Massive real-estate-development growth and acceleration in the number of real-estate financing and refinancing transactions in the early to mid-2000s combined with the credit implosion of 2008 created an avalanche of title-insurance claims unlike anything the industry had previously experienced. Title-insurance companies and their lawyers are on the front lines of a daily battle in the real-estate industry. Scott Vogt is vice president and managing counsel at Fidelity National Title Insurance Co. and has firsthand knowledge and understanding of the upheaval in the title-insurance industry as well as how the claims processes have become streamlined and more predictable.
Scott is a graduate of the University of Nebraska and obtained his law degree from the University of Nebraska College of Law in 2001. He clerked and then worked as a litigation associate for nine years with the Lincoln, Nebraska, law firm of Hoppe, Harner, Vogt & Barrows, LLP, now known as the Hoppe Law Firm, before taking a job with Fidelity in their Omaha, Nebraska, claims center in 2009. Fidelity’s claims center in Omaha employs more than 100 attorneys with a second center in Jacksonville, Florida. Scott is responsible for claims from Florida—a busy place since 2008 for title claims—and administers more than 100 claim files at any given time.
Q: Good morning Scott! Thank you for agreeing to be the subject of an interview this morning. I appreciate it.
A: Absolutely.
Q: I want to talk with you a little bit about trends in title claims and what you're seeing now, and what you've seen over the last couple of years since you've been with Fidelity. Are you now seeing the number of title claims continue to increase, are they holding steady, or are they declining a bit?
A: When I started here, we had, of course, recently taken over all of the claims of Commonwealth and Lawyers Title, and so, the claims counts were humongous. And we worked very hard to get everything under control after taking over all of those claims, and so, while the claims count is still high, there’s a feeling of stability now. We’ve worked through the transition, and we have everything better positioned and can move forward dealing with the new claims that come in, as opposed to trying to take care of things that were around for a very long time.
Q: Do you think you can tell a little bit about the general state of the real-estate market from the volume of claims that you handle? I sometimes think title-claim volume may serve as a barometer of how well our economy, or at least the real-estate market, is doing. Do you think that as well, or do you think I'm off base?
A: As to it being good or bad? I think the rule is that you’re going to see title claims coming in a relatively short period after a closing because that’s when they’re going to find the mortgage or find the dispute with the neighbor, and so I think there's clearly a lot of claims from the boom years of ’04 to ’08 when things went downhill, and so we’re still seeing a lot of that, and I’d say those are the majority of claims that I see, from that 2004 to 2008 period.
Q: Sure, the majority of the claims arose in that boom of real-estate closings . . .
A: Yes, when they're closing thousands and thousands of loans a year.
Q: Right. Real-estate attorneys were . . . a lot of them were really underwater during that time I would imagine.
A: Yes.
Q: Well, what are some of the most typical claims that you see and handle day in and day out?
A: I’d say the most typical claim that you see, comprising the majority of claims, is easily a mortgage that gets missed or not released, and presents as a lien that is set to be foreclosed at some point through no fault of the current insured—it’s just a mortgage that didn't get released.
Q: OK. So somebody goes to refinance or to sell, and for whatever reason, the satisfaction of mortgage is not filed with the appropriate recording office, is that right?
A: You’ll have a mortgage that was missed in a title search. Or a mortgage that was recorded in a period where it couldn't be found in the title search—sometimes intentionally done by a seller. Or you’ll have a second mortgage, home-equity-line mortgage, that gets paid down at closing, but after the fact, the lender doesn't release it, and the seller then runs it back up. You'll see those. Those are the majority of claims I see.
Q: Do you see some claims involving fraud where there’s no payoff to the first mortgage position?
A: Absolutely.
Q: Have you ever seen any fake deeds? I understand that there’s been a trend toward fake deeds being notarized and recorded without anybody at the register-of-deeds office bothering to check the veracity of that deed, and then the owner later learns that somebody’s tried to sell his property out from under him. Have you seen those claims at all?
A: I’m familiar with those claims, and I know that people have those claims. What I’ve seen more often is a mortgage-removal scheme where it’s almost like a get-rich-quick scheme that you see on TV. They teach you how to remove a mortgage from your property only to get a new mortgage and then just hope the first lender doesn’t notice, which unfortunately happens from time to time. So I’ve seen those claims come in, which are clearly fraudulent schemes to remove mortgages.
Q: Would that involve somebody filing a satisfaction of mortgage where the underlying debt hasn’t been paid?
A: Well, sure. You’ll see a satisfaction of mortgage or you’ll see a scheme where the seller will convey the title to a trust and then back and then to something else, and then something else, and at some point, they will also have a power of attorney that somehow claims to have the authority to release the prior mortgage, and they end up with something that looks like, at least to a title examiner, a clean title free of any liens.
Q: I see. But then the bank hasn’t been paid.
A: Then the bank catches on at some point, and they, you know, come back at it.
Q: Right. Right. What about troubled developers selling homes or lots that are already encumbered by liens? Have you seen any of those?
A: I’ve seen some of those, but none that I’ve seen at this point where it looked like the developer knew that a lot was encumbered and was just trying to get rid of it. I've seen situations where a blanket mortgage covers several lots, and they'll sell one lot, and either they'll assume that the mortgage has been released as to that lot, or there was supposed to be a payoff.
Q: In the fall of 2010, the media focused its attention on foreclosure “robo-signers” and speculated that those improper foreclosure practices would lead to a glut of title claims. Have you seen that happen?
A: Claims come involving those type of issues, and that has become an issue in certain claims, but I can't say sitting here that I've seen just a glut of claims related to the robo-signing issues.
Q: Well, that's good . . . as so often happens, sometimes the media over-sensationalize problems like that, and they don’t materialize, and they don’t become as bad as predicted. How about tax sales—have those been a pretty hot area for title claims, where a property is sold due to tax delinquency and then a title claim is made on a notice issue?
A: I've seen that more than a few times, where taxes get missed or something like that. Actually, I was in your neck of the woods, about a month ago, mediating something where that occurred. In fact, I’m going to say it—I think South Carolina has a problem when it comes to that stuff.
Q: Well, we’ve had some controversy in one of our counties adjacent to Charleston, which will remain unnamed for now, but there have been some real problems with notification issues from some of the counties here in South Carolina on tax sales. I’m sure that was an issue during your mediation.
A: It was brought forward.
Q: You have dealt with so many claims—is there any problem that you can imagine going wrong with title that you haven’t seen and handled in a claim?
A: You know, I can’t say that any new claims come in that surprise me with a new title issue. The facts are always different, but it’s going to have something to do with title. I haven't seen anything overly shocking recently that made me go, "Oh!" There’s only so many.
Q: Have you seen a claim come in that you thought was surprising or over-the-top, or I hate to say “amusing,” but something that really sort of made you scratch your head?
A: Of course you review claims all the time where you look at them, and you’re thinking, why would this person think he has a valid title claim when it has literally nothing to do with title? I’m more interested in these celebrity claims that come in, frankly.
Q: Well, we won’t name any names. Are we talking music industry or are we talking about Hollywood stars?
A: Cable hosts.
Q: That figures. For unjustified claims, do you think that sometimes owners/claimants are just looking for somebody to bail them out of a bad real-estate transaction?
A: I think there’s some of that, and I also think that there’s just kind of a basic misunderstanding as to the purpose of title insurance. I think that even goes to attorneys. I think there are some attorneys that don’t understand title insurance and don’t understand what a title-insurance policy covers or doesn’t cover.
Q: It would be great if you could give me and our readers your two cents on title insurance for everyone’s general edification.
A: Well, if you’re making a title-insurance claim, it has to have something to do with title. You know, I’d have to say when I was in private practice, I probably didn’t have a very good understanding of title insurance either. I made two claims [when I was in private practice]. I got denied both times and, looking back on the claims I made, they were right to deny them.
Q: What are the basic wrong assumptions that claimants and attorneys make about title insurance?
A: You’ll see claims that come in where, you know, a lis pendens gets filed, and they’ll just assume that that means that title insurance will step in. Again, for a title-insurance policy to have any application, there has to be an attack upon your title. It has to fall within our covering provisions within our policies, and I think that’s where some confusion comes in. You’ll have people make claims when their mortgage goes into default, and they'll try to make a title claim because the bank is, in fact, attacking their title, but the lender is attacking title because of a failure to pay the mortgage.
Q: Right. Not a risk the company has agreed to cover. So, do you sometimes wonder whether or not a claimant or his or her attorney has even read the policy?
A: I think that you do question that from time to time.
Q: Scott, what would you roughly estimate the percentage of claims that are legitimate on their face that result from the oversight of one of your title agents or closing attorneys?
A: Valid claims that come in regarding a title agent messing something up, you mean?
Q: Right, something goes amiss at the closing, and it could be attributed to the attorney.
A: It’s hard to say. I mean . . . it’s hard to say. You see things that happen. You know, a release won’t get forwarded on to the bank or a payment won’t get made or isn’t made properly or within the right amount of time. You’ll see multiple issues regarding short-sale disputes where a bank will agree to a short sale under certain terms and you’ll think you’ve got it; maybe you think you’ve got it done and ready to go, and then you go forward with the closing with your assumption that the bank consents based on its short-sale approval, and then, for whatever reason, they’ll say, "No, that wasn’t our agreement," or "you didn’t do this right," or "we never agreed to that," or "you got your approval from the wrong people, not from us, it should have been from this bank, not that bank,” or “the approval should have come from the banking side, not the mortgage side." You’ll see those things in short sales. As to attorneys simply making errors, it really comes, as you would imagine, in certifying a title and missing something in a title search.
Q: Right, or they failed to record a document that needed to be recorded.
A: Yeah. A document doesn’t get recorded properly or it takes too long to get a document recorded, or something like that.
Q: Would you say that more than half of the claims that you ultimately see could have been cured or remedied at closing in some way?
A: Probably. When those claims come in, it's almost always something that could have been corrected just by being careful and making sure that things got done as they were supposed to get done.
Q: Does Fidelity do anything to proactively attempt to reduce risks associated with mistakes at the closing table by its title agents?
A: I was just actually in a seminar that was put on by Fidelity for our title agents that went through ways to avoid these issues. And so, yes, the company is very proactive in trying to get that information out to our agents and our attorneys and you know, this is a way to avoid those issues.
Q: Does Fidelity present those types of seminars and CLEs across the country?
A: This seminar was for the Florida agents. I think that they attempt to do it all over the country.
Q: I know that Fidelity holds a yearly seminar in Charleston, South Carolina, that is free to all who wish to attend . . .
A: There you go.
Q: . . . all their closing attorneys and agents. So, I assume that they do that all over the country.
A: Yes. The company, of course, has an interest in minimizing claims, and I'm sure every title agent does too.
Q: And now we’re going to get to the things that people really want to know. Have you ever had to terminate outside counsel hired to litigate a claim, and what were the circumstances?
A: I have not terminated counsel at this point. I have merely threatened.
Q: Well, glad to hear it. What prompted your threat?
A: It's been a couple cases, and I’d say the biggest issue that I, as claims counsel, will have with an attorney is a lack of communication or a lack of adherence to our litigation guidelines. We need our counsel to communicate with us so we know the status of a case so in those situations where someone needs settlement authority, we know about it so we can get ready for it and do what’s necessary in a short amount of time.
Q: Right. And in the specific circumstances that you’re thinking about, was it a failure of communication in terms of some development that occurred during the litigation, or was it something else?
A: It was a consistent failure to update me regarding the case progress and having to basically beg for information, which makes my job that much more difficult, and I don’t have the time to beg our outside counsel to let me know what’s going on in our case.
Q: Right. So, good communication is a key to a successful relationship with any client, really.
A: That’s right.
Q: What about other things that may irritate you or bother you or cause the relationship not to be as marvelous as it could be between you and outside counsel?
A: Well, there's always a balancing act between outside counsel’s duties to the insured as to attorney-client privilege and duties to the company, and so I, of course, understand that is an issue. What concerns me is that it appears that our outside counsel will from time to time use that as a way to not communicate with us. They certainly can tell us when they file documents in court. Those are not privileged documents. So, it really comes down to communication with me. Letting me know trial dates is also helpful. Letting me know mediation dates is helpful. Letting me know that we’re going to have a hearing on a summary judgment is useful. Those are all things that it would be useful to have a heads-up on.
Q: Seems very little to ask.
A: It’s little to ask. I can safely say that I think Fidelity does a great job of picking counsel that do our claims work. I think they do a great job for our insureds, and they generally do a good job for the company.
Q: So, you’ve never become irritated, or terminated outside counsel for asking you to do an interview for any publication, have you?
A: Maybe in the next couple of weeks.
Q: Uh-oh. If a case that you’re supervising goes to trial, will you normally attend trial?
A: Sometimes. Sometimes not. A lot of that depends on the exposure related to that case.
Q: And so, do you have a threshold amount that you think about, or . . .
A: It’s really more of a feeling. It's usually a determination of the facts of the case, the thought process, a need to go there. Of course, if the company is involved in the litigation as a named party, we will always attend and be the representative for the company at that trial.
Q: Of course. When you attend trial, are you fairly actively involved, or do you give a lot of deference to your local counsel?
A: I’m a Nebraska attorney, and so I assume when I hire a South Carolina attorney that they know South Carolina law, and I expect them to really know what they're doing and I shouldn’t have to try to get too involved in a case. So, I’m counting on the fact that our attorneys know what they're doing. So I see no reason to get overly involved. I’d rather just watch and see how everything's going.
Q: And give some guidance on general strategy I’m sure.
A: Yes, general strategy.
Q: Tell me, have you ever been surprised or really shocked or astonished at the decision of the judge or jury?
A: Well, sure. In private practice I was routinely astonished by juries. The last two years I haven’t had a claim that I thought went surprisingly sideways as of yet, knock on wood. Although what is kind of becoming an irritation to me is it seems like we’re getting further and further away from judges granting motions for summary judgment that are based on legal issues that should be granted. That, I find, is irritating for all concerned.
Q: And you see that across numerous jurisdictions?
A: Yeah. I see that here in Nebraska, and I see that in all the states where I handle claims, where it seems like we’ve got a case that can be resolved on summary judgment that just doesn't get resolved. The judge is looking to just punt I think is the best way to say it.
Q: Right. And it can end up clogging the dockets when you don’t resolve issues that can be resolved on legal grounds.
A: Well, it’s costing everyone money. It’s costing everyone money when there really should be no reason for it to continue past summary judgment on a pure legal issue.
Q: What’s your favorite thing about your job?
A: I like dealing with outside counsel. I like strategizing. I like seeing how litigation is progressing and being involved in that. I like reading briefs. I always liked litigation, and I really enjoy the fact that I don't have to be the person litigating it, yet I get to sit back and watch it.
Q: Right. And you get to oversee and you get to develop strategies and suggest strategies and take a big-picture view of cases, which must be nice.
A: That’s right. It’s a step back from the day-in and day-out and the ability to get a broad picture of where I think a case is going and seeing if I can assist in any way to make it go the right way.
Q: Can you tell me about a very satisfying or vindicating resolution to any claim that you handled?
A: I think the most satisfying claims that we resolve—and it happens for everyone here—are situations where you prevent someone from getting kicked out of their house for something that they had nothing to do with, such as a missed mortgage that is being foreclosed. Keeping our insureds in their houses and resolving claims that greatly affect people’s day-to-day lives—that's the best kind of resolution.
Q: Ever thought about switching back over to private practice?
A: No. I’m pretty happy here.
Q: Great. Well, thanks, Scott, so much for your time this morning. I really appreciate it.
Keywords: real estate litigation, title insurance, title claims
Jeffrey S. Tibbals is a member in Nexsen Pruet, LLC's Charleston, South Carolina, office and is cochair of the Title Insurance Subcommittee of the Real Estate Litigation Committee in the ABA Section of Litigation.