The History of Title Insurance

Before Title Insurance

Prior to title insurance, purchasing real estate was a much riskier venture. When land was purchased, buyers assumed it was free of any title rights, interests, liens or encumbrances that would interfere with their claim once the transaction was complete.

Historians believe the first legislation regarding ownership of real property was enacted in the English colony of Virginia in 1626. It required all land sales to be recorded within one year of the date of transfer in the General Court at Jamestown. As the recording system developed, property rights such as easements, liens, rights of way and other pertinent interests found their way into the recording of property sales. 

People known as "conveyancers" managed early land transactions and were recognized as the local authorities on real estate law, despite the fact they weren't lawyers. They were responsible for conducting searches of the land records for any interests that could create liability for the new owner. They would produce a signed description of the status of the title, certifying that the title was free and clear. Such certification protected the buyer, but the protection was limited. 

The risk of losing property due to unresolved issues was significant. If unresolved issues caused problems, the borrower or lender would have to prove legal negligence in order to collect damages from the conveyancer for his or her errors, which was difficult to prove. 

Watson v. Muirhead

The court ruled that the lien, and thus the sheriff's sale was lawful, and Muirhead was not held liable for misinformation because legal standard was negligence or failure to act with due care. Since Muirhead had relied on an attorney's opinion that the lien was invalid, he had used "due care", even though the  attorney was incorrect. 

The First Title Insurance Company

As a result of the court judgment and subsequent loss to the purchaser, in 1870, Joshua H. Morris and a group of conveyancers formed a group called the Philadelphia Conveyancer's Association. The Legal Gazette published an article that stated the organization's purpose was to set a standard of proficiency and professionalism amongst conveyancer's in Philadelphia.