POSTED: 1/21/13
This is a Missouri case, Abengoa Bioenergy US Holding Inc. vs. Chicago Title Insurance Company, but there's a lesson here for all our members.
Chicago Title (CT) was hired by Abengoa to perform a radius search around a property in anticipation of a zoning change request. The idea is that the customer owned property, and needed to provide notice to every property owner within a certain area. CT was hired to identify each of those other property owners. CT apparently missed a number of the property owners, and the client ended up in protracted litigation which delayed their project.
Abengoa sued CT, and asserted damages of a very high dollar amount. CT argued there was a limitation clause on the search certificates provided to Abengoa which purported to limit the liability of CT to the $500 Abengoa paid for the certificate. The court said the limitation was not part of the initial agreement when the order was taken over the phone, and amounted to an attempt by CT to unilaterally amend the contract to add the limitation.
CT lost the trial, with a verdict returned in excess of $48 Million. CT appealed to the Court of Appeals, and to the Supreme Court of Missouri, and lost at both levels. With interest, they are now liable for over $50 Million.
We all try to limit our liability under a search to the amount paid for the search. There's a good argument in Michigan that we have a statutory scheme for insuring status of title holders to property, and that's title insurance, and if you want to be assured of who owns property, buy the policy. Anything attempting to insure (or assure) ownership of property is void and unenforceable as against public policy, because it would purport to circumvent our statutory title insurance laws.
However, that being said, nobody wants to be in the position of making those arguments, because that means you are likely involved in litigation and paying legal fees. So, a better practice may be to take the initial order, and follow up with a written agreement for the search prior to the work being done, which would limit liability. If the customer does not want to agree to a contract under those terms, they are free to go elsewhere.
Also, of note is that CT is on the hook because Abengoa’s agreement was directly with CT. An independent agent could not look to their underwriter for shared liability, but rather to their errors and omissions insurance carrier.
As always, if you have questions, please contact your underwriter.
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