The United States District Court for the Northern District of Illinois recently dismissed an insured owner’s negligent misrepresentation claim against a title insurance company arising out of a title commitment and policy that omitted liens and contained an incorrect legal description. See Wheaton Theatre, LLC v. First Am. Title Ins. Co., 2018 WL 6573222 (N.D. Ill. 2018). Plaintiff purchased the property at issue in 2012. In connection with the purchase, defendant issued a title commitment and title insurance policy. In 2013, plaintiff discovered unpaid sanitary district liens on its property dating from 2010. In 2014, plaintiff discovered that a portion of the property included in the commitment and policy’s legal description was dedicated to the City in 1948 and was not owned by plaintiff. Plaintiff sent defendant a letter demanding that defendant pay plaintiff’s attorneys’ fees incurred in connection with clearing the lien, as well as additional damages for plaintiff’s loss of the portion of the property owned by the City. The parties could not agree on a settlement amount, and plaintiff brought this action. Among other claims, plaintiff made a claim of negligent misrepresentation and defendant moved to dismiss.
The Court granted the motion to dismiss. Illinois law prohibits plaintiffs from recovering for solely economic losses under a theory of negligence with three exceptions: (i) personal injury or property damage resulting from a tortious event; (ii) where damages are caused by intentional misrepresentations; and (iii) “where the plaintiff’s damages are proximately caused by a negligent misrepresentation by a defendant in the business of supplying information for the guidance of others in their business transactions.” Plaintiff claimed its negligent misrepresentation claim fell under this third category. The Court disagreed, finding that an Illinois Supreme Court decision already addressed this type of claim in First Midwest Bank, N.A. v. Stewart Title Guar. Co., 218 Ill. 2d 326 (2006), where the Supreme Court found that “a title insurer is not in the business of supplying information when it issues a title commitment or a policy of title insurance and, accordingly, the negligent misrepresentation exception to the . . . doctrine does not apply.” The Court here further rejected plaintiff’s claim that its case was distinguishable from First Midwest because, according to plaintiff, defendant provided it with “something more akin to an abstract of title than a title commitment and policy based on the amount it paid for the policy and miscellaneous ‘title services,’ the language of the Commercial Sales Contract . . . and the degree to which it relied on those documents.” The Court found that this was not pleaded in the complaint and, therefore, dismissed the negligent misrepresentation claim.