In a fascinating article by Shannon Duffy of The Legal Intelligencer, the public gets a rare view into the inner workings of real estate title insurance, and the complexity surrounding the industry, itself.

Turns out, as professionals in the business know all too well, there are very significant duties and responsibilities that must be adhered to. As a lawyer-centered firm, we at www.MylesTitle.com truly appreciate the duties outlined by the Federal court, in this recently certified class action ruling. Frankly, there’s a huge lesson to be learned here.

Don’t get us wrong, we’re certainly not happy that Insurers and Agents are being sued. Quite to the contrary. Yet the suit itself highlights the need for the public (including but not limited to attorneys, accountants, bankers, developers, real estate agents, etc.) — in both the residential and commercial arenas — to recognize the need for professionally-minded agents and advisers in the real estate title insurance business.

Frankly, real estate title insurance is not a ubiquitous industry.There are huge differences amongst us. Turns out, having critical knowledge, and employing solid ethical practices and professionalism truly matters to your bottom-line.

Along these lines, a federal judge has just certified a consumer class action suit against Commonwealth Land Title Insurance Co., brought by homeowners who claim they were overcharged for title insurance when they refinanced, because they were never told that they qualified for a discounted premium.

THE RULINGby U.S. District Judge Eduardo C. Robreno in Alberton vs. Commonwealth Land Title Insurance Co. joins a growing list of courts that have certified similar class actions in Florida, Maryland, Minnesota, New York and Ohio.

At issue in all of the cases are claims by the homeowners that their entitlement to a statutorily discounted premium should have been detected by the insurer during its title search.

Under Pennsylvania law, title insurance rates are governed by a statute that calls for a 10 percent “reissue rate” discount whenever a property owner purchases title insurance within 10 years of obtaining a policy issued on the same property and a 20 percent “refinance rate” discount if the property owner applies for title insurance within three years of obtaining a previous policy.

PLAINTIFFS ARGUMENTS: Property owners are entitled to the discounted rates whenever the title search, which the insurer is required by law to conduct, reveals events in the chain of title that “would lead any reasonable title agent to conclude that a prior title policy was issued.”

PLAINTIFF’S ALLEGATIONS: The suit alleges that anytime Commonwealth Land Title’s agents discovered in the title search that an insurance purchaser had refinanced the property within the past three or 10 years, they should have known that a prior insurance policy had been issued and that the discounts should have been automatically applied.

THE DEFENSE: Argued that the law imposes no such duty. Instead, they argued, the law requires the insurance purchaser to provide evidence of the prior insurance policy rather than relying on the insurer to uncover the policy in its title search.Contrary to plaintiffs’ allegations, the defense argued that it is possible to obtain a mortgage or refinancing without title insurance in a variety of circumstances and that it is therefore impossible to conclude that every member of the proposed class who purchased title insurance from Commonwealth within three or 10 years of obtaining a mortgage or refinancing was eligible for a reduced premium.

PLAINTIFS CLAIMS: The plaintiffs brought nine claims — breach of express contract, breach of implied contract, money had and received, violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, fraudulent misrepresentation, negligent misrepresentation, negligent supervision, accounting and unjust enrichment.

JUDGES PRELIMINARY FINDINGS:

– Numerosity requirement was satisfied because the plaintiffs estimate that the class includes tens or even hundreds of thousands of individuals and that Commonwealth Land Title has estimated that it issued an average of 40,000 policies per year in Pennsylvania.

– Commonality requirement is satisfied because all of the class members share the factual question of whether a past mortgage necessarily meant a past purchase of title insurance.

– The lead plaintiff is also typical of the class, because his claims arise from the “identical practice” of charging a nondiscounted rate unless the purchaser presented evidence of previous title insurance and regardless of whether the title search revealed a prior mortgage or refinancing. The judge also rejected the argument that the lead plaintiff cannot be considered typical because he purchased his title insurance from an agent and not from Commonwealth Land Title directly

TITLE INSURANCE AGENTS: The Judge stated, “Whether or not Commonwealth is responsible for the actions of its agents is itself a question raised by the claims of many class members,” The Judge found, noting that by asserting a claim of negligent supervision, the plaintiffs had imputed responsibility for the agents’ actions to the insurer.

DEVILS IN THE DETAIL: For the refinance discount, the statute says the rate “shall be” the discounted rate, while the reissue rate applies “when evidence of the prior policy is produced.” As a result, the Judge found that Commonwealth Land Title could be found to have violated the first section but not the second. Nonetheless, the Judge found that the conflict did not defeat typicality and that the proper cure was to establish two subclasses, conditioned on the plaintiffs adding a representative for the reissue discount class.

THE POWER OF A FIDUCIARY RELATIONSHIP …The Judge further found that the misrepresentation claims may also be amenable to class treatment because individualized proof of reliance is excused for such claims where the defendant has a fiduciary relationship with the plaintiffs.

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