U.S. Bank National Association v. Lawyers Title Ins. Corp.
A title insurer can be legally responsible for defects in title, even though a title insurance policy was never issued. In August 2007, BNC Mortgage loaned $337,500 to Stephen Merrick, who intended to use the proceeds to pay off a prior mortgage on property in Milford, Conn., which would place the BNC mortgage and note first in priority, in the event that Merrick defaulted. The mortgage and note were assigned to U.S. Bank. Merrick defaulted on the loan. U.S. Bank, as BNC's successor in title to the mortgage and note, filed a complaint to foreclose and discovered that liens that were prior in time had not been paid with the proceeds of the August 2007 loan. Allegedly, Attorney Joseph Kriz, the authorized title agent for the defendant, Lawyers Title Insurance Co., absconded with the loan proceeds and did not pay off Merrick's debts. Kriz allegedly had provided a title commitment that lacked an attachment and had not furnished a title insurance policy at closing. Because Kriz allegedly failed to issue a title insurance policy at closing, the defendant, Lawyers Title, denied U.S. Bank's claims. U.S. Bank sued Lawyers Title, alleging breach of contract and breach of the covenant of good faith and fair dealing. The court found that U.S. Bank possessed title to enforce the title commitment but not the protection letter, addressed only to BNC, which did not extend coverage to BNC's "successors" or "assigns." A factfinder could conclude that the title insurer is responsible for defects in title, even though a title insurance policy was never issued. Genuine issues of material fact exist with respect to whether Kriz possessed authority to act and acted for Lawyers Title, and whether Lawyers' Title is legally responsible, and the court denied Lawyers' Title's motion for summary judgment.