Is the Title Insurance Industry Now a Casualty Insurer

I read in William Pattison’s Blog the following:

“…old-school professional researchers, or “searchers” as they are commonly called, were not needed by title companies because of two factors: (1) the decision to skip-chain searches on property and (2) temp companies who can send inexperienced secretaries at minimum wage to type numbers into a keypad.

The skip chain research meant that the title company would no longer search the entire history of a property backwards in time to the original subdivison in order to properly ensure that no matters would adversely affect title. Instead, they would review the history back to when any title company (theirs or another) last insured a transaction and call the thing even at that point. In the case of a claim, instead of having conducted a diligent, comprehensive search to protect their corporate interests against a claim, they would simply pay out the insurance claim. This becomes a cost-of-doing-business expense, and hence a write-off for the corporation at the expense of the tax payer. The client is not protected up front, but rather protected in the back side by a willingness to simply have the title insurance pay out like any casualty insurance; a flood hits and the flood insurance pays off, a car hits yours and auto insurance pays claims, and someone makes a claim against title so the title company pays out.

The second item above, temp workers, means that professionals are no longer employed at high wages with full benefits when untrained, minimum wage workers can punch numbers into a machine that spits out results that are taken as gospel. No more consideration of the data is required. No more analysis of the information needs to occur. No follow-up or review of the results is necessary. Int the modern era, the information is passed automatically to a computer-generated report, which, if wrong, will be a potential claim that will simply be paid out in the future.” (End Quote)

What are your thoughts? Has title insurance become a casualty product where no one is looking at the title? It is not uncommon for me to see title commitments that simply say “Subject to easements of record or in use” rather than bother to find them, locate them, check that location against improvements, etc. The same is true with Restrictions.  Who cares? A homeowner has to be sued to cease and desist when they don’t follow the rules.  Unlikely to happen, so why bother to look for them or tell anyone there are restrictions.

I for one, am sad to see the quality of our product so deteriorated.  But then, it seems to go with the territory of all the foreclosures and REO farms that are dealing with horrendous title problems as best they can to get the real estate market back on its feet. It feels like we are cheating the public.