Indiana Appellate Court Holds Title Insurance Company Not Liable For Negligent Misrepresentation

The Indiana Court of Appeals recently held that an insured’s negligent misrepresentation claim against a title insurance company was properly dismissed because the insured’s claims were limited to the title insurance policy.  See Pearman v. Stewart Title Guar. Co., 2018 WL 3132451 (Ind. Ct. App. June 27, 2018).  In the case, the plaintiff insured purchased three lots for $5,000, and the defendant title insurance company issued a title insurance policy with regard to the properties.  The insured later discovered that he did not have title to one of the lots because the seller previously had conveyed it to someone else, and the insured filed a claim.  The title insurance company offered $8,000 to settle the claim, but the insured rejected the offer and brought this action.  Among other claims, the insured alleged that the title insurance company negligently misrepresented the status of title to the lot at issue in both the title commitment and the title insurance policy.  After further settlement discussions, the title insurance company filed a counterclaim seeking a declaratory judgment to approve the tender of the $70,000 policy limit to the insured.  The parties then cross-moved for summary judgment.  The trial court granted the title insurance company’s motion for summary judgment, awarding the insured the policy limit but dismissing his remaining claims.  The insured appealed the dismissal of his remaining claims.

On appeal, the Court of Appeals affirmed.  First, it held that the insured’s negligent misrepresentation claim was properly dismissed because a title insurance company in contractual privity with an insured could not be liable for negligent misrepresentation:  “STGC issued the title commitment to Pearman, and the title insurance policy lists Pearman as the named insured. Thus, pursuant to U.S. Bank, Pearman may not bring a claim of negligent misrepresentation against STGC because the parties are in contractual privity.”  Second, the Court found that the insured was not entitled to attorneys’ fees because the “Policy provided for payment of attorney fees only in one specific circumstance, i.e., when a third party asserted a claim covered by the policy adverse to the insured. . . . [and] no such third party has asserted a claim[.]”  Finally, the Court found that the insured’s bad faith and punitive damages claims were not alleged in the complaint and raised only at the summary judgment stage and therefore were properly dismissed.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, or Dylan Goetsch at dgoetsch@riker.com.