Thursday, April 03, 2008

query: how long should it take to take care of a claim

Hi Diane,

Have a question, how long should it take to take care of a claim? I have filed a claim with my title insurance co. They have hired an attorney. I have been told it could take a while. I was under the impression that the title company should pay the lien and then subrogate for the money. Just like in auto insurance. So it free's up my title. Am I mistaken? Please let me know your thoughts in the matter.
Thank you,


Hi, Coleen: The title company has the right to litigate and so some claims do take a long time. Your question goes right to the heart of a major dispute in the title insurance industry, casualty style underwriting versus traditional title examination underwriting. I'm a traditionalist. Most of the premium you pay for title insurance TRADITIONALLY went for a professional examination of title which took a little time but it was thorough. The purpose of the examination was to find and eliminate clouds and potential risks BEFORE the issuance of the title policy. In this way, title insurance had very few cases to litigate because the real work was in risk avoidance. This traditional method worked well for consumers because they rarely had to face a claim. The policy itself was more of a safety net meant to catch errors and fraud.

The problem is that the mortgage lending industry and real estate sales community started demanding profit centers under the RESPA affiliated business guidelines. This lead major title underwriters into the creation and support of many small title agencies. Each agency had to be run by a licensed agent and since there were not enough experienced professional agents to man all of these agencies, standards were lowered. There followed a demand for cheaper and faster title commitments which resulted in title underwriters creating automated searches or semi-automated searches or simply ignoring search standards.

Frankly, the title underwriters decided to bet that they would make so much money that they would be able to cover all the extra claims. They essentially embraced a casualty style of underwriting for an insurance product which is NOT a casualty product. This casualty philosophy decimated traditional infrastructure and hung the consumer out to dry.

Claims which were once rare, are now flooding into underwriter offices and the old style procedures which were never changed to handle volume may seem tortuous to consumers.

The best defense a consumer has is to select a traditional professional title agent when the insurance is purchased and reduce the possibility of going into a claim. Once you are facing a claim, you've just got to be the squeaky wheel. Keep good records, document everything and don't let them put you on the back shelf. ;)

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