October 10, 2018
A Brief History of Title Insurance in the United States
I’m the sort of guy who likes to know how and why things work the way they do. So I understand that impulse in other people, which is part of why I like to guide purchasers during a closing and make sure they are well-informed. It helps many of them feel better about the process.
Every once in a while, I’ll get asked where the whole concept of title insurance comes from.
According to the American Bar Association’s website, title insurance in America became established after a Pennsylvania court case in 1868 called Watson v. Muirhead (PDF of the case decision here). What happened in that case was that a man named Watson bought a parcel of land from a man named Muirhead. Muirhead had sold the property to Watson without telling him that there were some recorded liens against the property—but he didn’t do it out of malfeasance; rather, his decision to not do so was made after his lawyer informed him it would not be necessary. That turned out to be bad legal advice. However, the court determined that having not been informed of the judgments against the property was not a good enough reason for Watson to prevail over Muirhead in this case. Watson was left having to deal with the cost of the judgments against the property all on his own.
This case made it obvious that people buying property needed some sort of assurance that they could purchase a property with some peace of mind. The first title real estate company, The Real Estate Insurance and Trust Company, was formed shortly after, in 1876, in Philadelphia.
Following that fateful event, the concept spread like wildfire—though through the 20th Century it was mostly a matter of local companies serving their communities.
It was only after World War II, when the national house-purchasing boom took off with the G.I.s’ return home, that the national title insurance industry really became established. Lenders needed to be able to process large numbers of title insurance without having to read each policy each time. This was true whether the purchasers lived in Portsmouth, Rhode Island; Lenox, Massachusetts; or Fort Lauderdale, Florida.
The process and the policies became standardized, and our present-day title insurance regime was born.
Unlike Muirhead’s attorney, my team here at Topouzis & Associates, P.C. does everything we can to be absolutely sure our clients are conveying and purchasing title clear of judgments and defects. And, yes, we help our clients put into place a good policy of title insurance to make certain they don’t get surprised by any nasty lurking issues with a property. Contact us if you’d like us to do this for you.