Missouri Supreme Court Ruling Targets Low-Balling Title Insurance
The Missouri Supreme Court upheld a $1.29 million court award for Spalding Land Co. LLC in Independence for a mistake made by Stewart Title Guaranty Co.
The case had potential for serious ramifications regarding the way title insurance policies are interpreted and the level of payouts for damages. Company owner Randy Spalding acquired 419 acres of property near the Lake Winnebago Dam in Cass County, intending to build more than 300 homes, including about 154 “lake lots.” He acquired the land for $1.51 million and acquired title insurance from Stewart Title worth $1.7 million to protect from any losses or damages sustained because of any defect, lien or encumbrance on the title.
In January 2006, Spalding got a phone call from Paul Estes, who claimed to own a 1-acre tract within the development. Estes also held a deed on the property and also had acquired title insurance from Stewart Title. After an investigation, Stewart Title determined that Estes did indeed own the property, nullifying Spalding’s deed.
Spalding then filed a claim on his title insurance. Stewart Title issued a check for $10,000, basing losses on the land’s agricultural value and not its value as lakefront property. However, Spalding didn’t accept the check because it didn’t adequately compensate him for his losses from the mistake. He already had started preparing the property for development. Stewart Title continued to stick with its assessment of $10,000, so Spalding hired Matt Bartle of Bartle & Marcus LLC in Kansas City and filed suit.
“The $10,000 didn’t even begin to solve his problem because the guy holding the tract of land in question wasn’t going to sell for $10,000,” Bartle said. “What Stewart Title wanted to do is say the damages should be related to the value of the property as agricultural land, which was the lowest cost value. My client didn’t buy this property for agricultural use. Without the (title) defect, this is lakefront property, but with the defect it’s agricultural land and not even good agricultural land because it’s in the floodplain.”
A Jackson County Circuit Court jury ruled in Spalding’s favor. The court entered an amended judgment of $1.29 million, which included $1.1 million on the policy, penalties of $110,150 and attorney fees of $81,000. Stewart Title appealed, arguing that the claim was filed after the statute of limitations, that Spalding’s appraiser supplied insufficient testimony that never should have been allowed in court and that the jury wasn’t properly instructed regarding the measure of damages. But the Missouri Supreme Court affirmed the lower court’s decision on all counts.
The decision pleased Bartle, who said it’s important to everyone who buys title insurance. “Title insurance is something people just take for granted, but without title insurance that people can rely on, the buying and selling of property would involve dramatically more risk,” Bartle said. “This could have been devastating not only to my client but many others who buy title insurance because it could have allowed title insurance companies to always pick the lowest-value option.”