Title Insurance

Dallas insurance lawyers also need to know about “title insurance.”
When purchasing land or anything that sits on land, the buyer will want to verify that the seller of the land is the true owner of the land and has good title to the land. If the buyer has a lender involved, the lender will usually require title insurance as a condition of the loan. There are many interests that land could be subject to. These interests include liens, mineral interests, easements, rights of way, etc. The purchaser of title insurance is seeking to avoid the necessity and responsibility of checking, examining and analyzing public records to determine the title to the land. Thus, a title company is sought to do this research and issue title insurance. A title insurance company is to:
1) check the status of the title to the property; and
2) to provide title insurance against any future ownership claims against the property or any other problems which interfere with the title to the property.
In case it is not clear, the purpose of title insurance is to guarantee the title status and insurer the owner against title defects.
The Texas Insurance Code defines title insurance this way:
“Title Insurance” means insuring, guaranteeing, or indemnifying owners of real property or others interested therein against loss or damage suffered by reason of liens, encumbrances upon, or defects in the title to said property, and the invalidity or impairment of liens thereon, or doing any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of the Act.
The Eastland Court of Appeals issued an opinion in 1999, in the case Chicago Title v. Alford, wherein they stated:
The only duty imposed by the title insurance policy is the insurer’s duty to indemnify the insured against losses caused by defects in title as of the date the policy is issued. In this respect, title insurance differs from most other insurance lines in important ways: it is paid for by a single premium, and it covers the condition of the title only as of the policy’s date. Defects arising afterward cannot be the basis of a claim.
Title insurance is “first party” insurance. This means the benefits of the policy are strictly for the insured. There may be other parties involved such as adverse claimants or lienholders but the title policy insurance owes no duty to these other parties. Again, the obligations of the title insurance is strictly to the insured.
Title insurance differs from other traditional types of insurance. Most of the traditional types of insurance insure against future losses. Title insurance insures against already existing problems that are unknown or not properly researched.
A distinction to be known about title insurance is that title insurance does not guarantee good title to land. It only insures against losses resulting from not having good title to the land.
A title insurance commitment is a form that offers to issue a title policy, subject to stated exceptions, requirements, and terms.
Texas Insurance Code, Section 2701.001 defines a “commitment for title insurance” saying:
A title insurance form under which a title insurance company offers to issue a title insurance policy subject to stated exceptions, requirements, and terms. The term includes a mortgagee title policy binder on an interim construction loan.
A buyer can choose between two types of title insurance.
One of these is a standard title insurance coverage which insures against title defects obvious from an examination of public records. It also insures against risks such as forgery and lack of competency or capacity.
The other is extended title insurance which insures against title defects obvious not only obvious to an examination of public records, but also from a physical inspection of the property and from examining the land survey.