Brief History of Title Insurance and its Continued Relevance
The first case to establish a need for title insurance. It exposed the risky nature of 18th century home purchasing. The Watson v. Muirhead case in the Pennsylvania Supreme Court in 1868.
During that trial, an innocent plaintiff, a man by the name of Watson, lost money in a real estate transaction due to a pre-existent lien. The defendant was an attorney by the name of Muirhead, who was hired by Watson. Muirhead learned about the lien prior to the sale of the home but failed to share that information with Watson after incorrectly surmising that the lien was not valid.
The lien was valid, and the property had been sold at a Sheriff’s sale to settle the lien. Due to misinformation, Watson lost his new home and a great deal of money. The judge ruled in favor or Muirhead, stating that Muirhead and other professionals weren’t liable when offering opinions to their clients. This led to the Pennsylvania legislature passing an act in 1874, which allowed for the incorporation of title insurance companies. Two years later, attorney Joshua Morris and several of his colleagues created the first title insurance company, Real Estate Title Insurance Company of Philadelphia.
Morris and his colleagues were the first to insure buyers against potential losses due to “defective title, liens, and encumbrances.” Today title insurance remains vital and necessary, and it continues to provide security. Before title insurers arrived, buyers were solely responsible for confirming the validity of land titles possessed by sellers.
Owner’s and lender’s title insurance policies are foundations, which allow buyers to confidently sell, buy, and mortgage real estate. The purchase of property is likely the largest investment of a consumer’s lifetime. Protection against unscrupulous dealings and undisclosed liabilities can mean absolutely everything for someone spending their life’s savings on the purchase of a home.