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Haskins v. First American Title Insurance Co.

2011 WL 5080339 (U.S. Dist. Ct. D. N.J. 2011) (Unpublished)

CONSUMER FRAUD; TITLE INSURANCE — The sale and issuance of title insurance, even if only in the form of a loan policy, is subject to New Jersey’s Consumer Fraud Act where the title policy covers an ordinary residential transaction.

A class of New Jersey homeowners who refinanced their home mortgages sued a title insurance company. They alleged that the title insurance company had “systematically cheated New Jersey homeowners by misrepresenting the amount of money ‘due and owning for title insurance.’” One of their claims was that the title insurance company had violated New Jersey’s Consumer Fraud Act (NJCFA). The title insurance company “initially argue[d] that title insurance is not a consumer product because, first, it is not marketed to consumers and, second, the insurance is for the benefit of the lender, not [the borrowers].” The Court rejected that argument based on prior New Jersey case law, holding that “the title insurance at issue qualifies as a consumer product, within the ambit of the NJCFA.” It looked at a New Jersey Supreme Court case that had “held that the NJCFA covered the sale of credit insurance for the lender’s benefit, made in conjunction with a student loan.” The reasoning in that case was that: “[b]ecause the broad language of the [NJCFA] appears to include both lending and insurance-sales practices, we conclude that its terms also include the sale of insurance in conjunction with lending ... .”

The Court also rejected the title insurance company’s attempt to use another, prior New Jersey case, wherein the title company argued that the “precise issue” was governed by that case and the court, there, “came to the opposite conclusion.” This Court, however, found the prior case to be “clearly distinguishable in its facts ... [because it] was brought against a title insurance company by the lender beneficiary of a title insurance policy, not the actual purchaser of the policy.” Further, the case cited by the title insurance company “also dealt with ‘a complex product [($15 million title insurance policy)] that [did] not reflect services generally sold to the public.” Here, the Court was faced with a “simple title insurance policy governed by statutorily set rates.”

The title insurance company also argued that “the learned professional/semi-professional exemption” applied. According to the Court, that exemption excludes insurance brokers, acting within the scope of their professional license, from liability, not insurance companies selling insurance, like [the title insurance company in this case].”

Finally, the Court rejected the title insurance company’s third argument, to the effect that the present homeowners had not alleged that their alleged loss resulted from unlawful conduct by the title insurance company. Rejecting this argument, the Court held that the homeowners had “satisfied this requirement by alleging that [the title insurance company] misrepresented the cost of title insurance and that they were induced to purchase the title insurance based on the mistaken belief that the listed rates matched the applicable regulated rates.”


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