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Singer v. Crain

A-1958-09T1 (N.J. Super. App. Div. 2011) (Unpublished)

TITLE INSURANCE —Unless the insurer has assumed duties other than those imposed by the title insurance policy, a court should not impose liability upon a title company under negligence principles as the law is clear that a title company’s liability under a title insurance policy is limited to contractual claims.

A property owner contracted to sell its property. His buyer refused to close because his title search uncovered a riparian/tidelands claim in favor of the State of New Jersey. The owner allegedly notified his title company of the potential defect in title. The owner then sued his buyer and his title company, specifically alleging the title company had failed to uncover the tidelands claim and to quiet title. The owner then moved for a declaratory judgment that the title company was liable for actual damages. The lower court dismissed the complaint against the buyer. It held that the owner’s title company was liable to both the buyer and seller for its failure to disclose the existence of the tideland’s claim. On appeal, the title company argued that the lower court erred by declaring it liable to the owner under negligence principles or that it breached its contract of title insurance with the owner.

The Appellate Division reversed, holding that the lower court erred by disposing of the question of liability by summary judgment. The lower court had determined that the buyer had the right to refuse to close title under the contract where a title defect would substantially interfere with the use of the property for residential purposes. It found the lower court made no findings of fact concerning whether the tidelands claim constituted substantial interference with the use of the property for residential purposes. In fact, the title company asserted that the tidelands claim impacted only a small part of the premises, and did not touch the residential structure. The Court concluded that there were genuine issues of material fact as to whether the tidelands claim interfered with the use of the property for residential purposes, thus precluding summary judgment in favor of the owner.

The Court also held the lower court erred by imposing liability upon the title company under negligence principles as the law is clear a title company’s liability is limited to contractual claims under the policy. It found a question of material fact as to whether the insurer assumed duties other than those imposed by the title insurance policy.

The Court also held that there was a genuine issue of material fact as to whether the title company breached the contract of title insurance. The company had asserted that it attempted to obtain a riparian grant on behalf of the seller as a protective action under the contract, and that the owner, as required by the policy, failed to cooperate with it by not completing the documents necessary to file for a riparian grant.


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