Title insurance firms face off in Wisconsin lawsuit

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MILWAUKEE — A stymied mixed-use building in downtown Milwaukee could have new momentum, but two companies that insured the original, failed project remain stuck.

Construction stalled in 2009 on a hotel and condominium project in the city’s downtown. The Milwaukee School of Engineering in June announced its plans to renovate the half-finished building and create student housing.

But two firms, the company that provided title insurance for the original project and the company that acted as the insurance agent, are mired in a dispute.

Racine-based Knight Barry Title Inc., acting as an agent, provided title insurance to the project’s owner with Madison-based First American Title Insurance Co.’s backing in 2008.

First American claims Knight Barry over-insured the project, according to court documents, and erroneously included a protection against construction liens. Those mistakes contributed to a settlement with the policyholder, court records show, and First American contends Knight Barry should cover those costs.

Knight Barry claims it was not consulted about the settlement, according to court documents, so First American is barred from seeking that judgment.

Craig Haskins, executive vice president at Knight Barry’s Milwaukee office, refused to comment on the details of the lawsuit. However, he said, the dispute will not affect MSOE’s project.

The case is scheduled for trial in June 2014.

Knight Barry’s attorney, James Davidson, partner at Chicago-based O’Hagan Spencer, refused to comment. First American’s attorney, Brian Pfeil of Milwaukee-based McNally Peterson, did not respond to a request for comment.

According to court documents, Specialty Finance Group of Atlanta loaned money to Wilmington, Del.-based DOC Milwaukee to pay for construction of the mixed-use building. That loan was backed by a mortgage on the property, according to court documents. New York-based 2010-1 SFG Venture later bought the loan and mortgage from SFG.

First American alleges Knight Barry’s authority to insure the property was capped at $1 million but the agent extended a $14.9 million policy, court records state. Knight Barry contends First American was aware of the scope of the policy offered to SFG and condoned it.

First American also alleges Knight Barry erroneously insured against construction liens, which led to a settlement after a host of companies filed millions in liens against the failed project.

Knight Barry denies that allegation as well. Knight Barry claims it relied on instructions from First American in insuring SFG and that First American was “careless and negligent.”