Title Insurance Case Argued in Georgia Supreme Court

Here is a link to a news story regarding a case argued in the Georgia Supreme Court yesterday.  In the case a man used a stolen identity to obtain a loan from a lender.  At the closing the lenders received a commitment to issue a lenders title insurance policy from Fidelity National Title Insurance Company. As normal, the title commitment required that certain conditions be met before the issuance of the policy. The conditions included the requirement that “[d]ocuments satisfactory to the Company creating the interest in the land and/or mortgage to be insured must be signed, delivered and recorded.”

The closing attorney prepared the required closing documents, and at the closing, checked the ID of the phony "Mr. Shanahan" without discovering that it was an impostor. The closing went forward, and the law firm gave the phony "Mr. Shanahan" loan proceeds of $106,000. The closing attorney paid Fidelity the insurance premium for the title policy, then recorded the deed with the county clerk.


The fraud was discovered before the title policy was issued.  Fidelity instructed the title agent not to issue the policy.  The lender sued seeking coverage for the loan amount.  The arguments centered on the language in the title commitment. Fidelity claimed that since the forged documents signed by the impostor actually created no interest in the property, the condition that "“[d]ocuments satisfactory to the Company creating the interest in the land and/or mortgage" had not been met, relieving Fidelity of its obligation to issue the title policy. The lenders argued for a different interpretation of this clause, saying that this condition has been met if the title agent has been satisfied that the documents create an interest in the land and or mortgage, whether an interest has actually been created or not.

The trial court ruled in favor of Fidelity, but the Court of Appeals reversed.  Stay tuned for the result.