The New Jersey Appellate Division recently affirmed that an insured who received only a title commitment and title insurance policy did not have a cause of action against the policy-issuing agent for negligence or breach of contract if the agent omitted a prior mortgage. See Russo v. PPN Title Agency, LLC, 2017 WL 3081709 (N.J. Super. Ct. App. Div. July 20, 2017). In the case, the insured contracted to purchase a property and ordered a title commitment from defendant title agent. Defendant ordered a title search from an abstractor, and the resulting report indicated that there were no mortgages on the property. The insured then purchased the property and obtained a title insurance policy insuring title up to the amount of $275,000. One year later, the insured contracted to sell the property but discovered that the prior owner had encumbered the property with a mortgage that had not been disclosed. The outstanding balance on the prior mortgage was $341,017.76. The insured made a claim, and the title insurance company paid him $275,000, which was the full amount of the policy but not enough to satisfy the prior mortgage. The insured then brought an action against defendant for negligence in performing the title search and breach of contract. The parties cross-moved for summary judgment and the trial court granted defendant’s motion.
On appeal, the Appellate Division affirmed the lower court’s decision, citing to the New Jersey Supreme Court decision in Walker Rogge, Inc. v. Chelsea Title & Guar. Co., 116 N.J. 517 (1989). There, the Supreme Court held that “a title company’s liability is limited to the policy and that company is not liable in tort for negligence in searching records. . . . If, however, the title company agrees to conduct a search and provide the insured with an abstract of title in addition to the policy, it may expose itself to liability for negligence as a title searcher in addition to its liability under the policy.” In this matter, the insured had asked for a title commitment and title insurance policy, not an abstract of title, “and a negligent title search cannot be the basis of suit to recover damages beyond the policy limits.” Instead, the Court found that defendant conducted the search for its own benefit and could not be held liable for the same. Finally, the Court held that defendant’s duties were specifically controlled by the terms of the policy. “The remedy available to plaintiff was for breach of contract. Plaintiff received the full proceeds of the policy to compensate him for the negligent title search. He is entitled to nothing more.”