The history of title insurance

The need for title insurance historically arose from the fact that traditional methods of conveying real estate did not provide adequate security for the parties involved. Until a century ago, the transfer of real property titles was handled primarily by the transferors, who were responsible for all aspects of the transaction. The assignor conducted a title search to determine the seller’s property rights and any other rights, interests, liens, or encumbrances that may exist with respect to the property and, based on its search, provided a signed summary (or description) of the property. title status. Although the assignor was generally not an attorney, that individual was recognized as an authority on real estate law. The origin of title insurance can be directly attributed to the limited protection that the work of said transferor provides to the buyer of real property.

In 1868, the famous case of Watson c. Muirhead (57 Pa. 161) filed in Pennsylvania. In that case, Muirhead, a carrier, had sought and extracted a title for Watson, the purchaser of a parcel of real estate. In good faith and after consulting an attorney, Muirhead chose to ignore certain registered judgments and report the title as good and unencumbered. Based on Muirhead’s summary, Watson went ahead with the purchase, but was subsequently presented with liens that Muirhead had concluded were not impediments to title, and was required to satisfy them. Watson sued Muirhead to recover his losses, but the Pennsylvania Supreme Court ruled that there was no negligence on the part of the carrier and dismissed the case. Watson, an innocent buyer who had suffered financial damage from the liens on his title, had no recourse.

The decision in Watson v. Muirhead clearly demonstrated that the existing transfer system could not provide a complete guarantee to real estate buyers that they would be safe and secure in their property. As a result of that decision, the Pennsylvania legislature soon after passed legislation “to provide for the incorporation and regulation of title insurance companies.” The first title company was founded in Philadelphia in 1876.

This new type of insurance (called “title insurance”) addressed the concerns raised in Watson v. Muirhead providing:

1. Liability without proof of negligence;

2. Financial protection through a reduction in the risk of insolvency; Y

3. The assumption of risks beyond those revealed in public records (for which the extractor was not responsible).

Since the late 1800s, the title insurance industry has grown to become an essential component in the vast majority of real estate transactions in this country. The services provided by title insurers may vary slightly from one area of ​​the country to another, reflecting the different laws, customs, and procedures of the various states and counties throughout the country. But the essential purpose of these services is the same: to help all parties to real estate transactions by ensuring that the acquisition or transfer of a real estate interest can be carried out with the maximum degree of efficiency, security and protection.