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The Florida Bar
www.floridabar.org
The Florida Bar Journal
July/August, 1995 Volume LXIX, No. 7
Title Insurance Liability Beyond the Policy

by David L. Boyette

Page 24

Title insurance is different from all other forms of insurance in that it is not casualty based. Rather than insuring against potential future events, title insurance is based on events in the past and insures the validity and priority of the interests of owners and mortgagees in real property. When a policyholder provides notice of a covered claim or loss to a title insurer, it triggers the title insurer's obligations 1) to indemnify for any loss not excepted from coverage; 2) to defend the insured in litigation; and 3) where feasible to cure the defect, lien, or encumbrance from the title. Ordinarily, title insurers do not become parties to litigation. In the typical claim involving a title insurer, there will be no litigation as the title insurer will either pay to cure the defect or pay to indemnify the insured. If there is litigation, typically, the insured policyholder is the party to the litigation which attempts to cure the defect while the title insurer carries the cost of defense.

In the typical situation, counsel for the policyholder is able to rely solely on the policy to remedy the problem and needs only look to the policy to review the specific obligations, rights, and duties of the title insurer and the policyholder. There are instances, however, where counsel for the policyholder should look beyond the title insurance policy. Claims outside the policy may provide a remedy where the policy affords no relief. This article examines the situations in which and theories by which title insurance companies may be liable outside the contract of the title insurance policy.

Abstracter's Liability
One cause of action which has been successfully asserted against title insurance companies which is outside of the contract of the title insurance policy is for abstractor's liability. Generally, an abstractor will be held liable for negligent errors, defects, or omissions in the abstract. Sickler v. Indian River Abstract & Guaranty Company, 195 So. 195 (Fla. 1940). Although abstracts and title insurance policies are different products, title insurance companies may still be liable under an abstractor's liability theory. Shada v. Title & Trust Company of Florida, 457 So. 2d 553 (Fla. 4th DCA 1984).

Strictly speaking, title insurance agents do not prepare abstracts. An abstract is merely a compilation in chronological order of all instruments of record affecting title to a certain piece of land. A title insurance commitment or policy involves not only locating all record instruments affecting the subject property but also interpretation of the instruments. F.S. §627.7845 mandates that title insurers cause to be conducted a "reasonable search and examination of the title" and "a determination of insurability of title."

To determine the insurability of title, title insurance agents must interpret the record instruments to determine: 1) current ownership, 2) which instruments have been satisfied or discharged, 3) whether certain instruments render title unmarketable, 4) what interests encumber the subject property, etc. Of course, the most significant distinction between an abstract and a title insurance commitment or policy is that an abstract does not "contract" to indemnify the customer. Despite these distinctions, in Shada v. Title & Trust Company of Florida, 457 So. 2d 553 (Fla. 4th DCA 1984), the court stated:

We see no reason why the principles applicable to an abstractor should not be applied to a title insurance company where it undertakes the duty to schedule record title defects. The use of a title insurance binder or commitment instead of an abstract and an attorney's opinion of title has become commonplace. A title insurance company has a duty to exercise reasonable care when it issues a title binder or commitment and its failure to do so may subject it to liability in either contract or tort.

In Shada, the title insurance commitment and policy failed to except from coverage certain outstanding judgments which the title insurer refused to cure from the title. The insured was held to have viable claims in contract for breach of the title insurance policy and in tort for negligently failing to schedule record title defects. Of course, where the insured has viable claims both under the contract of a title insurance policy and on an abstracter's liability claim, double recovery is not permitted.1

An interesting question which has not been squarely addressed by a Florida court is whether a title insurer who is liable as an insurer in contract for the face amount of the policy can also be liable as an abstracter in negligence beyond the face amount of the policy. The economic loss rule would seem to preclude this possibility. The economic loss rule precludes recovery of economic damages in negligence unaccompanied by physical property damage or bodily injury.2 Although there has been much written and much debated regarding the economic loss rule, the Florida Supreme Court recently addressed the issue and succinctly framed the rationale of the economic loss rule in Casa Clara v. Charley Toppino & Sons, 620 So. 2d 1244 (Fla. 1993), when it posed the following question:

When only economic harm is involved, the question becomes "whether the consuming public as a whole should bear the cost of economic losses sustained by those who failed to bargain for adequate contract remedies."

In the scenario of an insured who has been paid the full policy limits, the insured could have bargained for greater contract remedies by simply purchasing higher policy limits.3 The Florida Supreme Court in Casa Clara went on to describe the economic loss rule as "the fundamental boundary" between contract law and tort law because contract law "is designed to enforce expectancy interests" while tort law "encourages citizens to avoid causing physical harm to others."4 Without the economic loss rule, "contract law would drown in a sea of tort"5 because plaintiffs could circumvent the conditions of their contractual agreements. Counsel for purchasers of title insurance should carefully consider the policy limits to be purchased, because their client's remedy may be limited to exactly the amount of insurance for which the client paid.6

First American Title Insurance v. First Title Service Co., 457 So. 2d 467 (Fla. 1984), is sometimes cited as creating an exception to the economic loss rule for abstractors.7 While First American does create an exception to the economic loss rule, it is a tightly worded expansion of abstractor's liability. First American did not involve the purchaser of a title insurance policy but instead involved a party with no privity with the abstractor. Prior to the First American case, an abstractor could only be held liable to those in privity.8 In First American, the strict privity rule was abandoned and the abstractor's duty of care was extended not only to the purchaser of the abstract but also to third persons whom the abstractor knew would be provided the abstract by the purchaser for the purpose of inducing reliance by the third party.9

In these limited circumstances. First American held that a plaintiff may sue as "a third party beneficiary of the contract of employment of the abstractor."10

Even if limited by the economic loss rule to the face amount of the policy, an inducement to plaintiffs to include an abstractor's liability claim is the ability to claim for special damages which would not be possible in a suit on the policy alone. In Safeco Title Insurance Company v. Reynolds, 452 So. 2d 45 (Fla. 2d DCA 1984), the title insurance policy failed to except from coverage a recorded easement and reciprocal parking agreement and the insured policyholder sued for breach of the title insurance policy and for negligence. The court stated:

In addition to the recovery of general damages naturally resulting from a breach of the contractual duty, Western Union Telegraph Co. v. Merritt, 55 Fla. 462, 46 So. 1024 (1908); Williams v. Atlantic Coast Line Railroad Co., 56 Fla. 735, 48 So. 209 (1908), a plaintiff may also be able to recover special damages such as lost profits in cases of tort arising from a contractual setting. Florida East Coast Railroad Co. v. Peters, 72 Fla. 311, 73 So. 151 (1916); Krohne v. Orlando Farming Corp., 102 So. 2d 399 (Fla. 2d DCA 1958). Damages from torts arising out of contracts are governed by the same rules as in the case of contract actions. Peters. However, it is clear that a plaintiff who proves both a breach of contract and a breach of duty of care (negligence) owed pursuant to the same contract is entitled to only one recovery for each type of damages (general and special) pled and proven.

Torts in Conducting Closings
Another theory which has been successfully asserted against title insurance companies is for torts committed in the context of conducting a closing. In a series of Florida cases, claims have been upheld against title insurance agents in situations where there was no claim against the policy. In these cases it was not disputed that the state of the title was exactly as it was insured, rather, plaintiffs counsel asserted that negligence or fraud occurred at the closing table.

In Florida Southern Abstract & Title Company v. Bjellos, 346 So. 2d 635 (Fla. 2d DCA 1977), a residential purchase and sale contract provided that the seller was required to provide the buyer a negative termite inspection report. A pest control service found an active termite infestation which it treated and then issued a termite guarantee. The termite service also sent a letter to the seller "which simply stated that on that date he had inspected the property and did not visually observe any termite activity."11 The buyer tes-tified he was not furnished any documents regarding termites at the closing but later discovered the termite guarantee among the papers he carried home from the closing. The court found that one who "undertakes to supervise a closing ... is obligated to do so in a reasonably prudent manner"12 and thus had a legal duty to see that the buyer was furnished a negative termite inspection report. The court stated that the closing agent was not obligated to render a legal opinion on the sufficiency of the documentation furnished at closing but "was at least obligated to examine the instrument presented and point out the possibility that it did not constitute the 'negative termite report' which was a condition to closing."13

In Sudberry v. Lowke, 403 So. 2d 1117 (Fla. 5th DCA 1981), a title insurance agent handling a residential closing failed to disclose to the buyer that the mortgage being assumed by the buyer bore interest at 11 percent. The purchase and sale contract provided that the buyer would assume the mortgage at 9.5 percent interest and if the lender had the option to increase the interest rate the buyer could cancel and rescind the contract. The title insurance agent handling the closing received mortgage information from the lender which indicated that the lender intended to increase the interest rate. The title insurance agent did not make the buyer aware of this information. The court held that these facts stated a cause of action for breach of a duty to disclose all material facts relevant to the agency created by being the buyer's closing agent.

In Daniel v. Coastal Bonded Title Company, 539 So. 2d 567 (Fla. 5th DCA 1989), Coastal Bonded acted as closing agent for a residential purchase and sale. The commitment and policy contained the standard exception for easements and encroachments. The buyers alleged that at the time of the closing Coastal had in its possession a survey which showed certain encroachments, but that Coastal had not disclosed their existence prior to the closing. The buyer sued for breach of the insurance contract, breach of fiduciary duty, fraud, and punitive damages. The trial court dismissed the case with prejudice finding that it did not state a cause of action. On appeal, the Fifth District agreed "that the title defects complained of by the Daniels are clearly excepted by the commitment language"14 and affirmed the dismissal with prejudice of the breach of contract claim. The Fifth District reversed as to the breach of fiduciary duty and fraud counts finding that the complaint stated the causes of action in tort because Coastal had a duty to disclose the existence of the easements prior to closing.

In Askew v. Allstate Title & Abstract Company, 603 So. 2d 29 (Fla. 2d DCA 1992), the seller objected to a subordination provision in a purchase and sale contract and was told by the real estate broker that the provision could be deleted. Although other changes to the contract were handwritten in, to the contrast, the subordination provision was not removed. At the closing, the seller expressed concern to the buyer about the subordination provision and was assured by the buyer that he did not plan to implement the provision and would notify the seller if he did so. Allegedly, the Allstate Title closing agent was present when these assurances were made by the buyer to the seller. The seller also alleged that the closing agent knew of another closing scheduled for the same day in which the buyer was giving a mortgage which would have priority over the seller's purchase money mortgage, thus triggering the subordination provision. The seller sued Allstate Title in negligence for not preparing the closing documents in accordance with the contract, and for breach of fiduciary duty for failing to disclose the laterscheduled closing. Summary judgment, which had been granted in favor of Allstate Title at the trial court, was reversed on the grounds that the closing documents were inconsistent with the contract. The Second District cited Florida Southern for the proposition that "it is well established that a title insurance company acting as a closing agent has the duty to supervise a closing in a 'reasonably prudent manner'" and this duty includes the "duty to prepare the closing documents in accordance with the contract." The court did not rule on the fiduciary duty argument but suggested in dicta that the closing agent's duty to properly supervise the closing runs to both the buyer and the seller and that Allstate Title's duty was not to disclose the laterscheduled closing but instead was to withdraw.15

Florida Southern, Sudberry, Daniel, and Askew clearly stand for the proposition that real estate closing agents have a duty to supervise closings in a reasonably prudent manner. To the extent plaintiffs sue for fraud, or otherwise in intentional tort, these cases should be reliable authority. To the extent plaintiffs sue in negligence, the viability of Florida Southern, Sudberry, Daniel, and Askew is in doubt because of the economic loss rule. Florida Southern, Sudberry, Daniel, and Askew are all based in tort and not breach of contract. Under the economic loss rule no cause of action in negligence exists for purely economic losses in the absence of physical property damage or bodily injury.

The proposition that Florida Southern, Sudberry, Daniel, and Askew are suspect authorities because of the economic loss rule suggests the following question. If the economic loss rule applied to the facts in Florida Southern, Sudberry, Daniel, and Askew, why did these courts find for the plaintiffs? The answer is that the economic loss rule was clarified by the Florida Supreme Court after the decisions in Florida Southern, Sudberry, Daniel, and Askew, and it has evolved further since then. At the time Florida Southern, Sudberry, Daniel, and Askew were written, Casa Clara and Sandarac Association, Inc. v. W.R. Frizzell Architects, Inc., 609 So. 2d 1349 (Fla. 2d DCA 1992), had not yet been decided. Prior to Casa Clara and Sandarac, a common opinion was that the economic loss rule could only apply if there was privity of contract.16 Based on this principle, the economic loss rule would not apply in Florida Southern, Sudberry, Daniel, and Askew because (while there was privity with the title insurer) it is difficult to identify a contract with the parties that supervised and conducted the closing, i.e., the title insurance agents. Casa Clara and Sandarac applied the economic loss rule in negligence even though there was no privity and even though there was no alternative remedy against the defendants in those cases. Accordingly, since the economic loss rule may apply even when there is no privity and no alternative remedy against the particular defendant, there is an argument that Florida Southern, Sudberry, Daniel, and Askew are no longer good authority.

In arguing for continued viability of these cases in negligence actions against title insurance companies, counsel for plaintiff could assert the following:

1) Florida courts have explicitly found exceptions to the economic loss rule for actions against attorneys, accountants, and abstracters. The result of Florida Southern, Sudberry, Daniel, and Askew is that a similar exception exists for real estate closing agents.

2) Even if Florida Southern, Sudberry, Daniel, and Askew are not exceptions to the economic loss rule, there is an action in contract against the closing agent based on an implied contract to conduct the closing in a reasonably prudent manner.

In response, counsel for defendant has the following arguments:

1) Florida Southern, Sudberry, Daniel, and Askew did not state they were creating exceptions to the economic loss rule, and since they were written prior to Casa Clara and Sandarac there was no necessity and no intent to create an exception to the economic loss rule. Furthermore, exceptions to the economic loss rule should only be created in the rare circumstances where the courts are "convinced the problem justifies a judicial allocation of the relevant risks among the members of society, and that an adequate remedy cannot realistically exist through private contracts and statutory remedies."17 In Florida Southern, Sudberry, Daniel, and Askew, an adequate protection is available statutorily by virtue of F.S. §627.786(3), which provides title insurance customers the opportunity to obtain an insured closing service letter.18 Also, title insurance customers could negotiate an agreement with the closing agent whereby the closing agent assumes liability for any acts inconsistent with closing the transaction in a reasonably prudent manner.

2) Since Casa Clara and Sandarac did not recognize an exception to the economic loss rule for real estate closing agents, Florida Southern, Sudberry, Daniel, and Askew did not create an exception to the economic loss rule.

3) Since Florida Southern, Sudberry, Daniel, and Askew did not expressly create an exception by category, it must be that Florida Southern, Sudberry, Daniel, and Askew were joining a "line of cases that seem to create a new relationship of duty in negligence to protect economic expectations merely because no contract exists. Latite Roofing Company v. Urbanek, 528 So. 2d 1381 (Fla. 4th DCA 1988). . . ."19 Since Casa Clara expressly overruled Latite, Florida Southern, Sudberry, Daniel, and Askew are also no longer good authority.

4) Allowing a claim based on an implied contract to act in a prudent manner would effectively eliminate the economic loss rule. If allowed, any plaintiff in negligence could avoid the economic loss rule by arguing that there was an implied contract not to engage in negligent conduct.

It is difficult to predict how Florida courts will rule on the application of the economic loss rule to the duty to supervise closings in a reasonably prudent manner. Until and unless it is held that the economic loss rule precludes an action in negligence for failing to supervise closings in a reasonably prudent manner, this rather vague and openended legal duty will be fertile ground for creative practitioners to fashion new claims. So far, from the Florida Southern, Sudberry, Daniel, and Askew opinions, we know that the duty to supervise closings in a reasonably prudent manner includes the duties:

1) to prepare the closing documents in accordance with the contract,

2) to examine documents which are a condition to be satisfied prior to closing and to point out that they may not constitute the necessary document, and

3) to disclose facts which are material to the closing.

The duty to disclose material facts provides additional fertile ground for litigation to determine what is material to the closing.

To the extent Florida Southern, Sudberry, Daniel, and Askew survive the economic loss rule, defense counsel in future cases may be able to limit the expansion of the closing agent's duty of reasonable and prudent supervision by citing Florida case law which clearly holds that title insurance companies are prohibited from giving legal advice.20 For example, if a husband and wife sued a closing agent for negligently preparing the deed because it did not create a tenancy by the entireties and unnecessarily subjected the property to execution of a judgment, the defendant closing agent could argue that Florida law prohibited advising plaintiffs on how to take title.

Title Insurers/Title Insurance Agents
Florida Southern, Sudberry, Daniel, and Askew all spoke generically of "title insurance companies" without distinguishing between title insurers and title insurance agents in their analysis. Daniel acknowledged the distinction between the title insurer (First American Title Company) and the title insurance agent (Coastal Bonded Title Company) involved in that case when identifying the parties and discussing the facts of the case, but in its analysis Daniel digressed to the generic term "title insurance company."

"Title insurance agent" is defined in F.S. §626.841 as "a person appointed in writing by a title insurer to issue and countersign binders, commitments, policies of title insurance, or guarantees of title in its behalf." "Title insurer" is defined in F.S. §627.7711, as a company "authorized to do business under the provisions of Chapter 624, for the purpose of issuing title insurance." F.S. Ch. 624 requires title insurers to obtain a certificate of authority from the Department of Insurance, to maintain certain deposit requirements, to maintain certain capital and surplus fund requirements, etc.

There are thousands of title insurance agents in Florida. Many law firms are authorized agents for one or more title insurers and sell multiple brands of title insurance. There are also numerous nonlawyer corporations and individuals which are licensed and doing business as title insurance agents and which sell one or more brands of title insurance.21 The primary functions of title insurance agents are to determine insurability by searching the public records and examining and evaluating the title, to issue title insurance commitments and policies, to remit premiums to the title insurer, and to maintain certain records. Of course, title insurance agents commonly conduct closings in connection with their functions as a title insurance agent. In some instances, title insurance agents issue title insurance commitments and policies while a third party conducts the closing.22

There are 27 licensed title insurers in Florida.23 The primary functions of title insurers are to provide policies and related forms for their title insurance agents to use, to educate and audit their title insurance agents, to receive premium remittances from their title insurance agents, and to respond to policy claims. Some title insurers also operate offices which perform all the functions of title insurance agents. The analysis which follows assumes the standard relationship in which the title insurer is not directly performing the search, issuing the policy, handling the closing, etc. The legal ramifications of the distinction between title insurer and title insurance agent as discussed in the remainder of this article do not exist where title insurers perform the functions of title insurance agents inhouse.

Many practitioners fail to recognize the distinction between title insurer and title insurance agent. For instance, many lawyers file policy claims with the issuing agent even though paragraphs 3(b), 4 and 13 of the Conditions and Stipulations section of the policy require that written notice be sent to the title insurer, not the title insurance agent.24

Recognizing the distinction between title insurer and title insurance agent is very important in deciding what claims will be brought and against whom. In the ordinary scenario of title being challenged or being found not to exist as it was insured, the proper claim in contract is against the policy and the proper party is the title insurer, not the title insurance agent. The title insurance agent, who is the disclosed agent of the title insurer on the face of the policy, is not a party to the contract and is not liable on the policy.25

With respect to negligence claims for abstracter's liability, the title insurance agent is the proper party against whom the claim should be asserted. Except where title insurers perform these functions inhouse, the title insurance agent is the party who conducts the search, examination, and evaluation of title and schedules the title defects. If a record title defect is not scheduled, it is the title insurance agent who commits the negligence, not the title insurer.

There is no Florida case specifically discussing whether a title insurer, as opposed to a title insurance agent, can be liable for abstractor's liability. Agency law provides that a principal is liable for the acts of its agent which occur within the scope of the agent's actual or apparent authority. The scope of the agency of a title insurance agent is defined by F.S. §626.841(2) as follows:

"Title insurance agency" means an insurance agency under which title insurance agents and other employees determine insurability in accordance with underwriting rules and standards prescribed by the title insurer represented by the agency, and issue and countersign binders, commitments of title insurance, endorsements, or guarantees of title, on behalf of the appointing title insurer. The term does not include a title insurer.

Clearly, the acts which form the basis ofabstracter's liability (searching the public records, determining insurability and scheduling title defects) are within the scope of title insurance agency. Thus, title insurers should be vicariously liable along with their title insurance agents for abstractor's liability. An interesting question which arises is whether this vicarious liability should include furnishing a negligently prepared ownership and encumbrance (0 & E) report or foreclosure title report. Arguably, these services are outside the scope of title insurance agency because these searches are not made in order to issue a commitment or policy of the title insurer.

Title Insurance Agent/Closing Agent
Recognizing the distinction between title insurer and title insurance agent in deciding what claims will be brought and against whom, is also very important when the state of the title is exactly as it was insured and there is no claim against the title insurance policy. When a plaintiff asserts a claim that a tort occurred in connection with conducting a closing, clearly the title insurance agent is the correct party as the alleged tortfeasor. The title insurer, on the other hand, cannot be the tortfeasor as the title insurer did not conduct the closing. Rather, title insurers merely have their policies issued by their agents who may or may not conduct a closing in connection with issuing a policy or commitment.

In Sommers v. Smith and Berman, P.A., Chicago Title Insurance Company, et al., 637 So. 2d 60 (Fla. 4th DCA 1994), a Florida court for the first time addressed the issue of whether a title insurer may be vicariously liable for the torts of a title insurance agent in connection with conducting a closing. In Sommers, a residential purchase and sale contract contained only the street address, not the legal description, of the property. Based on alleged misrepresentations of the sellers and the real estate broker, the buyers believed that one boundary line of the lot was farther from the house than it actually was. At the closing, the buyers received a deed and title insurance policy which identified the property by the proper legal description. According to the court, "there was no defect in the title of the property which they were conveyed and which was insured."26 The buyers alleged that the lawyer they hired to close the transaction also knew about the misrepresentation of the boundary line. Chicago Title was sued on the ground that the lawyer knew about the misrepresentation and was the agent of Chicago Title. The court described the key allegations as follows: "[T]he complaint alleges . . . that the lawyer acted as the representative for Chicago Title at the closing, and that the acts of the lawyer were 'conducted within the course and scope of the agency relationship' between the lawyer and Chicago Title."27 The trial court dismissed the second amended complaint against Chicago Title with prejudice.

The Sommers court acknowledged Askew and Florida Southern for the proposition that if a title insurance company acts as a closing agent, it has a duty to conduct the closing in a reasonably prudent manner. The court then went on to affirm the trial court's dismissal with prejudice and based its decision on the distinction between closing agency and title insurance agency. The Sommers court cited with approval Cameron County Savings Association v. Stewart Title Guaranty Company, 819 S.W. 2d 600 (Tex. Ct. App. 1991), for the proposition that a title insurance agent acting as a closing agent wears "two hats," one hat being that of title insurance policy issuing agent and the other hat being that of real estate transaction closing agent. Obviously, the title insurance agent can be liable as the tortfeasor if he or she commits a tort in conducting a closing. As to the title insurer in Sommers and Cameron, there was no liability via an agency theory because the alleged act of the lawyer occurred within the scope of the closing agency, but outside the scope of the title insurance agency.

The Sommers case provides an excellent example of why plaintiffs counsel must be cautious in selecting the correct party defendant(s). Whether the correct party is the title insurer or the title insurance agent or both, the defendants) should be collectable. If the title insurer is the only correct party, it should be collectable by virtue of the minimum deposits and capital surplus requirements of F.S. Ch. 624. If the title insurance agent is the only correct party, it should be collectable by virtue of F.S. §626.8419, which requires title insurance agents to obtain errors and omission insurance with coverage of not less than $250,000 per claim. The availability of E&O insurance for title insurance agents has two major holes. First, E & 0 insurance policies typically will not cover intentional torts. Secondly, even though attorneys may act as title insurance agents, F.S. §626.8417(4)(a) exempts attorneys from the licensing and appointment requirements of F.S. Ch. 626.28 As to attorneys, malpractice insurance may be available. As to nonattorneys, plaintiffs may be able to plug the collectability hole by framing their claim as a negligence or negligent misrepresentation claim, rather than an intentional tort claim. Of course, framing the claim in negligence may create a problem with the economic loss rule.

F.S. §627.792
F.S. §627.792 is a statutory exception to the rule from the Sommers case, and provides that "a title insurer is liable for the defalcation, conversion, or misappropriation by a licensed title insurance agent of funds held in trust by the agent. . . ." Pursuant to the statute, title insurers are liable for the theft from escrow by their agent even though it occurred outside of the scope of the title insurance agency while the agent was wearing his closing agent hat. The existence of F.S. §627.792 is consistent with and collaborates the Sommers ruling. If the statutory definition of the scope of title insurance agencies29 was intended to include closing and therefore escrow activities, as well as the acts set forth in the statute,

there would be no need for F.S. §627.792 to exist at all. F.S. §627.792 would have no purpose because title insurers would be vicariously liable under an agency theory. The existence of F.S. §627.792 verifies that Sommers is consistent with the statutory scheme created by the legislature because the statute creates a liability which did not otherwise exist. For instances in which funds are stolen from escrow, the correct party defendants include both the title insurance agent as tortfeasor and the title insurer who is statutorily liable by virtue of F.S. §627.792.

Insured Closing Service Letter
F.S. §627.786(3) authorizes title insurers to issue insured closing service letters by which "the title insurer assumes liability for loss due to the fraud of, dishonesty of, misappropriation of funds by, or failure to comply written closing instructions by, its contract agents or approved attorneys in connection with a real property transaction for which the title insurer is to issue a title insurance policy. . . ." The form and content of the letter must be approved by the Department of Insurance. Florida Administrative Code §4186.010 provides the approved form for the letter. As with F.S. §627.792, the statutory authorization for insured closing service letters collaborates that the intent of the statutory scheme is that title insurers are not liable under the doctrine of respondent superior for the torts of their agents. If title insurers were liable as a matter of law under an agency theory, there would be no purpose nor necessity for the existence of F.S. §627.786(3).

Conclusion
Title insurance is unique. It is the only type of insurance which is not casualty based. It does not insure against potential future occurrences but instead insures the state of the interest held by an owner or mortgagee at the point in time when the policy is issued. The state of the title at this fixed point in time is based on the instruments which were recorded in the past. The statistical frequency of title insurance losses is relatively constant because title is based on a frozen record and is not subject to the unpredictability of the future. Title insurance premiums are regulated by the government such that title insurers are required to charge a minimum premium amount known as "promulgated rate."30 There is no government regulation of how high a title insurance agency may charge for a premium as this is regulated by competition in the marketplace. F.S. §627.782(2) provides that in adopting promulgated rates the Department of Insurance must give due consideration to the "loss experience" of title insurers, a reasonable margin for underwriting profit sufficient to allow insurers and agents to earn a rate of return on their capital that will attract and retain adequate capital investment in the title insurance business, expenses for administration and handling of risks, liability for defalcation, and other relevant factors. If Sommers had ruled that torts in conducting closings were within the scope of title insurance agency, it would have transformed title insurance into casualty insurance. The Sommers ruling that victims of torts by title insurance agents cannot sue title insurers preserves the statutory framework for regulation of title insurers, which in part is aimed at insuring solvency of title insurers in order to protect the public.

Individual victims of torts are not necessarily left without a remedy. They may look beyond the policy for relief by recognizing the distinction between agent and insurer and pursuing their claim against the agent who is the tortfeasor. The statutory framework envisions that agents will be collectable by requiring nonattorney title insurance agents to carry E & 0 insurance and by the apparent statutory assumption that attorney agents will be collectable.

1 Safeco Title Insurance Co. u. Reynolds, 452 So. 2d 45 (Fla. 2d D.C.A. 1984).
2 See Sandarac Association, Inc. v. W.R. Frizzell Architects, Inc., 609 So. 2d 1349 (Fla. 2d D.C.A. 1992); Casa Clara Condominium Association, Inc. v. Charley Toppino & Sons, Inc., 620 So. 2d 1244 (Fla. 1993); and City of Tampa v. ThorntonTomasetti, P.C., 646 So. 2d 279 (Fla. 2d D.C.A. 1994). A/so see Prosser, The Law of Torts, §101 (4th Ed. 1971).
3 Fla. Admin. Code §4-186.003(l)(b) provides that "In all cases the owner's policy shall be issued for the full insurable value of the premises." Fla. Admin. Code §4-186.003(4)(b) provides that "a mortgage title policy cannot be issued for an amount less than the full principal debt. A policy can, however, be issued for an amount up to twenty-five percent in excess of the principal debt to cover interest, foreclosure costs, etc."
4 Casa Clara, 620 So. 2d 1244, at 1246. 6 Id. at 1247, quoting the U.S. Supreme Court in East River Steamship Corp. v. Trans America Delaval, Inc., 476 U.S. 858, at 866, 106 S. Ct. 2295, at 2300 (1986).
6 Supra note 3.
7 See Sandarac Association, Inc. u. W.R. Frizzell Architects, Inc., 609 So. 2d 1349 (Fla. 2d D.C.A. 1992), and R. Buesing, J. Johnson, The Economic Loss Rule: A Trial Lawyer's Guide to Protecting Contract Rights, 66 Fla. B.J. 38 (1992).
8 Sickler v. Indian River Abstract and Guaranty Co., 195 So. 2d 195 (Fla. 1940).
9 First American Title Ins. v. First Title Service Co., 457 So. 2d 467, at 473.
10 Id. at 468.
11 Florida Southern Abstract & Title Company v. Bjellos, 346 So. 2d 635.
12 Id. at 636.
13 Id. at 637.
14 Daniel v. Coastal Bonded Title Co., 539 So. 2d 567, at 568.
15 Askew v. Allstate Title & Abstract Co., Inc., 603 So. 2d29, at 31.
16 See Justice Shaw's dissent in Casa Clara citing Prosser and Keaton, The Law of Torts §95A at 681 (5th Ed. 1984).
17 Sandarac, 609 So. 2d 1349, at 1353.
18 Fla. Stat. §627.786(3) and insured closing service letters are discussed later in this article.
19 Sandarac, 609 So. 2d 1349, at 1355.
20 See Cooperman v. West Coast Title Company, 75 So. 2d 818 (Fla. 1954); The Florida Bar v. McPhee, 195 So. 2d 552 (Fla. 1967); and Preferred Title Services v. Seven Seas Resort, 458 So. 2d 884 (Fla. 5th D.C.A. 1984).
21 Fla. Stat. §626.8413 provides that title insurance agents may not use a name containing the words "title insurance," "title guaranty," or "title guarantee," unless such words are followed by the word "agent" or "agency."
22 Title insurance agents who are not attorneys are permitted to prepare closing documents (deeds, mortgages, satisfactions, etc.) and conduct closings only "as a mere necessary incident to honor a title insurance commitment and to issue a title policy." Preferred Title Services, Inc. v. Seven Seas Resort, 458 So. 2d 884 at 886 (Fla. 5th D.C.A. 1984). While attorneys can conduct closings without issuing a title insurance commitment or policy, a nonattorney title insurance agent is subject to criminal prosecution for unauthorized practice of law if he or she prepares closing documents other than as a mere necessary incident to honor a title insurance commitment. See Cooperman, 75 So. 2d 818 (Fla. 1954), and The Florida Bar v. McPhee, 195 So. 2d 551 (Fla. 1967).
23 The names and addresses of all licensed title insurers in the State of Florida may be obtained from the Department of Insurance.
24 Pursuant to Fla. Stat. §627.777, title insurers must write title insurance on policy forms which are approved by the Department of Insurance. The most widely used form in the State of Florida is the ALTA Form B Owner's Policy and the ALTA Loan Policy. For policies written on other forms, the notice requirement may not be located in TOO) and 4 of the Conditions and Stipulations sections of the policy.
26 See Boros v. Carter, 537 So. 2d 1135, (Fla. 3d D.C.A. 1989), which states, "Absent an expressed agreement, an agent acting for a disclosed principal is not personally liable for the debts of the principal. Blount v. Tomlinson, 57 Fla. 35, 48 So. 751 (1909);
International Bulk Shipping, Inc. v. Manatee County PortAuth., 472 So. 2d 1321 (Fla. 2d D.C.A. 1985)."
26 Sommers v. Smith and Berman, P.A., Chicago Title Insurance Co., et al., 637 So. 2d 60, at 61 (Fla. 4th D.C.A. 1994).
27 Id. at 61.
28 Pursuant to Fla. Stat. §626.8471(4)(c), the exemption does not apply if "an attorney or attorneys owns a corporation or other legal entity which is doing business as a title insurance agency other than an entity engaged in the active practice of law."
29 See Fla. Stat. §626.841.
30 See Fla. Stat. §627.782(1), which provides that the Department of Insurance "must adopt a rule specifying the risk premium to be charged in this state by insurers. . . ." Also see Fla. Admin. Code Ch. 4-186 for the promulgated rates.

David L. Boyette practices in the area of civil trial law and is resident in the Sarasota office of Ruden, Barnett, McClosky, Smith, Schuster & Russell, P.A. Mr. Boyette received his law degree from the University of Florida in 1989 and his undergraduate degree from the University of Florida in 1985.

The author thanks John S. Jaffer of the law firm of Wilson, Johnson & Jaffer, P.A., for his assistance in developing this article.

[Revised: 02-10-2012]