Why Should an Owner Get an Insurance Policy? (Part Two)

We defined what a title insurance policy is in Part One, and you have more questions:

How does it work?  How do you file a claim? Who do you need to notify?

You bought your new home, finished your honey-do list and are getting ready to watch every episode of “The Simpson’s” in chronological order. As you are returning to your easy chair with a cold beverage and popcorn, you see a sheriff’s deputy pull up in front of the house and get out of his vehicle with a handful of paperwork. You meet her at the front door and answer yes to the question, “Are you John Smith?” which is followed with the dreaded phrase, “You have been served.”

Still in a state of confusion and shock, you look through the paperwork and see that you have been noticed of a foreclosure action of a deed of trust which appears to be a former owner, or a claim of lien has been filed because a subcontractor was not paid for her work, or that missing heir that was in a commune has decided she wants to rejoin society and claim her interest in the family land which your subdivision now sits upon… You get the picture.

Now what?

  • Find your title policy that you vaguely remember your closing attorney mentioning during closing with the instruction to put it with your important documents for your house.
  • Read the jacket for the name of your title company and the instructions for how to file a claim.
  • Follow the instructions precisely, and send the claim to the listed address on the policy.
  • Always file a claim in writing and keep a copy.
  • Follow up in a week with a phone call if you have not been contacted. You have now performed your first and most important duty in preserving your investment by putting the title company on notice.

Shouldn’t I notify the settlement agent or my real estate agent or will my lender handle the claim?

You may contact either or both as a matter of courtesy but DO NOT rely on either stating they will make sure the claim gets handled. It would be smart to notify your lender as well. Even though many of your interests are aligned, there may be a point where the lender’s resolution of the claim is not necessarily the property owner’s best interest.

ALWAYS follow the directions on your policy. I know of too many instances where an agent said she notified the settlement agent or the settlement agent was notified and tried to fix the situation but an important deadline passed and the insured’s rights under the policy were put in jeopardy or were even voided.

Once you have filed your claim with the title company you should be contacted by a claim’s attorney or officer requesting a copy of the paperwork you received (which you should provide when filing your claim). The title company will then do its investigation to see how best to handle the situation.

Remember, just like any other insurance claim, the title company is going to try and settle the claim or resolve the issue with minimal loss or cost.

A settlement may consist of the title company defending the action based on legal grounds, settling the claim by a monetary settlement or paying it’s insured up to the policy limit if no settlement is reached.

If you get a denial of your claim by the title company or at any time you are not certain of what you should do or don’t understand what is being done about your claim, contact a licensed North Carolina attorney that is competent in the practice of real estate and is familiar with title claims.  

Published by Christopher T. Salyer on January 29, 2016