Johnstone TitleInsurance 1957

Title Insurance
Author(s): Quintin Johnstone

Source: The Yale Law Journal , Feb., 1957, Vol. 66, No. 4 (Feb., 1957), pp. 492-524
Published by: The Yale Law Journal Company, Inc.
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TITLE INSURANCE
QU1NTIN JOHNSTONE t
Title insurance is a means of protecting against the risks inherent in the

uncertainty of land titles by delineating some defects of title and by insuring
against potential losses from others. Conceived in this country in the latter
part of the nineteenth century,1 title insurance is now written by 147 com?
panies, of which 77 have more than one outlet in their home state, 31 operate
in more than one state, and 11 in 5 or more states.2 As an indication of the
present size of the business, premiums on title insurance written in 1954
totaled about 100 million dollars3?representing, at an average premium
rate of Zy2 dollars a thousand, 28)4 billion dollars of title insurance coverage.4
Although the extent of its use varies, being highest on the Pacific Coast and
least in New England, title insurance has become the predominant method
fAssociate Professor of Law, Yale Law School.

1. The first title insurance company was formed in Philadelphia and received its
franchise in 1876. Rhodes, The Insurance of the Real Estate Title, 10 Conn. B.J. 115,
206, 211 (1936).
Title insurance has been almost entirely restricted to the United States. In England
"conveyancing insurance" can be obtained, Insurance in Aid of Conveyancing, 100 Sol. J.
139, 157 (1956), although the volume written is small. A policy of this kind insures
against loss from a known defect, such as a restrictive covenant or a lost deed, or from
the risk that an adverse possessor for the statutory period has not acquired good title. The
policy is issued for a fixed period, and only one premium is paid. It resembles American
title insurance in that it is ordinarily written to facilitate a conveyance or the making
of a mortgage.
2. These computations are based on listings in the 1956 Directory of the American
Title Association, state insurance commission reports and correspondence. They are
only approximations. Home offices, branch offices and agencies are considered as outlets,
and subsidiaries are treated as separate companies. Multi-state operations include only
the writing of title insurance policies and do not include reinsurance. Territories and
the District of Columbia are considered as states.
3. The estimate of 100 million dollars as the gross title insurance premiums for 1954
is based on the reported premiums, listed in Appendix I, infra p. 518, plus an estimate
of unreported premiums.
4. This is a rough estimate because of the contingent character of both the 100
million dollar premium total and the 3l/2 dollar a thousand rate.
About 20% of the total was written by one company, the Title Insurance and Trust
Company, and its subsidiaries, operating exclusively on the Pacific Coast. The 1954
premium income of the parent and its subsidiaries was $19,262,614, and their total assets
on December 31, 1954, were $49,262,858. Annual Report, Title Insurance and Trust
Company (1954). The 1954 premiums of the parent company, which operates only in
California, were $15,630,324, and it paid losses of $308,118. Report of the California
Insurance Comm'r 167 (1954). The second largest title insurance company in the United
States is the Chicago Title and Trust Company, which writes policies only in Illinois. In
1954 its premium income was $11,413,924; its total assets at the end of 1954 were
$65,390,006. Annual Statement, Chicago Title and Trust Company (1954).

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1957] TITLE INSURANCE 493
of title protection in many metro

land in every state.5
Although there has been a large i
written in urban America since th
vailing method of title protection
yer's opinion,7 based either on ab
abstracters or on title searches ma
of title protection, Torrens regis
country and is permitted in only e
Despite the growing use of title i
to make a rational judgment of its r
for lack of adequate information.
content and coverage of title insur
issue it, and the scope of governm
source material for this study con
dence with leading title insurers,
the country, as well as data obtain
The latter part of the Article will
and future of title insurance comp
tection?the lawyer's opinion syst
Title Insurance Protection
Probably a majority of fee simple purchasers and certainly a

mortgagees of fee interests in real property obtain title insuranc
lawyers' title opinions, and it is becoming increasingly common fo
5. A survey giving rough estimates by state as to the relative use of var

title evidence appears in Report of the Committee on Acceptable Titles to R
Appendix A, Proceedings of the ABA Section of Real Property, Probat
Law 47 (1953) (hereinafter cited as Acceptable Title Rep.).
Of the title insurance policies written in the state of New York in 1953,
issued against property in metropolitan New York City: New York, Br
Queens, Richmond, Westchester, Nassau and Suffolk counties. Preliminar
of the New York Superintendent of Insurance 40 (1955).
The business of title insurance may be carried on in all states except Iowa, Iowa Code
Ann. ? 515.48 (Supp. 1956), and policies on Iowa land are written outside the state.
6. See Appendix II, infra p. 520.
This increase is due in large part to the rising volume of conveyances and mortgages
resulting from the increase in private construction. See Appendix III, infra p. 520.
In part it is due to inflation in real estate prices.
7. See Acceptable Title Rep., App. A, 47.
8. See note 93 infra.
For the description, history and extent of Torrens registration, compare Poweix,
Registration of the Title to Land to the State of New York (1938), with Mc?
Dougal & Brabner-Smith, Land Title Transfer: A Regression, 48 Yale LJ. 1125 (1939)
(a critical review of Powell). See discussion in text at notes 90-97 infra,
9. Any statements of fact in text or footnotes not attributed to cited authority are
based on these interviews and correspondence.

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494 THE YALE LAW JOURNAL [Vol. 66:492
lessees to do so. The parties to the contract ar

ing title protection as quickly as possible, for per
until it is provided.10 When title insurance is o
for the mortgagee to require that the mortgagor
ly, in some areas contracts of sale customarily pr
some or all of the cost of a policy insuring tit
frequently give the seller the alternatives of pro
policy or an abstract showing marketable tit
the buyer pays the entire cost of title insuran
ance.12
Applicants for a title insurance policy are intere
ance coverage, but they are sometimes more in
examination of title discloses. This is perhaps
vailing philosophy of title insurance companie
delineation rather than risk coverage. In man
agrees to buy only if the seller's title is one
company will insure subject to no more than
contract purchasers may have agreed to buy o
depending on the title insurance examination
and if the title is not marketable, the seller w
must be cleared to make it so. If the applicant
factory or a liquor store on the premises, he
know if there are restrictive covenants agains
consistent with the type of building he propo
is to be mortgaged with a life insurance company
tion report may be used to determine whether
cumbered to meet the legal standards set for l
not unusual for title policies applied for never to
report of the title insurance company may disclo
obligated to accept.
Risk Coverage
Title insurers argue that theirs is a dual syste
ing a thorough title examination with the in
potential defects. Their critics assert that titl
in fact insurers since they except any risks ap
examined. Although this assertion is overbro
10. Because they are more willing to assume the r

lesser interests in real property, donees and owners w
interests seldom obtain formalized title protection. Of
possession, prescription and tort and contract rights
tection to a transferee even though he has no lawy
policy. See, generally, 3 American Law of Property
11. Acceptable Title Rep., App. A, 53.
12. Ibid.

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insurers compared to most other

companies except most risks dis
contain printed general exception
title are excluded from coverage
quently refuse to insure a title u
to their regular form of coverag
Many companies offer a variety
differing from one another in t
risks covered and excepted may var
less, the pattern of title insuran
adhered to by most firms.
Risks Usually Covered by Title I

Errors in the title examination. Th
employee or agent of the company
results. The most common error
appearing in the public records. An
nize defects that should be disclo
premises whenever such examina
acceptable independent surveyors
A few known defects. These
mortgagees' policies, if they are
estoppel or a statute of limitation
age are setback requirements, res
reverter, rights of re-entry and sl
on neighboring land.13
Defects that would be disclosed
intentionally does not make. Som
and assume the risks of any defe
close. For example, in the easte
often written on a search that g
there are few defects older than
to search for them.14 Also, some
be disclosed by a survey, even
inspector qualified
only to make
Some hidden defects not disclos
records, physical inspection of t
of the recording acts prevents m
insured, there is no risk for the
nate all such defects, and title in
including: a recorded instrumen
13. Henley, What Investors in Mor

Title News, May 1956, p. 9. '
14. See Reeve, Guaranteeing Marke
(1951).

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was forged, never properly delivered, or execu

ity; any judgment that from the records appe
lack of jurisdiction; a deed incorrectly stating
if the fact of his marriage does not appear elsewh
any public records to disclose an instrument or c
under the recording acts, including the claim
at the time of examination; errors in the p
officials, to the extent they are not protected
including failure to put on record and failure
resulting from the practice of some tax office
paid upon receipt of a payment check, then alter
returned for lack of sufficient funds.
Market ability. This risk is generally covered in mortgagees' policies and
often in owners' policies. One of the risks involved in insuring marketability
is correctly anticipating the judicial meaning that will be given to this vague
concept, for courts have been far from consistent in their interpretations of
"marketable title."15
Risks Usually Not Covered in Title Insurance Policies

Defects disclosed by the title examination. Defects of this sort are generally
not covered, and when found are listed as exceptions in the policy.
Defects that physical inspection and survey of the premises would disclose.1*
Defects of this kind are usually not covered in owners' policies, but ordinarily
are in mortgagees' policies. They include such possible interests as adverse
possession and unrecorded leases and easements that would be disclosed by
an inspection of the premises. They also include the defects that surveys would
disclose, including encroachments, incorrect boundary lines and setback viola?
tions.
Defects created subsequent to the date of the policy.
Defects of which the insured was aware or which he assumed prior to the
date of the policy. The general insurance doctrines of misrepresentation and
concealment by the insured also apply to title insurance.17
Restrictions of any government police power regulation on the use and
15. See 3 American Law of Property ?? 11.48 & 11.49 (Casner ed. 1952).
In Texas the Board of Insurance Commissioners does not permit marketability to be
insured but does allow the insurance of "good and indefeasible" title. Tex. Bd. of Ins.
Comm'rs, Basic Manual of Rules, Rates and Forms for Writing of Title Insurance
in the State of Texas ? III (1956) (owner's policy and leasehold policy). Until recently
marketability was not insured in Chicago, even in mortgagees' policies. The case against
marketability is made in Reeve, Guaranteeing Marketability of Titles to Real Estate
(1951) ; written by a senior vice-president of the powerful Chicago Title and Trust Com?
pany, the book seeks to justify that company's former stand against insuring marketability.
16. A typical clause excepting risks of this sort provides: "Rights or ciaims of parties
in possession not shown of record, and questions of survey. . . ."
17. See, e.g., Rosenblatt v. Louisville Title Co., 218 Ky. 714, 292 S.W. 333 (1927) ;
First Nat'l Bank & Trust Co. v. New York Title Ins. Co., 171 Misc. 854, 12 N.Y.S.2d 703

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enjoyment of the premises. These

The apparent reasons for the lim
to ascertain, and that they are
tionality. But the limitation h
policies insure titles, and police
ment rights of a non-title charac
Title to personal property, ev
Some hidden defects not discl
records, physical inspection of
this sort often are expressly ex
men's liens which are effective
the policy;19 and dower, curtes
of the insured's spouse. Some com
rights acquired at tax sales and
Mechanics' and materialmen's li
if a physical inspection of the p
or?when there has been recent
of payment, if lien waivers or
for payment of any unpaid con
The Scope of Coverage

Under a title insurance policy
at the time the policy goes into e
term, but coverage?up to the
as the insured can suffer any l
mortgagee's policy ends when t
mortgagees' policies usually provi
becomes an owner of the prope
ment of the morgage debt. Ins
insured conveys all his interest in
remains covered for his continu
occasionally possible, he has assi
tain subrogation clauses for th
policies contain salvage clauses
amount of the debt to the insu
shall be assigned to the insurer
(Sup. Ct. 1939). For a treatment of

Vance, Insurance ?? 61-70 (3d ed. 1
18. Rhodes, Treatment of Restricti
pp. 13, 14.
19. Lien preference without recording continues for 4 months to 2 years after com?
pletion of contract, III. Ann. Stat. c. 82, ?? 1, 7 (Supp. 1956) ; for 60 days to 6 months
after indebtedness accrues, Mo. Ann. Stat. ?? 429.010, 429.060, 429.080 (Supp. 1956); for
90 days after cessation of performance of labor or furnishing of materials, Wash. Rev
Code ?? 60.06.010, 60.04.040-60.04.060 (1956).

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Morgagees' policies usually cover assignees of

policies do not cover grantees of the insured, a
seldom permitted by title insurers.20 Thus, ea
a title policy, if he wishes title insurance cov
the advantages of his grantor's policy, howeve
in his deed.
Liability for Negligence

In addition to its liability under the policy, the company may be liable for
negligence in performing title search and examination. If the opinion is in
error due to negligence in the search or analysis of the facts disclosed by the
search, the company is liable, provided the customer detrimentally relied on
the opinion.21 Ordinarily under such circumstances the customer will claim
under the policy, but it could be more advantageous for him to bring a tort
action for negligence. This would be the case if a negligent search had been
made but no policy issued, if it had been issued on the wrong tract,22 or if
the policy had been issued after the reliance and it contained an exception
to a defect not appearing in the examination report.23 A tort action would also
be better if the loss from the reliance were greater than the face amount of
the policy.
Title Protection Afforded by Competing Systems

The protection provided by the lawyers' opinion system is almost as great
as that provided by title insurance, if competent abstracters and lawyers are
used. The added protection of title insurance covers only remote risks, al?
though the losses can be heavy if they do occur. Abstracters and lawyers are
liable in tort for their negligence,24 but it is difficult to secure a judgment
against a lawyer for negligence in examination. Abstracters often are covered
by liability insurance, and some states require that they be bonded against the
20. Owners* policies usually contain this or a similar clause:

"This policy is not transferable to subsequent owners. A reissue policy in favor
of new purchasers should be obtained.''
But some owners' policies contain this clause:
"Assignment of this policy must be with the assent of this company endorsed
hereon. This policy necessarily relates solely to the title as of the date of the policy,
and, therefore, in assenting to such assignment, this Company assumes no liability
for defects, liens or incumbrances attaching between the date of the policy and the
date of assignment. In order to protect an assignee against intermediate defects, liens
or incumbrances, this policy should be reissued to cover the date of assignment."
21. Glyn v. Title Guarantee and Trust Co., 132 App. Div. 859, 117 N.Y. Supp. 424
(lst Dep't 1909).
22. See Ehmer v. Title Guarantee and Trust Co., 156 N.Y. 10, 50 N.E. 420 (1898).
23. Dorr v. Massachusetts Title Ins. Co., 238 Mass. 490, 131 N.E. 191 (1921).
24. An attorney was held liable in Bayerl v. Smyth, 117 NJ.L. 412, 189 Atl. 93 (1937),
for a defective title examination. Other such cases are cited in the Bayerl opinion and in
Annot., 5 A.L.R. 1389 (1919).

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risk of loss to others from negl

losses due to their negligence r
licity of litigation. But even t
surance companies, title insura
losses than are abstracters and
existence when the losses occur.
The protection provided by the Torrens system is broad but not absolute.26
Under this system the original applicant brings an action similar to a quiet
title suit, naming all known adverse claimants as defendants. After the result?
ing decree a certificate is filed in the registrar's office that is determinative of
all rights and interests in the land, and a duplicate copy is issued to the owner.
But for a period after the decree, it may be attacked by certain persons who
have been deprived of rights.21 In addition, the holder of a certificate is not
protected from a few possible types of encumbrances, even though they are
not noted on the certificate.28 The Torrens statutes provide for indemnity or
assurance funds, established from registration fees, to compensate those wrong-
fully deprived of interests in land through the negligence or fraud of the
registrars' staffs or others.29 In all important Torrens areas the funds are
more than adequate.30
Additional Services of Title Insurance Companies

In addition to title search and insurance, most title insurance companies
perform other services usually but not always related to their title insurance
business. One advantage that title insurance provides over other forms of
25. Kan. Gen. Stat. Ann. ? 67-802 (Supp. 1955); Nev. Rev. Stat. ? 76-501 (1950).
26. See note 8 supra.
27. III. Ann. Stat. c. 30, ? 70 (Supp. 1956) (decree may be attacked within two
years by persons with an interest in the land who were unaware of the proceedings and
were not served with process); Mass. Ann. Laws c. 185, ? 45 (1955) (within one year
of a decree fraudulently obtained); Minn. Stat. Ann. ? 508.26 (Supp. 1956) (within
60 days by interested persons who were unaware of the proceedings and were not served
with process).
28. The decree is conclusive after two years, by the literal language of the Illinois
statute. III. Ann. Stat. c. 30, ? 70 (Supp. 1956). But the Illinois Supreme Court has
held the certificate subject to attack by persons in possession at the time of registration
and who were sought to be made parties not by being expressly named but under the
heading "all whom it may concern." Chicago Title and Trust Co. v. Darley, 363 111. 197,
1 N.E.2d 846 (1936). And the court has held that an execution purchaser of a Torrens
title is estopped to deny a common law dedication made by his grantor, even though never
registered. Hooper v. Haas, 332 111. 561, 164 N.E. 23 (1928). These cases are discussed
in Powell, op. cit. supra note 8, at 140-43. The Massachusetts statute lists five encum-
brances that, although unregistered, prevail over a certificate. Mass. Ann. Laws c. 185,
? 46 (1955). The Minnesota statute lists six such exceptions. Minn. Stat. Ann. ? 508.25
(Supp. 1956).
29. E.g., III. Ann. Stat. c. 30, ?? 136-40 (Supp. 1956) ; Mass. Ann. Laws c. 185,
?? 99-109 (1955); Minn. Stat. Ann. ?? 508.74-508.79 (Supp. 1956).
30. The Cook County, Illinois fund is $1,200,000, and claims paid have totaled $72,000.
In the two largest Minnesota counties, no claims have ever been paid. Other recent data

180.179.211.228 on Sun, 27 Aug 2023 16:08:15 +00:00
500 THE YALE LAW JOURNAL [Vol.66:492
title protection is that the title insurer agrees t

tion against the insured based upon a title de
obligation includes court costs as well as atto
in addition to any losses incurred by the ins
defend when obligated to do so has been hel
to defend and then recover the expenses of
A few companies qualified to write title ins
or fire insurance underwriters. Some title insur
banking or trust business, and many of them
title insurance companies with title plants pr
quently sell title data to credit agencies. At th
authorization, some companies even draft lega
titles sought to be insured. Usually documen
as an accommodation to the customers who h
least one large title insurance company makes
on pleadings prepared in connection with litig
an application for title insurance is pending.
formerly guaranteed the payment of mortgag
during the depression of the thirties that few
this business.
Premium Rates
The major national companies, when writing policies through agents,

charge only for insurance coverage unless arrangements have been made to
permit the agent to charge for search and examination. The basic rates are
$3.50 per thousand for owners' policies and $2.50 per thousand for mortga?
gees' policies, with some reduction as the amount of coverage increases.
Because of differences in coverage, competition and cost of searching and ex-
amining, these rates vary somewhat among companies.32 But careful and de?
tailed actuarial risk studies used in computing many kinds of insurance rates
are not made for title insurance risks. Such studies would be of limited value
because of the lack of data on uninsured losses, inconsistencies among insurers
in methods of computing losses, and unstandardized coverage practices of
insurers.
A number of factors affect the cost of a given policy. For example, mort?
gagees' insurance is sold at lower rates because it usually terminates more
quickly, the risk decreases as the debt is paid, and the insurer has a chance to
salvage losses through debt assignments; furthermore, most mortgagees are
on Torrens funds and claims appear in 4 American Law of Property 648 n.6 (Casner
ed. 1952).
31. Overholtzer v. Northern Counties Title Ins. Co., 116 Cal. App. 2d 113, 253 P.2d
116 (1953) ; Fidelity Union Cas. Co. v. Wilkinson, 94 S.W.2d. 763 (Tex. Civ. App. 1936),
aff'd, 131 Tex. 302, 114 S.W.2d 530 (1938).
32. For sample rate charges in different parts of the country, see Appendix IV, infra
p. 5m

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large lending institutions that have

owner's policy is obtained at the sam
of the latter is often nominal. Rate
title that the company has previously
limited search and examination and the
title insurance premiums include cha
but without distinguishing the charge
ance of risks assumed. Some compan
a charge for survey and physical ins
Losses
Accurate quantitative data on title insurance losses are difficult to obtain.

The accounting methods used by title companies for computing losses differ
to such an extent that comparison is likely to be misleading. Some companies
include as losses only claim payments that clear policyholders, titles from de?
fects; others add the full cost of maintaining and operating a claims depart?
ment, including the cost of investigation and defense of claims for which no
payments are made. Some companies subtract recoveries from their loss totals,
others do not. And variations in methods of computing premiums affect the
comparative value of loss ratio data. Many companies are reluctant to disclose
their loss records; if their loss ratio is low, they are subject to criticism that
title risks are so trivial that insurance is unnecessary. In addition, accurate
reports on types of loss are likely to show a high percentage of loss due to
company negligence or to "casualty" risk assumption.
Despite the confused state of title insurance loss statistics, a few generaliza?
tions about title insurance losses can be made with considerable accuracy.
The percentage of losses to premiums is much lower than for most kinds of
insurance?the national loss ratio for 1954, based on reports of public agencies,
was 1.69 per cent.34 Loss ratios are generally higher when examinations are
made by agencies or approved attorneys than when made by full-time company
personnel, indicating greater accuracy, knowledge and honesty in home office
systems of examination. The risk of loss is greatest during the first few years
after a policy is written since defects are most likely to be discovered during
these years; and as time passes, there is the increasing likelihood of defects
being cured by statutes of limitations, adverse possession and prescription.
Loss ratios are higher during periods of business recession and falling real
estate prices, for the volume of new policies declines, more defects are raised
by buyers seeking to avoid executory contracts of sale, and salvage under
33. See text at note 45 infra.

34. Appendix I, infra p. 518. Ratios of losses to premiums for groups of companies
show group averages varying from 1.5% to 12%. Gage, Land Title Assuring Agencies in
the United States 111-14 (1937); Burlingame, Experiences m Losses and Ciaims, Eastern
Area, Title News, Dec. 1953, p. 66; Davenport, Title Insurance?Losses and Ciaims, Title
News, Mar. 1952, p. 97.

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mortgagees' policies is less. More losses result fr

employees and agents than from any other
unpaid taxes, restrictive covenants, easemen
particularly troublesome.35 Losses from insu
small or even nonexistent.36
Because of their small losses title insurers give less attention to maintaining
the ability to pay losses than is true of insurers assuming greater risks. The
reserves of most title insurers are low,37 and some companies maintain no
reserves at all. The practice of reinsurance is nevertheless well developed in
the industry, some companies reinsuring all risks over $25,000. This practice
is encouraged by the refusal of national lenders to accept title policies of small
companies that do not reinsure a safe percentage of each large policy they
write. Even the major title companies often reinsure large risks.38
The Relationship Between Title Insurance and the Large

Institutional Lenders
Of vital significance to title insurance as a business and as an

is the fact that the most important consumers of mortgagees' title i
the large institutional lenders, which hold eighty per cent of the na
farm real estate mortgage debt.39 All of these lenders except lif
companies and some savings banks concentrate on loans secured
located close to their centers of business activity.40 Life insuranc
35. Gage, op. cit. supra note 34, at 109; Losses and Claims, Title News,
75; Burlingame, supra note 34, at 66.
36. Reeve, ap. cit. supra note 15, at 67(i), 76(b).
37. A recent study of twenty-four companies that write title insurance
for title companies showed that the percentage of operating expense allocat
for insurance losses during the years 1949 to 1952 rarely exceeds 2% and f
below 1%, although three companies showed allocations averaging 5-8%. Sh
ating Expenses in Percentages, Title News, Jan. 1954, p. 14. A study of sevente
for the years 1954 and 1955 disclosed that of the companies studied, only t
in New York, where loss reserves are required by law, had such reserv
Claims, Title News, Dec. 1955, pp. 75, 76.
38. Recently twelve major title insurance companies entered into a treaty
large risks assumed by one company are automatically reinsured by the ot
Treaty for Automatic Title Reinsurance by and among Abstract and Title Guar?
antee Company, Detroit, Michigan, and other Companies (Feb. 27, 1956).
39. Institutional lenders' 96 billion dollars in debt holdings were divided as follows:
building and loan associations, 32 billion; life insurance companies, 27 billion; commercial
banks, 20 billion; and mutual savings banks, 17 billion. Dep't of Commerce, Survey of
Current Business 14 (May, 1956). See also Appendix III, infra p. 520.
In 1954, when the farm mortgage debt was 7.7 billion dollars, life insurance companies
held almost 2 billion dollars of it and commercial banks held over 1 billion dollars.
Statistical Abstract of the United States 454 (1955).
40. Hoagland, Real Estate Financing 235 (1954) ; Morton, Urban Mortgage
Lending 61-65 (1956). Building and loan associations in some states are subject to legal
restrictions drastically limiting the geographical area within which they may do business.
See, e.g., Minn. Stat. Ann. ? 51.36 (Supp. 1956) ; Mo. Ann. Stat. ? 369.400 (Supp. 1956).

180.179.211.228 on Sun, 27 Aug 2023 16:08:15 +00:00
however, are national lenders, an

lands located in all parts of the
of their mortgage loans, but buy ex
Because the life insurance compan
whether a mortgage is acceptable
located, they prefer to obtain sta
a title point of view, mortgage ac
means that the land must be readi
sary. It also means that the mortg
upon the investment practices of
example, restrict life insurance m
cumbered real property.42
Since title insurance tends to be the
tion, life insurance companies mak
insist on it as a condition of appro
title insurance is uncommon and
competitive disadvantage with lender
tection. Other reasons for this pr
home office examination, the cove
negotiation and litigation by the titl
title insurers to pay ciaims. Some
cates unless a title insurance po
Torrens certificates without rest
loans up to a certain sum, varyin
not take an uninsured Torrens ce
registration when the registration
mortgage bankers and the Federal
title insurance and will insist on i
life insurance companies.
Lenders that do most of their m
home offices accept any form of t
cality. This is the usual position
commercial banks and smaller life
mortgage lending in one state. Bu
if they contemplate reselling the
the Federal Housing Administrati
on title insurance as a condition of
Most life insurance companies ar
41. On the operation of mortgage banks, see Hoagland, Real Estate Financing
c. 15, 250-67 (1954). The organization of life insurance companies for originating mortgage
loans over wide areas is discussed in Saulnier, Urban Mortgage Lending by Life
Insurance Companies c. 3 (1950).
42. Cal. Ins. Code Ann. ? 1176 (Deering Supp. 1955) ; Conn. Gen. Stat. ? 6168
(1949) ; N.Y. Ins. Law ?? 81, 85, 90.

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because the examination criteria and reports a

those of title insurance, but some life insuran
from lawyers whom they approve. In part as
competitive disadvantage, the bar in some sta
success, to create greater title analysis consistenc
uniform title standards.44
As the leading customers of mortgagees' title insurance, the life insurance
companies have been able to force the title insurance companies to offer
policies giving broad, standardized coverage. Some of the usual exceptions are
often eliminated from the policies, so that the companies insure known and
unknown risks they would prefer not to cover.45 In addition, the industry
was forced to adopt the American Title Association mortgagee's policy,
known as the ATA policy.46 The standard provisions of this form are written
by almost every title insurance company in the United States.47 This and
similar broad policies are the ones preferred by most institutional lenders,
and only when competition makes it necessary will they accept a narrower
policy.
Although little judicial construction of policies has taken place,48 there are
expressions by a few courts that title policies, like other insurance policies,
should be construed against the insurer.49 Such a doctrine may well be valid
when the policies are contracts of adhesion and the insurer can present the
insured with a take-it-or-leave-it proposition.50 But this is plainly not the
44. Payne, Increasing Land Marketability Through Uniform Title Standards, 39 Va.
L. Rev. 1 (1953); Acceptable Title Rep., App. B, 54.
45. The opposition of many insurers to broadening risk assumption for institutional
lenders is expressed in Henley, What Investors in Mortgage Loans Are Demanding in
Title Insurance, Title News, May 1956, p. 9.
46. The origins of the ATA policy and its predecessor, the LIC, or Life Insurance
Company form, are discussed in Reeve, op. cit. supra note 15, at 127, and in The American
Title Association Standard Loan Policy of Title Insurance, Title News, July 1929, p. 5.
There are two forms of the American Title Association loan policy now being written;
the standard loan policy (revised 1946) and the additional coverage loan policy (revised
1946). Only the former is widely used. Reeve, op. cit. supra note 15, at 129. A copy
of the policy is reprinted in Appendix V, infra p. 521.
47. The American Title Association is still trying to develop an acceptable standard
owner's policy. Henley, Report of Committee on Standard Form of Title Insurance, Title
News, Dec. 1955, p. 72.
48. Very few losses occur, and when they do, insurers are generally liberal in adjusting
them. Cases on the construction of title insurance policies are collected in 9 Appleman,
Insurance Law and Practice c. 210 (1943) ; and in 2 Fitch, Abstracts and Titles
to Real Property c. 33 (1954). The measure of damages under title policies has caused
the courts some difficulty. The damage cases are discussed in Hilton, Theories of Lia?
bility, Title News, May 1956, p. 16; and Comment, 6 Western Res. L. Rev. 49 (1954).
49. Coast Mut. Building-Loan Ass'n v. Security Title Ins. & Guaranty Co., 14 Cal.
App. 2d 225, 57 P.2d 1392 (1936); Broadway Realty Co. v. Lawyers Title Ins. & Trust
Co., 226 N.Y. 335, 123 N.E. 754 (1919).
50. A contract of adhesion is one in which one of the parties merely has the choice
of accepting or rejecting the contract, with little or no choice as to its terms, because of

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case when the insured is a life in

shaping the content of the polici
struction should be applied to m
Patterns of Title Insurance Company Operation
Although some title companies insure titles only in one county

many national or statewide companies that insure titles in many
even many states. The Lawyers Title Insurance Company, ope
the widest area, has title insurance offices or agents in forty-t
the District of Columbia, Hawaii and Puerto Rico.51 Nearly
companies maintain dual title insurance operations, organized
operations: a local business in the home office county, and a natio
for the rest of the area served. In its local business, the company
title examination and abstract service and maintains its own title
of the national companies do a larger business locally, both in do
and in number of policies written, then all their national busines
Outside of the home office locality the national companies
through agents and approved attorneys, although some compani
branch offices. The agents are mostly independent abstract comp
with title plants of their own, but a few agencies are wholly or
owned subsidiaries of the national company.52 There are bot
agencies and agents that represent several insurers. For the insu
permit attorneys in private practice to act as agents, only those
his relatively inferior bargaining position. See Kessler, Contracts of Ad

Thoughts About Freedom of Contract, 43 Colum. L. Rev. 629 (1943).
51. Other major national companies include the Kansas City Title Insu
pany (Missouri), operating in 22 states, Alaska and the District of Colum
Title Insurance Company (Kentucky), operating in 17 states and the District
Title Guarantee Company (Maryland), operating in 14 states and the District
and Title Insurance Company of Minnesota, operating in 19 states. A com
footnote is classified as a national company only if it does more than 25% of
business outside of its home state. In title insurance premium volume, Lawyers
ance Corporation is the third largest title insurance company in the United Sta
premium income of $6,939,852. The 1954 title insurance premium income of
companies was: Kansas City Title Insurance Company, $1,647,337; Louisvill
ance Company, $1,282,815; Title Guarantee Company, $985,428; and Title Ins
pany of Minnesota, $967,572. Report of the Missouri Division of Insuran
Report of the Tennessee Commissioner of Insurance and Banking 2
1955 these companies, with more agencies, increased their total premium volum
one-third.
52. The Lawyers Title Insurance Corporation has 36 branch offices, 193
over 12,000 approved attorneys. In comparison, the Chicago Title and Tru
which has sought more intensive development of title insurance outside its
county than have most national or statewide companies, has 5 regional offi
or partly owned associated title companies, and 80 abstract company agen
all located in Illinois outside of Cook County, except for one associated
Indiana.

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who have considerable skill and experience in

approved.
Ordinarily, when a policy is issued through an agent, the agent has prepared
an abstract, the abstract has been examined by an attorney in private practice
approved by the insurer, and the attorney has given a written opinion as to
the state of the title. The agent then issues the policy in the name of the
insurer, although some approval by personnel from the insurer's home or
branch office may first be required. Title insurance written through a national
insurer's agent usually does no more than add title insurance protection to
that provided by a lawyer's opinion.53 The examining attorney secures his
usual fee for an abstract examination; the abstracter obtains not only a fee for
preparing the abstract, but he also receives part of the insurance premium as
a commission, often as high as forty per cent of the total premium. A title
insurance business operated in this way does not compete with abstracters
and lawyers; it supplements their services. Since it is difficult to convince
a person with a lawyer's opinion showing marketable title that he should also
have title insurance, this type of insurance develops resistance because of cost.
Such a noncompetitive approach has probably prevented the development of
intensive title insurance coverage in individual counties, although some new
business has been skimmed from areas where title insurance was never before
written, most of it resulting from lenders' insistence on coverage.
Some forms of national title operation, however, adversely affect local
abstracters and lawyers in private practice. Abstracters are foreclosed from a
considerable amount of business when title insurers open branch offices and
make their own title searches or hire lawyers in private practice to do so,
all without the aid of independent abstract companies. And lawyers in private
practice lose potential fees when the insurers or their agents use full-time
employees to handle title examination.
The national insurer does more for an agent than merely insure policy
risks. Its advertising and promotion of title insurance in the agent's area
and its financial and service reputation develop both insurance and abstract
business. Some insurers provide a legal advisory service for those agents that
make title examinations. On their part, agents are expected to actively seek
new title insurance business; and agency contracts commonly provide that
agents shall indemnify the insurer for losses caused by negligence in their
searches and examinations.54
Title Plants
Because financial success in the title insurance business depends to a large

extent on ownership or control of private title plants, title insurers writing a
53. For excerpts from a sample contract between a company and its agents, see
Appendix VI, infra p. 523.
54. A typical agent's indemnification clause is reprinted in Appendix VII, infra
p. 524.

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large volume of insurance in any

plant in that county, or have an a
These plants consist of copies or s
land titles, indexed so as to facili
history of any parcel of land in th
recorded instruments; records of
records; and records of such judic
resulting in liens on realty, forec
exceptions each private title plant
It is possible for abstracts to be
be made directly from the public
abstract and title companies, but s
title plants can be made much more
indexing systems used by the privat
convenient arrangement of data f
indexes or geographic filing sys
grantee indexes customary in mos
unplatted urban land, title compa
the tract descriptions in these pla
also known as general indexes, are
parable public indexes, if, indeed,
data, copies of recorded instrumen
proceedings that are part of many
employees to prepare an abstract
company records without the nece
copies at the various public office
as a factory, with many semiskille
and mechanized tasks.
Title plants are costly to maintain, for every day a large volume of instru?
ments must be copied and transactions indexed if the plant is to remain
current. In Cook County, Illinois, for example, about 300,000 real property
instruments were recorded during 1954.56 About 900,000 real property instru?
ments were filed in Los Angeles County, California, during the same year.
In addition to these instruments filed under the recording acts, each large
title plant annually processes thousands of tax and judicial documents.57
55. This is known as the arbitrary tract system or progressive arbitrary system. For
a detailed description of one such system, see Myren, Arbitraries, Title News, Dec. 1953, p 3.
56. In the nine-month period from December, 1953, to August, 1954, there were 222,369
real estate recordings in Cook County. 2 The Cook County Recorder 1 (1954). During
the same period, an additional 47,928 Torrens filings were made. Ibid.
A statistical study of deeds recorded in eight selected counties and the District of Colum?
bia annually from 1895 to 1946 appears in Fisher, Urban Real Estate Markets, Char?
acteristics and Financing 160 (1951).
57. The Chicago Title and Trust Company has 650 employees maintaining its Cook
County title plant and making searches and examinations. For Los Angeles County, Cali?
fornia, the Title Insurance and Trust Company has 450 employees doing similar work.

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508 THE YALE LAW JOURNAL [Vol 66:492
Whether or not a title or abstract company fin

a title plant depends on the location, arrangemen
records; the volume of title search business don
county; and the extent of the competition. In c
it is usually profitable for at least one company
and frequently several do so. But in New York C
competing for title insurance business, no comp
to keep a tract index or make daily take-offs fr
ments. The larger companies discontinued this prac
and although some of them make current miscellan
title plants for older recordings, searches for re
are made exclusively from public records. Fortunate
maintained by the public recording authorities
runs counter to the national trend, which is to
more complete title plants, even in smaller count
Title Examination
Title insurance is issued only after an examination of the title and a report
to the applicant. The examination is based on data secured from public
records or a title plant, frequently supplemented by a survey or inspection
report of the premises. The data from the public records and title plant may
be assembled in the form of a complete abstract, certified as accurate by an
abstracter and belonging to the owner of the property. Or it may consist
of the same information, assembled in more economical form and remaining
in possession of the examining company. Examinations are usually made by
members of the bar, but some companies employ laymen with extensive
experience in title work and law students. In most companies examiners are
restricted to the specialized task of analyzing title data assembled for them
and making reports to applicants on the conditions and exceptions under
which policies will be written. After receiving these reports, applicants or
their attorneys frequently negotiate with the insurer for the elimination of
at least some exceptions. A suit to quiet title may be necessary to cure a
defect, but this is less the case with title insurance than with the lawyer's
opinion system,58 for insurers are somewhat more liberal than lawyers in
passing titles as marketable.
Examinations for title insurance applications are made only back to the date
of the last policy issued by the company on the tract in question. This differs
from the practice under the lawyer's opinion system, where the full abstract is
customarily re-examined. The reasons for the title insurers* practice in this
regard are that risks of error in prior examinations are small, the added
58. Kansas is an example of the significance of quiet title suits in predominantly ab?
stract opinion states. In that state such suits constituted 15% of all civil litigation filed
in the general courts of first instance for a ten-year period from 1946 to 1955. Kan. Jud.
Council Bull. 33 (Oct. 1955).

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expense of re-examination is co
under an indirect obligation to
the applicant under title coven
title insurance examinations, e
they have insured the titles to
the past.
Advertising
The ability to conduct aggressive advertising and promotion is a major
advantage that title insurance has over competing systems of title protection.
Some appeal is made to the public at large, but attention is centered on the
businesses and professions that seek title protection for themselves or their
customers and clients: lawyers, realtors, builders and institutional lenders.
Personal solicitation from members of these groups has been especially effec-
tive; one large Eastern company has a forty-man stafT making personal calls
on potential sources of business. Individual lawyers are prohibited by canons
of ethics from advertising or soliciting, and the occasional advertising by bar
associations of the title examination services provided by lawyers has not
been effective. The Torrens system has been similarly handicapped. Govern?
ment agencies traditionally are not expected to advertise their services, and
funds for this purpose are difficult to secure. For example, the registrar in
Cook County, Illinois, does distribute some promotional literature on recording
and registration, but he has never had over $10,000 a year available for pro?
motion, and in Minnesota, there has never been any paid promotion of the
registration system.
The Lawyers' Title Guaranty Fund

Recently a form of title insurance operation has developed in Florida
that may be the lawyer's answer to the inroads title insurance has made. A
title insurance business was formed by 1,400 members of the Florida bar and
is conducted in the form of a common law business trust.59 The trust, or fund
as it is called, is managed by a board of fifteen member trustees elected by the
members, who must be Florida lawyers. In the name of the fund the members
issue title insurance policies providing conventional coverage,60 including the
ATA mortgagee's form. Expenses and reserves for losses are provided by the
initial contribution of $200 made when members join the fund, and additional
contributions, analagous to premiums, made by the clients when the policies
are written. All contributions of a member are credited to his account, and
59. Carter, Lawyers' Title Guaranty Fund, 8 U. Fla. L. Rev. 480 (1955).
In 1955 a similar organization of lawyers was licensed to write title insurance in Ohio,
starting business with more than 750 lawyer shareholders. Ohio Bar Title Company
Licensed by State, 28 Ohio Bar Ass'n Rep. 480 (1955).
60. There are some limitations that the fund places on the rights of members to issue
policies. Regulations under Declaration of Trust of Lawyers' Title Guaranty
Fund, Re&s. 1,4 (i).

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at the end of the year expenses are allocated a

their contributions made that year.61 Losses
among all the members as expenses, except that
of a member in issuing a policy are charged o
Provision is made for withdrawal of a memb
that has been in the fund more then seven y
Government Regulation of Title Insurance
Title insurance companies are all subject to some form of govern

regulation, closely resembling that of life, fire and casualty insuran
ordinarily under the authority of the state insurance commission.62
the statutes regulating title insurers were passed in the legislative flurry
followed the South-Eastern Underwriters case 63?holding that inter
surance transactions are interstate commerce?and the enactment of P
Law 15 64?declaring a congressional policy in favor of state regula
insurance. They are chiefly the result of efforts to forestall federal reg
of the insurance industry.65 Most regulation is designed to reduce th
hood of insurers becoming insolvent. But frequently regulation seeks to
policyholders from unfair rates and unfair policy terms, or to give com
or monopoly advantages to insurers, abstracters or other favored
affected by title insurance.
States commonly restrict the businesses in which title insurers may en
Some states have prohibited them from writing any kind of insuran
title insurance,67 from guaranteeing mortgage loan payments,68 or f
gaging in the banking business 69?all of which are or have been im
61. In 1954 the Fund had assets of $407,530. In that year the premiums on p
wrote totalled $156,140 and its losses were $717. Fla. Ins. Dep't Rep. 38 (195
62. But in Illinois it is the State Auditor of Public Accounts, III. Ann. Sta
?? 479-85 (Supp. 1956) ; in Ohio, for title guarantee and trust companies,
Auditor, Ohio Rev. Code ? 1107.23 (Anderson 1953) ; in Colorado, the State B
missioner, Colo. Rev. Stat. Ann. ? 31-11-2 (Supp. 1955) ; in Kansas, for trust
writing title insurance, the State Bank Commissioner, Kan. Gen. Stat. Ann.
9-1704 to 1707, 17-2002 (Supp. 1955).
63. United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533 (1944
64. 59 Stat. 33 (1945), 15 U.S.C. ?? 1011-15 (1952).
65. Examples of statutes pertaining exclusively to title insurance and passed
after the enactment of Public Law 15 are: Cal. Stat. 1949, c. 891; Md. Laws 1947
and Wash. Laws 1947, c. 79, art. 29.
66. E.g., Cal. Ins. Code Ann. ?? 12390-12392 (Deering Supp. 1955) ; Ky. R
Ann. ?? 287.040, 304.918 (Baldwin 1955); Tex. Ins. Code Ann. art. 9.01 (Sup
67. Cal. Ins. Code Ann. ? 12360 (Deering Supp. 1955) is applicable to
and foreign companies, and foreign companies that write other kinds of insur
outside California are ineligible to transact the business of title insurance in C
See also Va. Code Ann. ? 38.1-25 (Supp. 1956).
68. E.g., Ky. Rev. Stat. Ann. ? 304.923 (Baldwin 1955) ; N.Y. Ins. Law
436; Tex. Ins. Code Ann. art. 9.04 (Supp. 1956).
69. E.g., Tex. Ins. Code. Ann. art. 9.01 (Supp. 1956) ; Va. Code Ann.
(Supp. 1956).

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activities of title insurers. Man

stantial deposits of cash or sec
business.70 Reserve 71 and cap
restrictions on the investments
restrict the amount of risk tha
surance.74 Many statutes prov
discriminatory between similar r
be filed with the state insurance
disapprove rates as filed.76 Sta
became effective, prohibiting t
or commissions, except to their
lawyers to act as agents for tit
the financial condition of a tit
70. E.g., Cal. Ins. Code Ann. ? 123

state; III. Ann. Stat. c. 73, ? 479 (Su
any one county plus $5,000 for eac
1956), $50,000; Tex. Ins. Code Ann
capital but not in excess of $100,000.
71. E.g., Cal. Ins. Code Ann. ? 123
of the insurer's subscribed capita
of premiums collected; Tex. Ins. Cod
but not in excess of $100,000, and w
72. Cal. Ins. Code Ann. ? 12359
Stat. Ann. ? 68.01 (Supp. 1956), at
1956), at least $100,000.
73. Investment is usually permitted
title plant; and limited investment
Stat. Ann. ?? 17:24-7, 8 (Supp. 195
?? 38.1-179 to 217, 38.1-724 (Supp.
74. Miss. Code Ann. ? 5671 (Supp
and surplus) ; Tex. Ins. Code Ann. a
and surplus) ; Va. Code Ann. ? 38.
amount of capital and surplus and r
75. N.Y. Ins. Law ?? 438, 440; O
tit. 40, ?? 477b, 1241-1264 (Purdon
76. N.Y. Ins. Law ?? 184, 440; Pa.
Texas Board of Insurance Commissi
terms, applicable to all companies d
(Supp. 1956); Tex. Bd. of Ins. Co
for the Writing of Title Insura
power of the Texas Board of Insuran
panies has been upheld as constitution
with a public interest. New York T
1931) ; Daniel v. Tyrrell & Garth In
77. Cal. Ins. Code Ann. ?? 12404
? 381.100 (Supp. 1956) ; Tex. Ins. C
person owning and operating an abs
Ibid. Board of Ins. Comm'rs v. Tit
78. Fla. Stat. Ann. ? 625.01 (Sup
N.Y. Ins. Law ? 440.

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authorize the commission to require that the

or even discontinue its business ;80 the state may
or liquidate the company.81
Some statutes are designed at least in part to
advantages to a favored group. Among them a
high deposit requirements, discouraging new
an area ;82 that prevent companies writing oth
gaging in the title insurance business;83 and
have a complete tract index or title plant in t
office in the state is located.84 Similar prefe
statute requiring that a title insurance agent
qualify for a division of premiums,85 and b
that the insurer, its agent or someone certify
the title, own and maintain a title plant in ev
does a title insurance business.86
Title insurance companies, wherever they do business, are generally re?
quired each year to file detailed financial statements.87 Audits of domestic
companies are usually made every two or three years,88 and occasionally
representatives from other states where the companies do business join in
the examinations. These audits are the only supervision that most state
agencies give to title insurance companies. Most state regulatory bodies, which
are generally understaffed, concentrate their attentions on other kinds of in?
surers, but in Texas and New York state agencies give more than average
attention to title insurance. This is explained by the greater degree of state
regulatory activity required under the Texas title insurance statutes, and by
the insolvency record of New York insurers during the thirties.89 In New
79. E.g., N.Y. Ins. Law ? 434.

80. III. Ann. Stat. c. 73, ? 482 (Supp. 1956) ; N.Y. Ins. Law ?? 510, 511, 513;
Tex. Ins. Code Ann. art. 9.13 (Supp. 1956).
81. N.Y. Ins. Law ? 434.
82. E.g., the $500,000 deposit requirement to do title insurance business in Cook
County, Illinois. III. Ann. Stat. c. 73, ? 439 (Supp. 1956).
83. See notes 66-69 supra.
84. Ore. Rev. Stat. ? 748.084 (1955); Wash. Rev. Code ? 48.29.020 (Supp. 1956).
86. Ore. Rev. Stat. ? 748.084 (1955).
87. E.g., Idaho Code Ann. ? 41-2805 (Supp. 1955); III. Ann. Stat. c. 73, ? 485
(Supp. 1956).
88. Idaho Code Ann. ?? 41-2809, 41-702, 41-708 (Supp. 1955) ; III. Ann. Stat. c. 73,
? 484 (Supp. 1956) ; Mo. Ann. Stat. ? 381.120 (Supp. 1956).
89. Thirty-one of the forty-four title and mortgage guaranty companies organized in
New York from 1920 to 1930 were eventually taken over by the state for rehabilitation
and subsequent liquidation. Gray, Title Insurance Companies 23 (1954) (a pamphlet
reprinting a lecture given at the In-service Training Program of the New York State
Insurance Department) ; see also Fisher, Urban Real Estate Markets : Character?
istics and Financing 33-35 (1951). Supervision of title insurers by the Texas Board
of Insurance Commissioners includes an audit of each domestic and foreign insurer at
least every two years, occasional unscheduled spot-check audits of these insurers, approval

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York the Title and Mortgage Se

Property Bureau has an eight-man s
and investigates their agents and
ance business without authorization. The Section's audit of title insurers
includes a spot-check of their title searches and examinations to determine the
amount of risk really being assumed. It also handles applications for title
insurance rate changes.
Future Prospects of the Title Protection Systems
Existing systems of title protection have made titles sufficiently certain

enable vast land resource development in the United States without serio
interference from title risks. But the prevailing systems are cumbersome a
expensive. They are often as ingeniously and efficiently operated as t
controlling legal structure will permit. That structure, however, is faulty.
is based on a recording system that provides inadequate protection and n
cessitates intricate record and non-record searches before even partial ti
protection can be offered.
Torrens Registration
Torrens registration, a cheaper and simpler system, has been rejected by
but a few counties in the United States.90 Although this system had con
siderable support fifty years ago, its promise has never been realized. Torre
registration has had strong opponents whose economic lives it threatened
title insurance companies, abstracters and important elements in the bar. T
registrars' offices have not been aggressive in their competition with the other
systems and, unlike the title insurers, have done little or no advertising a
promotion. Their service has too often been slow, and there has been delay
securing the necessary personnel and equipment to remedy this problem.91 Nor
of policy forms and fixing of premium rates. A study of title insurance premium rat
fixing is currently being made by the Texas Board in an effort to develop more preci
rate fixing standards than the desires of insurers tempered by vague feelings of the co
missioner as to what is fair.
90. See notes 26-30 supra and accompanying text.
After initial registration, Torrens is the cheapest form of title protection. For a discus?
sion of costs during the 1930's, see McDougal & Brabner-Smith, Land Title Transfer:
A Regression, 48 Yale LJ. 1125, 1138 (1939). The same is true today, even in Illinois,
which in 1955 increased its registration fees. III. Ann. Stat. c. 30, ? 145 (Supp. 1956).'
In the few counties where appreciable new Torrens registration is still taking place,
the cost advantage is the reason. Statistics on new registration in Massachusetts, Minnesota
and Illinois appear in 4 American Law of Property ? 17.40 (Casner ed. 1952). Many
of the new registrations are by urban developers who register titles to large tracts,
subdivide the tracts into small lots, and sell them individually. Another important
type of new registration is that of titles so defective that judicial action is needed to clear
them.
91. This has been most noticeable in Cook County, Illinois. Recently, when after
many years a substantial staff increase was made, the time for issuing new certificates

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do they have the power of their competitors to

when necessary to attract and hold new busin
The Torrens acts that have been passed conta
age registration. There is ordinarily no finan
into Torrens, for the judicial proceeding req
both slow and expensive, and the financial ben
to subsequent transferees. The existing statu
tection they provide: initial registration may be
and registration does not protect against all
Torrens system provide any inspection, releas
against possible unrecorded mechanics' liens.
have been sufficient to deter many institutional
titles.
The future of the Torrens system in the United States is bleak, for interest
in it has declined.92 The recent repeal of the California registration act de-
stroyed the system in one of the five states where it has been most extensively
used. 93 In Illinois, another of these five states, deregistration bills have been
introduced in recent sessions of the legislature, and once deregistration is
passed, repeal may follow.94
A revival of interest in land registration might take place if the existing
acts were amended so as to make initial registration more attractive to owners
and lenders. The time required to obtain an initial registration should be
reduced, as should its cost. This could be done by making the initial registra?
tion an administrative proceeding with right of appeal to the courts. An
early Illinois act so providing was declared unconstitutional,95 but develop-
on property already registered was reduced from six weeks to eight days. But space and
equipment are still short. Much of the added staff must work at night because there is
no office space for them during the day.
92. There was renewed interest in the Torrens system during the nineteen-thirties
after many New York title insurance companies became insolvent. The most compelling
argument in favor of the Torrens system made during this period is McDougal & Brabner-
Smith, supra note 90.
93. Cal. Stat. 1955, c. 332. Seven other states have passed and later repealed registra?
tion acts: Mississippi, Nebraska, North Dakota, South Carolina, South Dakota, Tennessee
and Utah. The following registration statutes are still on the books: Colo. Rev. Stat.
Ann. art. 10 (Supp. 1955); Ga. Code Ann. tit. 60 (Supp. 1955); III. Ann. Stat. c. 30,
?? 45-148 (Supp. 1956); Mass. Ann. Laws c. 185 (1955); Minn. Stat. Ann. c. 508
(Supp. 1956); N.Y. Real Prop. Law ?? 370-435; N.C Gen. Stat. c. 43 (Supp. 1955) ;
Ohio Rev. Code Ann. cc. 5309, 5310 (Anderson 1953) ; Ore. Rev. Stat. c. 94 (1955) ; Va.
Code Ann. ? 55-112 (Supp. 1956) ; Wash. Rev. Code ?? 65.12-800 (Supp. 1956). Hawaii
also has a registration act. Hawaii Rev. Laws c. 307 (1945). A substantial volume of
registrations exists in parts of only four states: Illinois, Minnesota, Massachusetts and
Ohio. Adoption in Illinois is by referendum vote of the people of each county. III. Ann.
Stat. c. 30, ? 148 (Supp. 1956). Such a vote has carried only in Cook County.
94. Deregistration preceded repeal in California. Cal. Stat. 1949, c. 293.
95. 111. Laws 1895, at 107, ?? 15, 81, was declared unconstitutional in People ex rel.
Kern v. Chase, 165 111. 527, 46 N.E. 454 (1896). Cf. State v. Guilbert, 56 Ohio St. 575,
47 N.E. 551 (1897).

180.179.211.228 on Sun, 27 Aug 2023 16:08:15 +00:00
ments in administrative law sin

today.96 An inducement to new
or costs were assessed the initial
of slightly increased registration
costs of the system could be pa
istration. Another improvement
excepted from the protection of
demnity fund for the rest, as w
attacks on registration decrees
mitted. Existing indemnity fu
risks without any rate increases
But even if these amendments
system could become the preva
States without mandatory regi
in those countries where Torrens
registration acts have had such
Title Insurance v. Lawy

In large cities title insurance
with both the Torrens and the
lawyers in private practice no
practice is too unremunerative
edge needed. The mass productio
head in metropolitan law offices
tation have made the lawyer's o
many large cities. But in small
far less successful. What succes
the national lenders for title insu
loans. To some extent it is used
marketability in sale or mortga
tion in small towns apparently
or branch office of the insurer
promotes title insurance and al
policy-issuing service, small tow
96. The following are a few of the

the assertion that they granted judic
Cb. v. Huff, 58 Idaho 587, 76 P.2d 9
184 La. 443, 166 So. 133 (1936) (int
Clark v. Briscoe Irrigation Co., 200 S
priation). See also Brown, Admini
Minn. L. Rev. 261 (1935).
97. An Illinois act requiring that representatives of decedents' estates register lands
held by them was held unconstitutional. Anderson v. Shephard, 285 111. 544, 121 N E 215
(1918).

180.179.211.228 on Sun, 27 Aug 2023 16:08:15 +00:00
practice apparently must be excluded from land

drafters and over-all supervisors of closings, f
counties under 100,000 population lawyers will b
searches and examinations, particularly in the
records are easy to use.
The competitive position of lawyers would be i
complete title standards were adopted and adhe
type forty-year curative act also should competitiv
by simplifying examinations and making titles
lawyers' fund form of title protection, if it can
provides an added incentive to the private prac
amination work more remunerative. The grow
should make it far more difficult for the conv
private practitioners from the title examination
"Casualty" Insurance
In metropolitan centers the large title insurer
are being threatened by low overhead insurers o
These latter operate on the casualty principle of
on loss prevention. They can afford heavier losse
for search and examination, since they check ba
policy issued by a competitor that made a thoro
public records for the searches and examination
these low cost insurers are branches or agents of
therefore have prestige and strong financing. W
extensive headway in large cities cannot yet be
already caused concern to their large local comp
some rate and coverage modifications favorable
If broadly applied, the typical casualty insuran
tion could have a disastrous effect on titles. If t
written on a risk basis only, without search or
a gradual deterioration in the certainty of titles. It
by owners upon receiving examination reports from
high degree of record title certainty of insured tit
and examination would remove the basis for cu
become more uncertain, losses would increase a
up. The apparent trend toward more widesprea
approach in title underwriting should be watch
far as to impair the certainty of titles, correcti
desirable.
98. See note 44 supra and accompanying text.

99. E.g., Mich. Stat. Ann. ??26.1271-79 (Supp. 19
(Supp. 1956) ; Minn. Stat. Ann. ? 541.023 (Supp. 1956

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Title Insurance Refor

For title insurance companies t
large, they should provide bro
losses occurring long after the
the nature of their services, and
meet the needs of parties to s
that these goals cannot otherw
justified.
Where substantial competition prevails, rigorous government regulation
of the title insurance industry is unnecessary as long as risks of loss remain
low. Because competition has generally meant lower rates, broader coverage
and faster service for the insured,100 regulation should be confined to provid?
ing adequate reserve or deposit requirements and reinsurance requirements.
But in the few large cities where a title insurer has a monopoly or near monopoly
over title protection, the state should regulate rates and policy terms.101
Companies that assume relatively heavy risks due to careless or limited searches
and examinations or to exceptionally broad coverage should be subjected to
stricter reserve, deposit and reinsurance requirements. Nationally uniform
methods of computing losses should be required so that comparative loss ratio
statistics would be more meaningful to state regulatory bodies and to con?
sumers. Some surveillance should be maintained over advertising in order
to prevent exaggeration of title risks and insurance coverage.
One aspect of a monopoly situation that should be encouraged in other large
cities is the existence of only one title plant, for complete plants are expensive
to develop and maintain and duplication is economically wasteful. The single
plant could be operated jointly by several competing insurers, or one insurer
could be given the sole operating rights. But perhaps the best solution would
be to divorce the business of title plant maintenance from that of examining
and insuring, thereby eliminating the waste of title plant duplication and re-
taining competition in examination and insurance. Such a system would re?
semble the customary division of function between lawyers and abstracters
under the lawyer's opinion system of title protection, although abstracts in
permanent form would not be necessary. On the other hand, title plant mo?
nopoly might retard the development of new plant maintenance techniques, for
highly competitive markets have resulted in the invention of some important
new title plant methods and equipment.
100. Competition among national companies has also been directed towards securing
field representation. This has been expressed in such diverse ways as higher commissions
and nonexclusive agreements with preferred agents, usually abstracters with title plants;
agency agreements with lawyers and "curbstone" abstracters, those without title plants
willing to undercut the charges of more desirable agents; and the establishing of branch
offices owned and operated by the insurer.
101. Some of the problems in regulating title insurance rates are discussed in Leary,
Rate Regulation and Title Insurance, 1953 Ins. LJ. 613.

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Private plants are also economically wasteful t

cate public records. Greater attention should be
for private title plants by introducing more c
and arrangements of public records. To the ex
offices can not or will not adapt themselves to
sideration should be given to reducing the cos
private title plants are locally maintained. For
tract indexes by recorders could be dropped.
real property instruments could be made the off
indexes the official indexes. Companies with
by the counties for part of plant maintenanc
would no longer maintain indexes or keep copie
companies would of course be required to ma
those interested, usually only county officials an
Conclusion
There have been three major reasons for the growth of title insuran
the United States: the life insurance companies' strong preference for
their lending operations; the efficiency with which title insurers having co
plete title plants can search and examine titles, particularly in large cities; a
the aggressive promotion of title insurance by the insurers. Because
factors are likely to continue, title insurance will probably become even
successful in the future. The Torrens system offers no serious compet
and the lawyers have shown surprisingly little opposition. Perhaps the lawy
will resist title insurance more strenuously if it threatens to exclude
from searches and examinations in small towns and rural areas. More state-
wide and national companies may shift their emphasis from developing large
networks of small volume agencies to heavy saturation of favorable areas,
following the Pacific Coast and Illinois patterns. Finally, rigorous government
regulation of the title insurance industry is unlikely, unless Public Law 15
leads to more intensive regulation of all kinds of insurance or unless insolvency
again threatens title insurers.
Appendix I
Title insurance premiums and losses paid for 1954.

Premium Losses
State Income Paid
Alabama $ 526,392 19,038
Arizona 3,140,087 31,146
Arkansas 116,028 2,873
California 30,954,882 451,492
Colorado* 102,131 none
Connecticut 117,073 1,479

Delaware 182,813 none
Florida 2,256,610 52,862

Georgia 665,550 6,707

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Losses
Paid
4,952
not reported
17,208
none
4,814
5,608
49,178
none
28,065
none
22,126
7,652
7,561
239
none
65,738
2,393
150,939
573
none
11,220
300
60,690
99,031
none
30,827
none
13,361
115,545
4,390
none
29,010
68,234
365
15,617
none
none
none
none
$1,381,233
The above data were obtained from the records of state agencies, in most instances
as published in state insurance commission reports. The state agencies secure their title
insurance statistical data from reports that the title insurance companies must file. Some

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companies report as premiums the entire cost of a title policy to the custom
the charge for the search and examination. Other companies report as pr
the charge for insurance, exclusive of search and examination. Most companies
losses paid apparently include only claim payments and not costs of investig
fending against claims.
Appendix II
Some examples of title insurance premiums and losses for 1940, 1945 and 1950
tained from state insurance commission reports, are as follows:
1940 1945 1950
Premiums Losses Premiums Losses Premiums Losses
California $5,927,097 $74,076 $13,405,156 $229,026 $23,547,875 $138,190

Florida 206,514 1,772 363,881 3,909 1,315,555 32,003
Michigan 695,322 4,458 599,637 8,604 3,153,382 8,543
Pennsylvania 1,006,997 42,798 1,803,419 38,861 4,446,171 65,422
Tennessee 274,648 4,288 432,680 5,033 802,730 16,252
Texas 2,271,270 57,060 7,866,346 56,112
Washington 908,023 11,671 2,046,715 11,378 3,780,934 38,813
Texas premiums and losses are unavailable for 1940.
Appendix III
Share of Nonfarm Mortgage Debt Institutionally Held

(in billions of dollars)
Total Nonfarm Institutionally Held
Year Mortgage Debt Amount Percent of Total
1920 15.3 7.9 52
1925 25.7 15.2 59
1930 37.7 22.7 60
1935 28.4 15.5 55
1940 30.0 18.0 60
1945 30.8 19.7 64
1950 66.7 49.3 74
1953 93.4 72.0 77
1955 120.8 95.9 79
Statistical Abstract of t
Lending 36 (1956).
Appendix IV
The following are examples of rate charges in various parts of the country, t
from interviews and company rate schedules:
Company A, for a large Eastern city:
For a $10,000 owner's policy, $107; for a $100,000 owner's policy, $357. For a $10,
mortgagee's policy, $60; for a $100,000 mortgagee's policy, $310. Charge for a mortga
policy is one-third the regular rate if it is issued simultaneously with an owner's po
Rates include search and examination.
Company B, for a large Eastern City:
For a $10,000 owner's policy, $115; for a $100,000 owner's policy, $515. Mortga
policies will be issued simultaneously with owner's policies for $10. Rates include sea
and examination.
Company C, for a large Mid-Western city:
For a $10,000 owner's policy, $84; for a $100,000 owner's policy, $444. For a $10,000
mortgagee's policy, $61; for a $100,000 mortgagee's policy, $331. Additional premiums

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charged for extraordinary risks. Reiss

search required. The charge for a mor
policy. An added charge is made for
search and examination.
Company D, for a large Mid-Western city:

For a $10,000 owner's policy, $35; for a $100,000 owner's policy, $307.50. For a $10,000
mortgagee's policy, $25; for a $100,000 mortgagee's policy, $206.25. Reissue rate is 60%
of the original rate and applies to some policies issued within 10 years of a policy on the
same tract. The charge for a mortgagee's policy is $7.50 when issued with an owner's
policy. Rates do not include search and examination.
Company E, for a Mid-Western city of 100,000 population:
For a $10,000 owner's policy, $70; for a $100,000 owner's policy, $370. For a $10,000
mortgagee's policy, $49; for a $100,000 mortgagee's policy, $249. Reissue rate for either an
owner's or mortgagee's policy is $23.50 on a $10,000 policy, and $143.50 on a $100,000 policy.
The charge for a mortgagee's policy when issued with an owner's policy is $5. Rates include
examination, but $15 is charged for a title search if no abstract is provided.
Company F, for a large Pacific Coast city:
For a $10,000 owner's policy, $60.25; for a $100,000 owner's policy, $327.75. For a
$10,000 mortgagee's policy, $48.20; for a $100,000 mortgagee's policy, $262.20. Added
charges are made for inspections, ATA policies (see text at notes 46-47 supra and accom?
panying text), and extended coverage including mechanics' liens. Rates include search and
examination.
Appendix V
AMERICAN TITLE ASSOCIATION STANDARD LOAN POLICY, REVISED 1946

[p.l]
THE TITLE INSURANCE COMPANY
a corporation of , herein called the Company, for a valuable

consideration, paid for this Policy of Title Insurance,
Does Hereby Insure
the owner of the indebtedness secured by the mortgage or deed of trust described in Schedule
A, herein called said indebtedness, and each successor in interest in ownership thereof,
and also any such owner who acquires the land referred to in this Policy in satisfaction
of said indebtedness as provided in the conditions and stipulations hereof, herein called
the Insured, against loss or damage not exceeding Dollars,
which the Insured shall sustain by reason of any defect in the execution o
or deed of trust, but only insofar as such defect affects the lien or charge o
or deed of trust upon the said land, or by reason of the invalidity of the lie
said land, or by reason of title to the said land being vested at the date h
than as herein stated, or by reason of unmarketability of the title of th
trustor, or by reason of any defect in, or lien or encumbrance on said t
hereof, or by reason of any statutory lien for labor or material which no
hereafter may gain priority over the lien upon said land of said mortgage or
other than defects, liens, encumbrances and other matters set forth in Sc
reason of the priority thereto of any lien or encumbrance at the date he
shown by Schedule B, all subject, however, to the conditions and stip
annexed, which conditions and stipulations together with said Schedu
hereby made a part of this Policy.
Subject to the provisions of Schedule B and the conditions and stipu
the Company further insures that, at the date hereof, any assignments sh

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A, whether recorded or not, are good and valid and

of trust in the Insured free and clear of all liens.
In Witness Whereof, THE TITLE INSURANCE COMPANY

has caused its corporate name and seal to be hereunto affixed by its
authorized officers, this day of
THE TITLE INSURANCE COMPANY
[p.2]
SCHEDULE A
1. The fee simple title to said land is at the date hereof vested in
2. The mortgage or deed of trust and assignments, if any, covered by th
described as follows:
3. The land described in the instrument above mentioned and with respect to which this
policy is issued is described as follows:
SCHEDULE B
Showing defects, liens, encumbrances and other matters against which

not, by this Policy, insure:
[p.3]
CONDITIONS AND STIPULATIONS
1. If any Insured acquires said land, or any part thereof, by foreclosure, truste
legal manner in satisfaction of said indebtedness, or any part thereof, this Policy
force in favor of such Insured, subject to all of the conditions and stipulations hereo
hereof shall inure to any federal agency or instrumentality acquiring said land under an insurance
contract or guaranty insuring or guaranteeing said indebtedness, or any part thereof, whether named
as an insured herein or not, subject otherwise to the provisions hereof.
2. The Company at its own cost shall without undue delay defend the Insured in all litigation
consisting of actions or proceedings commenced against the Insured, or defenses, restraining orders,
or injunctions interposed against a foreclosure or sale of said land in satisfaction of said indebtedness,
which litigation is founded upon a defect, lien or encumbrance insured against by this Policy, and may
pursue such litigation to final determination in the court of last resort. In case any such action or
proceeding shall be begun or defense interposed, or in case knowledge shall come to the Insured of any
claim of title or interest adverse to the title as insured, or which might cause loss or damage for which
the Company shall or may be liable by virtue of this Policy, the Insured shall at once notify the Company
thereof in writing. If such notice shall not be given to the Company within ten days of the receipt of
process or pleadings or if the Insured shall not, in writing, promptly notify the Company of any
defect, lien or encumbrance insured against which shall come to the knowledge of the Insured, in
respect to which loss or damage is apprehended, then all liability of the Company in regard to the
subject matter of such action, proceeding or matter shall cease and terminate; provided, however,
that failure to notify shall in no case prejudice the claim of any Insured unless the Company shall be
actually prejudiced by such failure and then only to the extent of such prejudice. In all cases where
this Policy permits or requires the Company to prosecute or defend any action or proceeding, the
Insured shall secure to it the right to so prosecute or defend such action or proceeding, and all appeals
therein, and permit it to use, at its option, the name of the Insured for such purpose. The word
"knowledge" in this paragraph means actual knowledge and does not refer to constructive knowledge
or notice which may be imputed to the Insured by reason of any public record or otherwise.
3 If any Insured shall in good faith contract to sell the evidence of indebtedness and mortgage
or deed of trust described in Schedule A, or having acquired said land as in paragraph 1 hereof provided,
in good faith contracts to sell the same, and any such contract fails, or if the successful bidder at a
foreclosure or trustee's sale ref uses to complete the purchase, because of alleged defects m the title to
said land and, in any of such events, the said title has been declared by a court of competent jurisdic?
tion to be defective or encumbered or otherwise unmarketable by reason of any defect, hen, or encum?
brance insured against by this Policy, the Company at its option shall either (a) pay such Insured the
amount of this Policy, (b) purchase said indebtedness, (c) establish the marketability of the title by
decree of court, or (d) otherwise save the Insured harmless. In the event of any litigation involving
refusal of title because of defects insured against hereunder, the Company will, at its own cost,
promptly and diligently prosecute such action as may be available to establish title as insured, and if
such action is not successful, will reimburse the Insured for all costs and attorneys' fees in said litigation
involving refusal of title.
4 The Company reserves the option to pay, settle, or compromise for or in the name of the
Insured, any claim insured against or to pay this Policy in full, and payment or tender of payment
of the full amount of this Policy shall terminate all liablity of the Company hereunder. In such cases
the Company shall be liable to pay in addition all costs and attorneys' fees incurred by it.
5 Whenever the Company shall have settled a claim under this Policy, all right of subrogation
shaU vest in the Company unaffected by any act of the Insured, except that the Insured may release

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or substitute the personal liability of any debtor or extend or otherwise modify the terms of pay?
ment provided such act does not result in any loss of priority of the lien of the mortgage or deed
of trust herein, but such subrogation shall be in subordination to the lien of the Insured under its said
mortgage or deed of trust and to the right of the Insured to receive and be fully paid for the amount of
principal and interest and other sums, if any, secured by said mortgage or deed of trust. If loss of
priority should result from any act of the Insured, such act shall not void this Policy, but the Company,
in that event, shall be required to pay only that part of any losses insured against hereunder which
shall exceed the amount, if any, lost to the Company by reason of the impairment of the right of sub?
rogation. The Insured, if requested by the Company, shall transfer to the Company all right, securities,
and remedies against any person or property necessary in order to perfect such right of subrogation.
6. The Company has the right and option, ln case any loss is claimed under this Policy, to pay
to the Insured the entire indebtedness secured by said mortgage or deed of trust to the Insured, together
with all costs and attorneys' fees which the Company is obligated hereunder to pay, in which case the
Company shall become the owner of, and the Insured shall at once assign and transfer to the Company
said mortgage or deed of trust and the indebtedness thereby secured and such payment shall terminate
all liability under this Policy and the Insured shall surrender the same.
7. A statement in writing of any loss or damage for which it is claimed the Company is liable
under this Policy shall be furnished to the Company within sixty days after such loss or damage shall
have been determined and no right of action shall accrue to the Insured under this Policy until thirty
days after such statement shall have been furnished, and no recovery shall be had by the Insured
under this Policy unless action shall be commenced thereon within one year after expiration of said
thirty-day period. Failure to furnish such statement of loss or damage, or to commence such action
within the time hereinbefore specified, shall be a conclusive bar against maintenance by the Insured
of any action under this Policy.
8. The Company will pay, in addition to any loss insured against by this Policy, all costs imposed
upon the Insured in litigation carried on by the Company for the Insured, and all costs and attorneys'
fees in litigation carried on by the Insured with the written authorization of the Company or as pro?
vided in paragraph 3 of the conditions and stipulations hereof but not otherwise. The Company will not
be liable for loss or damage by reason of defects, ciaims or encumbrances created subsequent to the
date hereof (excepting any statutory lien for labor or material insured against by this Policy) or for
defects, ciaims or encumbrances created or suffered by the Insured claiming such loss or damage, or
existing at the date of this Policy and known to the Insured claiming such loss or damage at the date
such Insured claimant acquired an insurable interest but not known to the Company or disclosed to it
in writing by the Insured. The liability of the Company under this Policy shall in no case exceed in
all the actual loss of the Insured and costs and attorneys* fees which the Company is obligated hereunder
to pay. All payments under this Policy shall reduce the amount of the insurance pro tanto and no
payment shall be made without producing this Policy for endorsement of such payment unless the
Policy be lost or destroyed, in which event proof of such loss or destruction shall be furnished to the
satisfaction of the Company. Payment in full by any person or voluntary satisfaction or release by the
Insured of the mortgage or deed of trust described in Schedule A shall terminate all liability of the
Company under this Policy, except as provided in Condition 1.
9. Nothing contained in this Policy shall be construed as an insurance against action by any
governmental agency for the purpose of regulating occupancy or use of said land or any building or
structure thereon.
*& ?he te?m "Land" when used herein shall be construed to include the land herein describ
specifically or by reference and improvements affixed thereto which by law constitute real property
* H\ All notices required to be given the Company and any statement in writing required to
furnished the Company shall be addressed to it at its Home Office at
Appendix VI
The standard contract of one large national company with its agents contains these
typical provisions:
Section 9. Each commitment to insure and each policy of title insurance shall be
based upon a title report and opinion made by an attorney approved by principal,
in writing, for such purpose, after such attorney shall have examined the complete
record title to the property described in such commitment or policy as disclosed by
all public records of the county and city or town or district wherein such property
is located. "Public Records," as here used, shall be deemed to include all recording
offices where instruments of conveyance or mortgage or other instruments may be
filed or recorded, all courts, including probate courts and other courts where wills,
estates, guardianships, suits, bankruptcies, or other actions at law or in equity may
be filed or judicial proceedings had or judgments rendered, all offices where me-
chanics' or materialmen's liens or other liens or ciaims may be filed or otherwise
evidenced, or where taxes or assessments may be levied or charged, or where condem?
nation proceedings may be had, affecting the title to property. An abstract of title
purporting to reflect the results of a search to all such public records and certified
to that effect by a duly recognized and responsible abstracter or abstracters or ab?
stract company or companies may be accepted by agent and furnished to the approved
attorney for his use in making his examination of title, but, as to any of the said

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public records not covered by such abstract as certif

search and furnish report thereon to such approved
agreed that agent is now lawfully engaged in the ab
area covered by this contract and that, in such capacity
or parts of the abstracts of title above mentioned and/
with respect to any property in said area. Where the t
in question shall have been theretofore insured by prin
may begin with the date of the prior policy, but all m
tions, encumbrance, exception or objection disclosed b
approved attorney's title report and opinion made fo
unreleased or undisposed of shall be reflected in any
be issued.
Section 10. No commitment to insure or policy of title insurance shall be issued

and delivered until it shall have been fully prepared in conformity with the applica?
tion, the approved attorney's title report and opinion and the agent's knowledge, and
then validated by the signature of an authorized signatory named and designated
thereon, who shall be only such person or persons as shall be appointed in writing
signed by principal. The appointment of any authorized signatory may be revoked
by principal at any time and shall be revoked by principal upon written demand of
agent.
Section 11. Ageht shall keep a permanent file on each parcel of property upon
which agent receives an application for title insurance, wherein agent shall preserve
the applications, approved attorneys' title reports and opinions, copies of commitments
and policies, and all other related matters and data, including surveyor's plat and
certificate of survey in all cases where general survey exception is not shown in the
commitment or policy issued.
Section 14 No commitment to insure, or policy of title insurance, in excess of
the sum of $ shall be issued until the approved attorney's title report and
opinion, together with an analysis of such title, giving its origin and course of devo?
lution and its important characteristics, shall have been submitted to principal at
its Home Office for review, accompanied by the approved attorney's and agent's
reports of their check of such title and their recommendations with respect thereto,
and principal shall have expressly authorized agent, in writing, to issue such com?
mitment or policy, or both.
Appendix VII
A typical agent's indemnification clause provides:

Section 16. Agent agrees to indemnify principal against any and all loss, cost o
damage which principal may sustain or become liable for on account of the failur
of agent to comply with the terms of this contract, or on account of agent's failure
to comply with any rules, regulations or instructions delivered or given to agen
by principal; or on account of any error or omission in any abstract of title or othe
record information furnished by agent in agent's capacity as an abstractor of titles;
or on account of the failure of any commitment or binder or policy issued by agent
hereunder or through agent's office to contain an appropriate requirement or exceptio
as to any lien, claim, encumbrance, defect or objection disclosed by the application
the approved attorney's title report and opinion, or known to agent, unless expressly
authorized in writing by principal to disregard the same; or on account of the failur
of any commitment or binder or policy issued by agent hereunder or through agent
office to correctly describe the property and reflect the then condition of the tit
thereto in the light of the application, the approved attorney's title report and opinio
and other relating paper and documents, the agent's knowledge, and the rules, regu?
lations and instructions delivered or given to agent by principal.

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Title Insurance

Author(s): Quintin Johnstone

Stable URL: https://www.jstor.org/stable/794045

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Title insurance is a means of protecting against the risks inherent in the

fAssociate Professor of Law, Yale Law School.

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of title protection in many metro

Title Insurance Protection

Probably a majority of fee simple purchasers and certainly a

5. A survey giving rough estimates by state as to the relative use of var

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lessees to do so. The parties to the contract ar

10. Because they are more willing to assume the r

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insurers compared to most other

Risks Usually Covered by Title I

13. Henley, What Investors in Mor

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was forged, never properly delivered, or execu

Risks Usually Not Covered in Title Insurance Policies

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enjoyment of the premises. These

The Scope of Coverage

(Sup. Ct. 1939). For a treatment of

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Morgagees' policies usually cover assignees of

Liability for Negligence

Title Protection Afforded by Competing Systems

20. Owners* policies usually contain this or a similar clause:

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risk of loss to others from negl

Additional Services of Title Insurance Companies

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title protection is that the title insurer agrees t

The major national companies, when writing policies through agents,

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large lending institutions that have

Accurate quantitative data on title insurance losses are difficult to obtain.

33. See text at note 45 infra.

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mortgagees' policies is less. More losses result fr

The Relationship Between Title Insurance and the Large

Of vital significance to title insurance as a business and as an

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however, are national lenders, an

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because the examination criteria and reports a

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case when the insured is a life in

Patterns of Title Insurance Company Operation

Although some title companies insure titles only in one county

his relatively inferior bargaining position. See Kessler, Contracts of Ad

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who have considerable skill and experience in

Because financial success in the title insurance business depends to a large

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large volume of insurance in any

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