When representing policyholders we are always trying to make our clients whole through the payment of attorneys’ fees or other costs of litigation. The basis behind this is, had the insurance company paid what they were supposed to in the beginning, the litigation and ensuing costs would not have been necessary. But what happens when the insurance company pays what they are obligated under the policy, but the insured is still left in the hole? I recently wrote about a Pennsylvania court expanding the obligations of insurance companies in the negligence arena.
The idea of bringing a negligence suit against an insurance carrier is not novel, however. In a 1984 decision, Florida’s Second District Court of Appeal explicitly permitted a claimant to seek negligence damages against a title insurer.1 The court stated “we note this court has recognized that an insured owner under a title insurance policy may sue his insurer in negligence for failing to advise him, according to the duties set out in the policy, of the existence of a properly recorded encumbrance affecting property covered by the policy.” The court noted further that “Recognition of such a cause of action is consistent with the long-established general principle that injuries caused by the allegedly negligent performance of a contractual duty may be redressed through a tort action.”
Florida courts have recognized that property owners rely on their title insurance companies for more than payment for problems with title, they also rely on their title insurers representations of good title to make purchase decisions. This is of great importance as, often, the impact of an unknown property encroachment can span far beyond the simple loss of a small portion of the land. Losing a small portion of land can drastically impact accessibility and visibility, two factors of the utmost importance in valuing a parcel of commercial property. Without the ability to make a claim for negligence, a property owner may be left with only a small recovery for the value of a small piece of land when the impact of that piece of land could far exceed its physical value.
If your title insurance company missed an encroachment on your property, I would encourage you to contact an insurance attorney as soon as possible.