The history of title insurance

The need for title insurance historically arose from the fact that traditional methods of conveying real property 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 transferor conducted a title search to determine the seller’s ownership rights and any other rights, interests, encumbrances or encumbrances that may exist with respect to the property and, based on his 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 traced directly to the limited protection that the work of such a cedant provides to the buyer of real estate.

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

The Watson v. Muirhead clearly demonstrated that the existing conveyance system could not provide full assurance to real estate buyers that they would be safe and secure in their property. As a result of that decision, the Pennsylvania legislature shortly thereafter passed an act “to provide for the constitution 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. Assumption of risks beyond those disclosed 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 can vary somewhat from one area of ​​the country to another, reflecting the different laws, customs, and procedures of different states and counties across the country. But the essential purpose of these services is the same: to assist all parties in real estate transactions by ensuring that the acquisition or transfer of an interest in real estate can be carried out with the maximum degree of efficiency, security and protection.