Title Insurer’s Negligent Title Search Precludes Subrogation

The recent decision in Lawyers Title Ins. Corp. v. MHD Corp., 2010 WL 4157301 (Ohio Ct. App. Oct. 22, 2010), addressed whether a title insurer was subrogated to the rights of its insured against a seller where the insurer's negligent title search failed to report a properly recorded encumbrance on the property.  The court ruled the title insurer was not entitled to subrogation.

In November 1991, MHD Corporation ("MHD") purchased 12.74 acres of real property from S&S Realty, Inc. ("S&S") pursuant to a warranty deed that contained a right of first refusal on the premises retained by S&S.  Lawyers Title Insurance Corporation ("Lawyers Title") acted as the escrow agent and title agent for the sale and, in such capacity, it recorded the warranty deed and issued a title guaranty.  The title guaranty did not list the right of first refusal retained by S&S.