The Michigan Court of Appeals recently reversed a lower court and held that a title agency was not liable for negligence when it allegedly improperly disbursed loan proceeds to a construction company.  See Elsebaei v. Philip R. Seaver Title Co., 2015 WL 7079068 (Mich. Ct. App. Nov. 12, 2015).  In the case, the plaintiffs contracted with a construction company to build a house and financed the construction through a construction loan.  The lender contracted with the title agent to, among other things, disburse the funds to the construction company.  The construction company’s owner fled the country after receiving one of the disbursements, and the plaintiffs sued the title agency for negligence.  The plaintiffs moved for summary judgment, and the title agent opposed, arguing that Michigan case law was clear that they did not owe a duty to the plaintiffs outside the title policy.  The plaintiffs responded that the referenced case law only applied when the title agent had a direct contractual relationship with the plaintiff.  The trial court granted the plaintiffs’ summary judgment motion, holding that the title agent and plaintiffs had no direct contractual relationship and that the agent therefore could be liable for negligence.  The Court of Appeals reversed, however, holding that the proper analysis was not whether there was a direct relationship, but instead whether the title agent had acted within the scope of the policy.  Finding that the title agent was allowed to act as the disbursement agent by the terms of the policy, it reversed the lower court and granted the title agent summary judgment.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.