Tuesday, March 27, 2007

arbitration

I picked this up in a Google Alert:

TITLE INSURANCE ARBITRATION WAS A RIP-OFF

DEAR BOB: We had a very bad experience with our owner's title insurance policy. Several months after we bought our home it was discovered we did not have clear title. The title company admitted they made a mistake and offered to pay a percent of the insurance claim. They wanted to go to arbitration. The arbitrator ruled we suffered no loss because the property went up in market value after our purchase. We were ordered to pay the title insurance company more than $8,000. It seems the arbitrator was clearly on the title insurer's side. Do we have any recourse? --Neal C.

DEAR NEAL: Your situation shows the pitfalls of agreeing to arbitration because there is no right of court appeal from an arbitrator's decision. In the future, if you foolishly agree to arbitration (perhaps involving a small amount), please remember the arbitrator probably works for your opponent frequently and is likely not to rule in your favor.
Contact the state insurance commissioner to file a complaint against that no-good title insurer who failed to pay a legitimate claim without hassle. After you bought your owner's title insurance policy, you should never have to pay a dollar to protect your property title rights.

Guess what? The new 2006 ALTA owner policy has this arbitration language built right in.

Section 11. ARBITRATION
a. If permitted in the state where the Land is located. You or We may demand arbitration.
b. The arbitration shall be binding o both You and Us. The arbitration shall decide any matter in dispute between You and Us.
c. The arbitration award may be entered as a judgment in the proper court.
d. The arbitration shall be under the Title Insurance Arbitration rules of the American Arbitration Association. You may choose current Rules or Rules in existence on Policy Date.
e. The law used in the arbitration is the law of the place where the Land is located.
f. You can get a copy of the Rules from Us.

I'd be very interested in the facts of Neal's case. Since arbitration is agreed to by consumer where allowed, simply by purchasing the owner policy, it's an issue that bears some looking into. I'm a title agent and I know there are often matters not covered that the consumer doesn't understand. At the same time, I know there are title insurers who are less than ethical.

Neal, if you're out there reading this, please contact me. Thanks!

1 comment:

Diane Cipa, The Closing Specialists® said...

Someone asked me off-line if I had any idea what would cause an arbitrator to require an insured to pay $8000 to the title company.

I've really never heard of a case like that before and would be very happy if someone would share their knowledge.

I took a stab, though and wondered if the title problem involved a loss of collateral for the mortgage lender. The title company may have had to pay the funds to the mortgage lender and perhaps the $8000 was the portion of the loss attributed to inflation or appreciation and thus not covered by the title company but required by the lender? If that were the case the money actually went to reduction in the amount owed.

Ohhh, I'm stabbing in the dark here, but that's the only thing I could think of.

Obviously we need the facts of the case to make heads or tails of it. I am totally using my imagination here and that's probably not helpful. Sheesh.