History of Title Insurance

Title Insurance Policy

The Law Property Assurance and Trust Society was formed as the first title insurance company in the United States.

The whole reason that title insurance began goes back to 1868, in Philadelphia, whereby a transaction was closed that demonstrated the need of more protection in real estate conveyancing than merely the examination of the public records. This single transaction can be credited with the birth of the title insdustry.

The facts of the case are set forth in the Pennsylvania Supreme Court case styled, Watson vs. Muirhead, 57 Pa 161.

In this particular case, a conveyancer performed a title search that revealed the existence of a judgment. The judgment was duly noted and the abstract was delivered to an attorney for him to opine as to the effect of the judgment on the title to the property. The attorney opined that the judgment in question was not a valid lien encumbering the property and the purchaser completed the transaction based upon the opinion.

Shortly afterward the deal was closed, execution was made upon the judgment and the property was subsequently sold at a Sheriff’s Sale. Litigation ensued and the courts decreed that the judgment was in fact a valid lien and the Sheriff’s Sale stood.

The attorney and the conveyancer were found to be liable and as a result of the financial loss incurred in this transaction, group of investors interested in real estate law decided that something should be done to protect innocent investors from such similar situations. Thus, the first title company was born.

This new type of insurance would be called “title insurance” and addressed many of the issues contained in the Watson vs. Muirhead case such as :

  • Liability without prooving negligence
  • Protection as a result of a reduction of the risk of insolvency
  • Assumption of risks above  those disclosed in the public records

Ever since then, the title insurance industry has grown to where it is today. It acts as a vital  component in the  overwhelming majority of real estate transactions in the United States.

Statewide Title Services, Inc.

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