contract. Breach of contract claims are often made in conjunction with other causes of action such as fraud, negligence, or breach of duty.
When it comes to title E&O insurance claims, negligence is a cause of action that alleges the failure of the title agent to exercise due care toward the client that a reasonable person would do under the same circumstances. The plaintiff must show proof that the title agent has a duty to them and that the agent’s action or inaction caused the client harm.
Negligence is different from fraud. Negligence is a breach of duty without any intent to cause harm. For example, a plaintiff doesn’t have to prove that the title agent purposefully concealed an issue with the title, but rather that the agent was or should have been aware of the problem but failed to disclose it.
Misrepresentation Regarding the Property
A title agent has a duty to communicate the state of title accurately. Misrepresentation occurs when an agent makes a persuasive statement about a property that is untrue. Generally, this relates to a feature of the property such as boundaries, defects, structural defects, easements, or renovations which haven’t been legally approved.
Three types of misrepresentation include:
- Innocent misrepresentation: occurs when a seller or agent believes that everything they’ve conveyed is true. They simply make an error with no intent to mislead the buyer.
- Fraudulent misrepresentation: occurs when a title agent provides false information with the intent to cover up a defect or mislead the client.
- Negligent misrepresentation: a title agent makes a false claim or fails to disclose information out of negligence. Unlike innocent misrepresentation, the agent should have done due diligence before making a statement about the property.
Simply put, misrepresentation can relate to any information about the property, which has been falsely presented by the agent and that information influenced the buyer’s decision to purchase.
Protect Your Agency from Title E&O Insurance Claims
Sometimes, accidents and errors in judgment can happen, even when you think you’ve acted with care and diligence in your operations. This is why it’s important to have adequate title E&O insurance. Attorneys First Insurance is committed to protecting title agents and attorneys against errors and omissions claims. We offer superior coverage with the most competitive premiums, rates, and terms.
We are happy to provide hands-on customer service and an easy application process. Contact us today to get a quick quote.