Written by attorneys · grounded in primary & secondary sources — see below
A contract by which an insurer agrees to indemnify the insured against loss from defects in title or liens not excepted in the policy. The insurer typically conducts a title search and issues a commitment before issuing the policy at closing. Coverage and exclusions are defined by the policy and state law.
Sources & Authorities
How it applies
Common Examples
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Insurable Title Satisfies Contract
Tanya Tang contracted to purchase land from Topaz Mining. The agreement required only insurable title at closing. A reputable title company issued a commitment to insure at standard rates despite an unreleased lien in the chain. Topaz tendered the deed and the commitment. Tanya refused to close, claiming the lien rendered title unmarketable. The court ordered specific performance because the insurer's willingness to issue a standard policy met the contractual obligation.
Closing Documents Include Commitment
Talia Torres agreed to buy a warehouse from Trailblazer Airlines. At closing the parties exchanged the deed, closing statement, and title insurance commitment. The commitment listed an existing mortgage that the seller's payoff statement addressed. The title agent oversaw execution and recording. After closing Talia discovered an overlooked judgment lien. She submitted a claim under the policy for indemnification of the resulting loss.
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Policy Indemnifies Title Defect
Tori Taylor purchased commercial property from True North Logistics. The title insurer conducted a search and issued an owner's policy without excepting a recorded easement. After closing a neighbor asserted rights under the easement and forced Taylor to relocate a loading dock. Taylor incurred substantial costs. She recovered those costs from the insurer because the policy indemnified loss from unexcepted defects.
Policy Covers Leasehold Interest
Tamara Tan leased space in a building owned by Theodore Tucker. Tucker later conveyed the building to Timothy Tang. A dispute arose over whether the lease survived the conveyance. Tan obtained a leasehold title policy before taking possession. The policy protected her against loss if the prior lease was invalidated by the subsequent deed.
Tenhet v. Boswell(1976) 18 Cal. 3d 150, 155, 133 Cal. Rptr. 10, 554 P.2d 330
Policy Addresses Mineral Interest
Topaz Mining acquired surface rights subject to an unused mineral reservation. Before development the company purchased title insurance. The policy excepted the reservation but insured against loss from any challenge to the surface estate. When a successor to the mineral owner asserted dormant rights, the insurer defended the title action.
Texaco, Inc. v. Short454 U.S. 516, 534 (1982)
Policy Required for Financing
Trailblazer Airlines sought a loan secured by its headquarters. The lender required title insurance as a condition of funding. The airline obtained an owner's policy and a lender's policy. Both policies protected against defects that a title search would have revealed. The transaction closed after the insurer issued the commitments.
Goldfarb v. Virginia State Bar421 U.S. 773, 788
Common questions
Frequently Asked
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What is the difference between insurable title and marketable title?+
Insurable title exists when a reputable title insurer will issue a standard policy at ordinary rates. Marketable title requires title free from reasonable doubt that a prudent purchaser would accept. Some contracts expressly adopt the less demanding insurable-title standard as an alternative to full marketability.
Supporting sources
What documents are typically exchanged at a real estate closing that involve title insurance?+
Closing documents include the deed, closing statement, title insurance commitment or opinion, payoff statements, affidavits, and transfer tax forms. Lawyers and title agents oversee preparation to ensure liens and encumbrances are addressed and title is properly conveyed.
Supporting sources
What does a title insurance policy actually protect against?+
A title insurance policy indemnifies the insured against loss from defects in title or liens not excepted in the policy. The insurer conducts a search before issuing the policy at closing. Coverage is limited to the policy terms and state law.
Supporting sources
Does title insurance cover risks that a standard title search would miss?+
Title insurance can cover certain off-record risks such as forgery or nondelivery of a deed. The policy also protects against defects the insurer failed to except. Actual loss must be shown before the insurer pays under the indemnity contract.
Supporting sources
421 U.S. 773, 788Property
…1971 petitioners, husband and wife, contracted to buy a home in Fairfax County, Va. The financing agency required them to secure title insurance; this required a title examination, and only a member of the Virginia State Bar could legally perform that service.[^maj-1] Petitioners therefore contacted a lawyer who quoted them the…