query: whose liability would it be if the title insurance company issued a final policy on a construction loan and the house never got built

I don't see the issuance of a title policy as having anything to do with the construction of the house.  Title insurance does not insure construction.  For the mortgage lender, it insures the validity of their lien.  For the owner, it insures the ownership of the land.

Any property owner or mortgage lender involved in a construction transaction must keep their own eyes on the construction and ought not to confuse title insurance and having anything to do with it.