Title insurance protects an insured against certain clouds on title as set out in the insuring provisions of the policy. However, where a covered title defect is fully resolved by an insurer, the insurer has satisfied its obligations and owes no further duty or compensation to the insured for that issue. The recent case of Golden First Mortgage Corp. v. Alleyne, Index No. 026405/2009 (Sup. Ct. Nassau Co. Apr. 16, 2020) is critical for real estate practitioners to understand the extent of a title company’s obligation under the policy to indemnify an insured.
In Golden First Mortgage Corp. v. Alleyne, an owner obtained title to a property and was granted a mortgage on it. For unknown reasons, the deed and mortgage were not recorded. When the lender discovered this fact, it commenced an action seeking an equitable mortgage on the property or, in the alternative, to have the seller execute a replacement deed to be recorded and the borrower (insured owner) execute a replacement mortgage.