TITLE INSURANCE. An agreement or undertaking by which the insurer, for a valua ble consideration, contracts to indemnify the insured in a specified amount against loss or damage suffered because of defects of title to real estate in which he has some insurable in terest. The business of title insurance is of comparatively recent growth. The first title insurance company was organized in Philadel phia in 1876, hut the development of the busi ness has been most rapid since about 1385. Con tracts of title insurance are subject to the same rules as govern other classes of insurance con tracts. The policy is usually granted upon written application, which is made a part of the policy and which contains statements or promises which are deemed to be warranties or conditions of the policy.
Generally the liability of the insurer is not limited in point of time, and the undertaking is to indemnify the insured against all loss or damage resulting from any defect in the title not known or specified in the policy, including defects in the chain of title and ineumbranees of every description existing at the time the insurance is effected. When the undertaking of the policy is to indemnify against loss or damage only, the obligation incurred by the insurer is substantially like that of a grantor whose deed contains the usual covenants of warranty. (See COVENANT.) Tt is not unusual for the policy of title insurance to provide that the insurer shall take the property at an appraised valua tion in the event that any defect of title is dis covered rendering the title unmarketable.
There are also usually provisions contained in the policy that the insured shall notify the insurer of any claim or demand against the property founded on any defect of title insured against, and that the insurer shall be permitted to bring or defend actions in the name of the insured, hut at its own expense, for the purpose of establishing that the title is free from such defect. When the insured is a mortgagor, pro
vision may be made in the policy far the protec tion of a mortgagee of the property by a mort gagee's clause making the loss payable to the mortgagee, or the same result may be accom plished by issuing an independent policy iit favor of the mortgagee.
There is no fixed method of ascertaining the amount of premiums in title insurance as is the case in life insurance. Experience has shown that the losses under title insurance contracts have been comparatively small. and that in fact an important benefit to be derived from the policy of title insurance in addition to the insurance features is the painstaking and ex haustive examination of the title made by the insurer. In many cases, however, the insurance feature is of great importance, since there may always be defects of title which au examination of the record title may not disclose. Many title insurance companies possess complete rec ords and title maps of all real estate within the territory where they do business and have other special facilities for the expert examina tion of titles. The prospective purchaser of real estate within such territory, by applying for title insurance, may thus procure a com plete examination of the title before the con veyance is made. The policy issued may, with the consent of the insured, be transferred to a subsequent purchaser of the property. This, however, is not customary except upon the pay ment of an additional premium. See INSUR ANCE; CONVEYANCE; DEED; COVENANT; RECORD ING OF DEEDS. Consult Frost, The Law of thiaranty insurance (Boston, 1900).