Page 4 - Title Insurance Explained With Closing Tips For Buyers and Sellers

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THE HISTORY OF TITLE INSURANCE

The need for title insurance arose historically from the fact that traditional methods of conveying real

property did not provide adequate safety to the parties involved.

Over a hundred years ago, transferring title to real property was Muirhead’s duty was to guarantee that the parcel would be
handled primarily by conveyancers, who were responsible for all conveyed to Watson without any liens or encumbrances.
aspects of the transaction. The conveyancer conducted a title
search to determine the ownership rights of the seller and any A judgment by default was outstanding against the seller of the
other rights, interests, liens or encumbrances that might exist parcel. Muirhead believed that the judgment did not constitute
with respect to the property. Based on the search results, the a lien against the property and, after receiving an affirming
conveyancer would provide a signed abstract (or description) of opinion from a respected Philadelphia attorney, he reported the
the status of the title. Although the conveyancer generally was title to Watson as being free and clear. Watson purchased the
not an attorney, that individual was recognized as an authority on property. Later, it was discovered that the judgment was deemed
real estate law. The origin of title insurance is directly traceable an encumbrance on the property and Watson was forced to sell
to the limited protection that the work of such a conveyancer it to pay the judgment. Watson sued Muirhead for the damages,
provided to the purchaser of real property. but the court held that conveyancers were not liable for honest
mistakes, and Watson was left without recourse.
Watson v. Muirhead is a landmark Supreme Court case that
helped to create the title insurance industry. In 1868, plaintiff Mark This case led to the establishment of title insurance as a
Watson was purchasing a parcel of real property in Philadelphia. protective measure for property buyers. It highlights the
He hired Charles H. Muirhead, a conveyancer, to ascertain the importance of thorough title searches and the need to safeguard
title’s validity and ensure it was free and clear of any title defects. against unforeseen title defects during real estate transactions.