by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
TITLE INSURANCE: As a general rule, upon failure of title, a property owner is entitled to title insurance proceeds, but is not liable for damages for misleading or deceptiive practices flowing from the title company's failure to determine, as required by statute, insurability of title in accordance with sound title underwriting practices.
Stewart Title Guar. Co. v. Becker, 930 S.W.2d 748 (Tex. App. 1996)
Texas courts have interpreted the Texas Deceptive Trade Practices-Consumer Protection Act to provide a statutory action against insurance companies for unfair and deceptive business practices. The property owner hoped to yank title insurance companies into the kettle with other insurers where the company had failed to determine insurability in a careful manner. By such route, the landowner could recover for damages for unfair and deceptive practices in addition to his actual damages. The strategy had worked below. Although the failure of title claim under the policy involved a damage claim of approximately $13,000, the trial court had awarded the property owner over $1.5 million in additional damages.
On appeal: held: Reversed: The court of appeals limited the property owner to his actual damages. Failure to carefully examine title is not the same type of deceptive practice that prior Texas cases had found justify liability claims against insurance companies. The court really doesn't say why.
The court also found that the provisions of the Texas insurance code imposing upon title companies duties of due care in examining and reporting title did not create a private cause of action.
The case does not deal with common law tort claims for negligence, perhaps because the concept of the statutory duty has been such a rich treasure source for Texas plaintiff's attornies in the past. Comment: The editor feels that consumers should have some expectation of quality title services that goes beyond the limits of the fine print policy used by title insurers, and that negligence claims ought to lie where that expectation is abused. But the editor is loathe to conclude that an error in issuing title insurance is a "deceptive practice," especially when the consequences of such a conclusion are so draconian. The Texas Supreme Court seems to have calmed down a bit from excesses of a few years ago, so perhaps the interpretation in this case will survive appeal.
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