The history of title insurance

The need for title insurance historically arose from the fact that traditional real estate transfer methods did not provide adequate security for the parties involved. Until a century ago, the transfer of real estate titles was handled primarily by the transmitters, who were responsible for all aspects of the transaction. The carrier conducted a title search to determine the seller’s property rights and any other rights, interests, ties, or encumbrances that may exist with respect to the property and, based on their search, provide a signed summary (or description) of the property. title status. Although the carrier was generally not an attorney, that person was recognized as an authority on real estate law. The origin of the title insurance can be directly attributed to the limited protection that the work of said carrier provided to the buyer of real property.

In 1868, the famous case of Watson v. Muirhead (57 Pa. 161) performed in Pennsylvania. In that case, Muirhead, a carrier, had sought and obtained a title from Watson, the buyer of a parcel of real estate. In good faith and after consulting an attorney, Muirhead decided to ignore certain recorded lawsuits and report the title as good and unimpeded. Based on Muirhead’s summary, Watson went ahead with the purchase, but was subsequently presented with, and required to satisfy, links that Muirhead had concluded were not impediments to the title. Watson sued Muirhead to recoup his losses, but the Pennsylvania Supreme Court ruled that there was no negligence on the part of the carrier and dismissed the case. Watson, an innocent buyer who had suffered financial damages due to liens on his title, had no recourse.

The decision of Watson v. Muirhead clearly demonstrated that the existing transfer system could not provide a full guarantee to real estate buyers that they would be secure in their property. As a result of that decision, the Pennsylvania legislature shortly thereafter passed a law “to provide for the incorporation 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 by providing:

1. Liability without proof of negligence;

2. Financial protection by reducing the risk of insolvency; Y

3. The 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 where it is now an essential component in the overwhelming majority of real estate transactions in this country. The services provided by title insurers may vary somewhat from one area of ​​the country to another, reflecting the different laws, customs and procedures of the various states and counties in the nation. 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.