Title Insurer Has No Liability When Insured’s Tittle Is Upheld
Even during this tumultuous period, Ganfer Shore Leeds & Zauderer’s real estate litigation practice has been successful, as in the next case. Title insurance protects the insured if a cloud appears against the insured’s title to the property. However, where a title defect is fully resolved by an insurer, the insured may not recover damages under the policy. In Golden First Mortgage Corp. v. Alleyne, Index No. 026405/2009 (Sup. Ct. Nassau Co. Apr. 16, 2020), an owner bought property and granted a mortgage on it. For unknown reasons, the deed and mortgage were not recorded. When the lender discovered this fact, it sued the owner for a declaration that it held a valid mortgage. The owner filed a third-party complaint against the title insurer seeking damages because she did not have good title to the property. The court ultimately held that despite the failure to record the documents, the insured remained the owner. To reflect this, the court directed that a new deed and mortgage be recorded. The title insurer then moved for summary judgment, arguing that by filing the new deed, it had cured the title defect. The court agreed, because “title insurance only provides indemnification for any diminution in value of property sustained because of the defects in the title insured by the policy” and does not cover “consequential damages.” Once the title insurer had successfully established the owner-insured’s title to the property, it had no further obligation to her.