08/2/22

A Title Insurance History Lesson

As we prepare for a new school year, we got to thinking about one of our favorite topics – yes, we’re talking about title insurance again. Though we know it’s common for people outside of real estate not to know about title insurance until they buy their first home, it’s certainly a subject we love talking about with anyone who wants to listen. (Have a title question? We’d love to answer it.)

While there’ve been lots of conversations lately about why title insurance remains essential, our team thought we’d give a brief overview of how title insurance came to be. Hint, its roots go back to an 1860s Pennsylvania Supreme Court Case. Hopefully, this doesn’t feel too much like a school lesson for you. (No homework or essays at the end, we promise!) 

A Time Before Title Insurance

Before the first title insurance company was created in 1876, buying real estate was much riskier than it is today. Locals with knowledge of the land known as “conveyancers” would provide some of the same basic services we do today, such as title searches, and give a certification that a title was clear of any issues such as an existing lien. However, without a title insurance policy backing up this certification, buyers were often liable for the damages that arose if conveyancers were wrong because of an undiscovered issue. The 1868 Pennsylvania Supreme Court Case Watson v. Muirhead exemplified this problem, and the case led to the birth of title insurance.

The Basics of the Case

In 1865, Mark Watson hired a conveyancer named Charles Muirhead to certify that a piece of property in Philadelphia was clear of any issues that would affect its purchase. Muirhead did indeed find an existing lien during the title search, so he brought it to an attorney to review. The attorney advised Muirhead that the lien was invalid. Muirhead certified the title as clear, and Watson completed the purchase of the property. Watson lived on the land happily ever after, right? Wrong.

The lawyer’s advice was incorrect, and the lien was valid. Soon after Watson completed the purchase, the property was sold at a sheriff’s sale to pay off the lien. Watson sued Muirhead for his damages, but the court ruled that because Muirhead consulted a lawyer about the lien, he was found not liable, even though the advice from the lawyer was wrong.

Title Insurance Saves the Day

If he had title insurance, Watson would have received full reimbursement of his losses. The first title insurance company was formed in 1876 to address Watson’s problem. Title insurance was created to protect people like Watson from unknown liens, defective titles, or other threats to their property rights. 

As the industry grew, title professionals have perfected our craft to resolve title issues before the purchase so homeowners can live with peace of mind in their new homes. We also provide more services like hosting home closings so our clients can complete their home buying journey in the most convenient way possible. The industry continues to grow and innovate while always keeping our central promise… to protect your property rights now and into the future.

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