Title Insurance Claim denied

When we bought our property in 2007, we purchased title insurance from the LandAmerica Commonwealth Land Title Insurance Company. We chose the more expensive "Cadillac Policy", which included an owner's policy and a loan policy.

In 2018 we discovered that the title to our property was clouded by a scrivener's error in our neighbor's deed that cut off about 26% of our property and assigned it to the neighbor. (see Figure 1). It was a clear case of a defective title which should have been covered by our title policy. Unfortunately, LandAmerica went out of business in 2008 without notifying us of any forwarding address.

Figure 1: Scrivener's Error in Neighbor deed cuts away a Portion of our Property.

Immediately after we learned about our title issue, we informed Becky G. by email about our problem. Becky G. was LandAmerica's escrow officer at the closing of our house. In 2018 she was working as an escrow officer for the Charter Title Company, but she was unwilling to tell us what happened with our insurance policy or to provide any other help with our problem.

Without support from our title insurance company, we proceeded by sending an attorney's letter to our neighbors describing the scrivener's error in detail (including sketches) and asking them to correct their deed and to cooperate in relocating the misplaced shared fence to the correct boundary line - one year earlier we had learned from a Land Title Survey of our property that the fence between the two properties encroached onto our side by as much as one foot.

Our neighbors denied the error in their deed and refused to cooperate with any of our requests. To clear the cloud on our title we had little choice but to file a lawsuit, albeit still without support from our title insurance company.

It was more than a year later, and only with the help of our realtor, that we found out that Charter Title had actually taken over our title policy from LandAmerica Commonwealth Land Title. With this information we were able to file a formal insurance claim on our policy in February 2020. By that time the neighbors had already signed a Nonmaterial Correction affidavit to correct their deed error. 

The title insurance company denied our claim. Initially, they ignored our defective title and only recognized the encroachment along the boundary, which is excluded from title insurance coverage. 

Only in further correspondence did they addressed our defective deed, but they still denied our claim and any liability resulting from our insurance policy. However, they offered to reimburse us for $5,000 if we agreed to settle. We did not accept their offer as it was completely insufficient to cover the legal fees we had incurred in getting the neighbors to change their erroneous deed.

In addition, we contest that the neighbor's deed correction by a Nonmaterial Correction per Texas Property Code 5.028 is appropriate. The Texas Property Code 5.029 (LINK) clearly stipulates that a Material Correction per 5.029 is required when land is added or removed from a conveyance, which is the case here. For our lawsuit the difference between a Material and Nonmaterial Correction would have made a significant difference, as it would have affected our neighbor's claim for adverse possession of any part of our property. 

The neighbors' deed correction was performed by the Law Firm of Irelan McDaniel, who acted on behalf of the neighbors' title insurance company. It was never explained to us why a Nonmaterial Correction (5.028) was used instead of a Material Correction (5.029), as stipulated in the Texas Property Code. 

Figure 2: Risks covered by Title Insurance