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Home / Opinion Digests / Insurance / Insurance — Title – Contract – Closing Protection Letter – Untimely Notice – Real Property – Mortgages – Florida Law

Insurance — Title – Contract – Closing Protection Letter – Untimely Notice – Real Property – Mortgages – Florida Law

Regions Bank v. Stewart Title Guaranty Co. (Lawyers Weekly No. 002-022-15, 23 pp.) (R. Bryan Harwell, J.) 4:12-cv-00195; D.S.C.

Holding: Even though a North Myrtle Beach property was not included in the title insurance policy issued by the defendant-carrier to the plaintiff-lender, the lender may still sue under the carrier’s coverage protection letter (CPL). However, since the lender did not give the carrier notice within the 90-day window required by the CPL, the carrier is not liable under the CPL.

Summary judgment for defendant.

Florida law applies in this case.

The lender lent more money to a borrower than the borrower’s Florida property could secure. As additional security, the borrower offered property in North Myrtle Beach.

At the time, the lender did not realize that the borrower’s individual partners – and not the borrower itself – owned the South Carolina property.

The carrier’s agent failed to follow the lender’s closing instructions, leaving the lender secured only by the borrower’s Florida property. The borrower defaulted.

The lender learned that the South Carolina property had never been owned by the borrower and had in fact been sold. Despite receiving notice of these facts, the lender waited until it had a formal title opinion from a South Carolina attorney before filing a claim with the carrier.

The CPL’s 90-day period commences when the lender has knowledge of the specific acts of the settlement agent that may trigger CPL coverage and has knowledge that the collateral is insufficient to cover the amount of the loan.

By August 6, 2009, the lender knew that (1) it could not foreclose on the South Carolina mortgage because the mortgage was in the borrower’s name, (2) title had been in the individual partners’ names, (3) the mortgage never properly encumbered the property, and (4) the property had already been sold. Moreover, the lender knew that this issue arose because of the closing agent’s failure to follow its closing instructions directing the agent to secure an enforceable lien on the South Carolina property.

The lender argues that it first needed a formal title opinion from a South Carolina lawyer before it can be considered to have had knowledge of or discovered the actual loss. However, the lender has provided no authority to support its argument. Even if that were the case, the lender should not be rewarded for waiting seven months to obtain the formal title opinion from the South Carolina attorney.

The lender’s May 10, 2010 notice letter to the carrier was untimely.

Motion granted.

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