Title Insurance: An Origin Story

Title Insurance and land record searches have become customary in just about every real estate transaction. They each play a vital role in assuring that a property is the homeowner’s to use and modify as they see fit. 

How did this all start?  

In 1795, the United States congress required counties to establish recorder’s offices to record deeds and mortgages publicly. Each state was responsible for establishing guidelines on how official records would be recorded and maintained. As the recording system developed, property rights such as easements, liens, rights of way, and other pertinent interests found their way into recording property sales. Conveyancers handled the property transfers by searching the records for any claims that could create liability for the new owner. 

Watson V Muirhead

A Philadelphia conveyancer, Charles Muirhead, was employed by Mark Watson to search and report on the title of a property he wanted to purchase. A judgment by default was outstanding against the seller, and Muirhead believed it did not constitute a lien against the property. After getting an affirming opinion from a respected lawyer, Muirhead told Watson that the title was free and clear. 

Watson purchased the property, and sometime later, the judgment was deemed an encumbrance on the property, and he was forced to sell it to pay the judgment. In 1868, Watson sued Muirhead for the damages of his lost investment and property, but the court held that conveyancers were not liable for honest mistakes. 

The Outcome

Primarily, as a result of that case, a group of conveyancers met in Philadelphia, and in 1874 the Pennsylvania legislature passed an act providing for the incorporation and regulation of title insurance companies, which triggered the founding of title insurance companies in urban areas all over the country.