As soon as an insured discovers any title-related problem that could impair its ownership or property related rights, a claim should be made under its title insurance policy. Title insurance provides that the insurer will defend a potentially covered title claim. The “duty to defend” is a very important insurance benefit and fundamental right. If the claim is made too late, it may be barred by the applicable statute of limitations.
The title policy and state law may provide various procedures and requirements in making a claim.
Like all insurance claims, even if the title insurer is first notified by phone, the claim should also be made in writing as soon as possible. Also like many other types of insurance claims, many insureds are represented by an attorney in making the claim.
The specific requirements of how an insurer is supposed to acknowledge, investigate, handle and dispose of an insurance claims depends in large part on the application state’s law.
For instance, the California Department of Insurance has a number of specific regulations for all insurers:
- Respond to communications within 15 days
- Acknowledge claims and begin the investigation within 15 days
- Accept or deny claims within 40 days, unless if more time is reasonable required. If more time is required, the insurer shall provide the insured within 40 days written notice explaining why additional time is required for the insurer to complete its coverage investigation. “This written notice shall specify any additional information the insurer requires in order to make a determination and state any continuing reasons for the insurer’s inability to make a determination. Thereafter, the written notice shall be provided every thirty (30) calendar days until a determination is made or notice of legal action is served. If the determination cannot be made until some future event occurs, then the insurer shall comply with this continuing notice requirement by advising the claimant of the situation and providing an estimate as to when the determination can be made.”
Also, like all other types of insurance, title insurers sometimes take too long to respond to claim and sometimes wrongfully deny claims. Whether an insurer is taking too long to respond or has wrongfully responded is generally a legal question that depends on the facts, circumstances, the terms of the policy, and applicable state law. However, there is a commonly held belief that it can be difficult to recover on a title insurance policy. As one blogger noted: “Boy, to recover on a title policy, an insured has to hit a bullet with a bullet!” Thus, obtaining title insurance coverage often requires retaining an attorney with special expertise and experience in title insurance law.
Why You Need a Title Insurance Specialist
For a number of reasons, title insurance is different than all other types of insurance. The vast majority of attorneys that handle claims against other types of insurance, such as auto, commercial general liability (CGL), health or life, have never handled a title insurance claim. Although many of the principles and rules from other types of insurance apply to title insurance, there are many rules, procedures and strategies that are unique to title insurance.
Title insurance is based on fundamental real estate law concepts, which the majority of attorneys that practice general liability, property damage or medical law issues have not dealt with law school and the bar examination.
Although title insurance policies contain versions of the general defense and indemnification coverages found in other policies, title policies provide important limitations on these concepts that unknowing attorneys can waste precious client resources trying to fight. Understanding how the policy works is a fundamental requirement to being able to bring a claim to successful resolution.
Since the mid-1990s, the vast majority title policies issued have contained arbitration provisions, which have been generally enforced. Thus, there is little more recent decisional law providing guidance on how the important policy provisions and disputes are being interpreted and resolved. However, the small buy experienced title insurance bar is still in the trenches and knows the industry trends and practices.
FAIR CLAIMS SETTLEMENT PRACTICES REGULATIONS, CALIFORNIA CODE OF REGULATIONS, TITLE 10. CHAPTER 5, SUB-CHAPTER 7.5. http://www.insurance.ca.gov/0100-consumers/0060-information-guides/0040-residential/fair-claims-settlement-regs.cfm
 Joan Cotkin, Title Insurance: What Does it Really Cover?, California Insurance Law Observer http://www.californiainsurancelawobserver.com/2010/09/articles/first-party-insurance/title-insurance-what-does-it-really-cover/