Reliance on Title Agent Representations
At the closing, the insured’s counsel requested
an escrow agreement be drafted to protect his client from potential unpaid
water charges that had not yet become liens. The title Agent’s representative
assured counsel the meters identified in the preliminary report were the only meters
that serviced the property and that those meters showed no additional charges.
Counsel asserted he proceeded with the closing in reliance on those
representations.
It turned out there was another meter
servicing the property of which the Agent was unaware at the time of closing.
Charges accruing from that meter totaled more than $62,000, but had not yet
become a lien as of the policy date.
The trial court observed the “policy
expressly provides that it is the complete agreement between the parties and
that any changes or amendments to it must be made in writing, [the Agent's]
oral representations, never reduced to writing, were not incorporated into the
policy and provide no basis for a breach of contract claim ….”
The appellate panel upheld the lower
court, noting that “title reports function to apprise title insurers of defects
in title; they do not serve to warn prospective purchasers of every risk facing
the property.” Timac
Realty v. G & E Tremont LLC, 2014 NY Slip
Op 6858 (First Dept., October 9, 2014).
(Kudos to
Constructive Notice subscriber Paul Kleidman, Esq. and his team at Fidelity
National Title Group on a job well done.)
Comment:
The Second Dept. has previously recognized
that lenders and buyers customarily rely on a title insurer's title search.
That circumstance, however, does not, by itself, render the search an
independent representation as to title that survives delivery of the policy and
gives rise to a cause of action in negligence or misrepresentation. Counsel must
take explicit steps, such as procuring affirmative insurance or
establishing an adequate escrow, to protect the client from risks excluded or
excepted from policy coverage.