What Are They, How Do They Function, and What Are the Differences?
Understanding what title insurance and title opinions are, their functions, and the difference between them is critical to understanding what product is best for the client. As such, one needs to know what they entail, the pros and cons for both, and the basis of all decisions per se, in order to make an informed decision.
First, one must understand that neither a title insurance policy nor an attorney’s title opinion is an absolute guarantee as to the status/state of title to real estate. There is always a possibility the owner will acquire a defective title or lose their title to the real estate. For instance, a title policy provides gap coverage whereas a title opinion does not. A gap in the record is created through the processing of a document for recordation, meaning it is the time between which a document is recorded and when it appears in the records.
A title opinion in Louisiana is completed by a Louisiana licensed attorney and discloses only the status/state of the title apparent from the public records at the time of examination. The title opinion is a statement of the attorney’s professional judgment expressed, following an abstract of title/title search, regarding the owner's rights, as well as any other party, to the property. Importantly, if the attorney is wrong about the owner’s rights to the property, the only remedy against the attorney is for negligence. The claim against an attorney in Louisiana is limited to three (3) years from the date of the occurrence, not the date of discovery.
Title insurance is an indemnification contract to compensate the insured for loss covered by the contract. Generally, title insurance provides greater title protection against covered title defects than a title opinion. This insurance provides payment and damages with the insured’s loss of possession of the property that results from a defect in title. Title insurance policies reveal possible defects available from research of public record but also insure against other risks which are not discoverable after a thorough search of public record. Title insurance is retrospective, meaning it insures the insured from issues that exist prior to the insured acquisition of title to the real estate. Additionally, title insurance is a one-time premium, and the insured continues to be covered by the policy generally until such time their ownership interest is transferred to another.
Protection can include some of the following defects such as forgery, fraudulent conveyances (quitclaims, sales, etc.), fraud in the execution of documents, errors in surveys, undisclosed or missing heirs, wills not properly probated, unauthorized transfer of title by a minor, unauthorized transfers by business organization, incorrect legal descriptions, clerical errors in recording legal documents, property rights resulting from dissolution of a marriage not disclosed by public record, and much more.
If you have any questions regarding title opinions and/or title insurance, please contact Joseph Marriott at joseph@qtsnola.com or (504) 834-7171.