Concluding Commentary on Title Insurance Claims

In this concluding commentary on our experience with title insurance claims I would like to summarize my previous commentaries and offer some concluding advice to homeowners and homebuyers.

It is important to keep in mind that just as “Health”, “Property”, and “Auto” insurance policies cover a variety of risks, and come in a variety of forms, so too does “Title” insurance. The title insurance policies sold to owners and Lenders on Commercial real estate transactions are “bare bones” policies. They typically cover only four to six different risks, the main one being the often misunderstood “Unmarketability of Title”. Residential policies, both the ones that protect Lenders, and the ones that protect Owners cover much more.

Residential policies – variously entitled a “Home Ownership Protection Policy”; or a “Residential Owner’s Policy”; or a “Gold Comprehensive Protection Owner’s Policy” typically cover over thirty “Covered Risks” many of which lawyers and judges would never consider “title” risks. Before listing these Covered Risks, these polices make it clear that they apply to your “Title” OR your “Land” (“Land” means essentially your house). In these commentaries I have focused on two of these coverages: (1) being forced to remove or remedy parts of your house that may have been built without the prior owner obtaining a Building Permit; and (2) any adverse circumstance affecting your house that would have been revealed had your lawyer searched the files at the Building Department before you closed.

In our representation of homeowners insured under these homeowner policies it is frustrating when the Insurers deny claims on the basis that the claim is not a “title” matter. Their polices cover much more than “title”. Secondly what is, or is not, a “title matter” is a very complex question. In the title insurance context, the Ontario Court of Appeal in Macdonald prompted significant confusion over whether “Work Orders” are title matters. There is also unsettled law on title matters in the requisition context (outside the title insurance context) as evidenced by commentary around Mr. Justice Perell’s decision on requisitions that are “matters of conveyance” in Chan v. Mangal, 2022 ONSC 2068.

Now here is my concluding advice:

1. Don’t assume that because you paid for something called “title insurance” it won’t be of use to you in non-title situations, particularly those having to do with physical issues (damage) you encounter at your house. If you are struggling with this issue, don’t hesitate to contact Davidson Cahill Morrison LLP for advice or litigation support.
2. Don’t assume that the lawyer that acted for you when you purchased your home has a good sense of whether you can make a claim. Contact a law firm like ours that has experience bringing title insurance claims. Your lawyer likely acted as an “agent” of the title insurer in selling you your policy and may have actually signed an agreement with the title insurer that prohibits him or her from providing advice or acting for you in the event of a conflict with, or claim against, the title insurer.
3. If what has happened to you is covered by one of the more than 30 “Covered Risks” keep careful notes of all of your costs and expenses. The policies cover your “Actual Loss” making it important to itemize what your issue has cost, and is costing, you.
4. The next time you buy a house tell your lawyer, as soon as you retain him or her, that you want them to send a Search Inquiry Letter to the Building Dept. of the Municipality where the house is located. The Municipality will likely charge between $100 and $150 and your lawyer may want to increase his or her “flat fee”. Have the letter sent. Then review the reply your lawyer gets from the Municipality. Better to know well before Closing when you still have the opportunity to require the Vendor to “fix what needs fixing”. This is particularly true if you are buying new construction as building permits often need further inspection and then need to be finally inspected and closed. Even if the Vendor can’t fix everything you are better off knowing before Closing when you still have the opportunity to get out of the deal, or get an endorsement from the title insurer tailored to the situation you have discovered. Houses are too expensive to buy on the hope you’ll be covered later. Be proactive. You must take steps to protect your most valuable asset in the event that you discover loss or damage that may very well be covered by your title insurance policy. Once again, if you’re unsure about any of this, please do contact the lawyers at Davidson Cahill Morrison LLP for assistance. We would be more than happy to share our knowledge and expertise with you.