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56. Is the son entitled to indemnification from the title insurance company?
Two years later, the son was successfully sued by a previous record owner with a superior title to the house. The previous owner's claim had not been excepted in the buyer's title insurance policy through the carelessness of a title company employee. At the time of the lawsuit, the house was still subject to the bank's mortgage. The son immediately sought indemnification for the loss from the title insurance company.
One year later, the buyer died. Under his will, the house passed to his son.
A buyer purchased a house for $300,000. The buyer financed the purchase, in part, with a $250,000 loan from a bank, secured by a mortgage on the house. Before the closing, the buyer's attorney advised him to purchase a standard-form, $300,000 title insurance policy naming the buyer as the insured. Because the buyer had forgotten to bring his checkbook to the closing, his son, who had accompanied him to the closing, paid the premium for him.
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A is incorrect. It is irrelevant that the son is not a named insured in the policy. The son is in fact insured under the policy because he was the devisee of the house under the buyer's will.
B is incorrect. A title policy protects whoever is the named insured, and their heirs or devisees, whether that person is the buyer or the mortgagee. Here, the buyer was the named insured.
D is incorrect. Who paid the policy premium is irrelevant. The only person protected by the policy is the named insured and their heirs or devisees, if applicable.