Title Insurance Fraud

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 What is Title Insurance Fraud?

Title insurance is a type of insurance policy that a prospective homeowner purchases before buying a new home. Title insurance protects the prospective homeowner against potential loss or liabilities in the event that there is an issue during the transfer of title from the prior homeowner to the new one. 

For instance, title insurance may be used to protect the prospective homeowner from defective title or a breach of the real estate purchase agreement. 

As the use of electronic documents become more widespread in real estate transactions, so does the rise of title insurance fraud incidents. According to general real estate and property laws, title insurance fraud is a form of fraud that occurs when a prospective homeowner is sold a fraudulent or forged title insurance policy. Similar to title fraud, it is also considered a crime. 

The exact definition of title insurance fraud will vary based on the state. This is partly due to the fact that each state has its own guidelines regarding title insurance fraud. The other main reason as to why the elements of title insurance fraud may vary is because most issues involving criminal or real property laws are state-specific. 

In addition, title insurance fraud can also lead to a number of other federal charges, such as wire fraud, identity theft, and conspiracy. Whether federal charges are included as part of a legal matter will depend on the facts of an individual case. Regardless of which an individual is charged with, being convicted of title insurance fraud in violation of either federal or state laws can have very serious consequences. 

Thus, if you are facing charges for title insurance fraud, you should speak to a local criminal law attorney immediately for further assistance. On the other hand, if you believe you are a victim of title insurance fraud, then it may be in your best interest to hire a local real estate lawyer to discuss the next steps you should take. 

What Are Some Commonly Used Fraud Methods for Title Insurance?

There are many ways that a person or entity can commit title insurance fraud. For example, an insurance company or agent may create a fraudulent or forged title insurance policy in order to gain access to a prospective homebuyer’s personal information.  

Some other common methods of fraud used in title insurance fraud schemes include:

  • Intentionally providing a policyholder with fake, misleading, or deceitful legal documents in connection with a title insurance policy;
  • Deliberately misrepresenting the credentials, reputation, or license of an insurance agent or their company; 
  • Charging an excessive amount for insurance policy rates or tacking on unnecessary fees;
  • Targeting homeowners who are not physically present in the state or are unavailable to meet with an insurance agent in person (i.e., absentee deals); 
  • Purposely withholding title insurance benefits from a policyholder;
  • Using certain tactics to pressure or coerce a prospective homeowner into purchasing a title insurance policy (i.e., rush deals); and/or
  • Refusing to payout or making unreasonably low payouts to a policyholder who runs into an issue that would normally be covered in full. 

Another method used in committing title insurance fraud is when an insurance company or agent deliberately misrepresents facts about defects in a title. Depending on the circumstances, any losses that stem from the title defect will become the responsibility of either the homeowner or the title underwriter.

One last example of how title insurance fraud may occur is when an insurance company or agent accepts payments from a policyholder, but never actually issues them a title insurance policy. Thus, it is important to have a lawyer review such policy documents to ensure that fraud will not become an issue in the future. 

Are There any Legal Remedies for Title Insurance Fraud?

Depending on state laws and the facts of an individual case, there are a few legal remedies that might be available in a lawsuit for title insurance fraud. In the majority of such cases, however, most plaintiffs who prevail on a title insurance fraud claim will recover some form of monetary damages award. The court will order the losing party to pay the plaintiff for any losses they suffered as a result of their fraudulent actions. 

In addition, many title insurance fraud cases are filed as class action lawsuits. This can often happen when a generic title insurance policy is distributed to a large group of policyholders and impacts each of them in a negative manner. The legal remedy for bringing a successful class action lawsuit is typically a monetary damages award as well. However, the amount of the award will usually be much higher than that for an individual case. 

Finally, if an insurance company or agent is charged with title insurance fraud, along with other types of crimes, then they could receive a criminal conviction on their permanent record. Although the penalties for title insurance fraud will be contingent on the circumstances and which laws were violated, a conviction could lead to having to pay criminal fines and/or potentially needing to serve a jail or prison sentence. 

What Should I Do If I’m a Victim of Title Insurance Fraud?

In order to report an instance of title insurance fraud, the victim should first review the laws of their state to determine the specific reporting procedures. Generally speaking, however, a victim will typically need to submit a complaint concerning the fraud incident and the name of the title insurance company or agent in question to their state insurance department. 

Alternatively, a victim can also report the title insurance fraud to their local fraud bureau or their state attorney general’s office. Any of these three options will either direct the case to the appropriate agency or investigate the matter themselves. If further information is needed about the fraud issue, then the agency assisting the investigation will inform the victim. 

Additionally, if the victim would also like to sue the title insurance company or agent for monetary damages, then they should contact a real estate lawyer in their area who is familiar with handling such cases. 

Do I Need a Lawyer for Help with Title Insurance Fraud Legal Issues?

If you believe you have been a victim of title insurance fraud, then it may be in your best interest to contact a local real estate lawyer for further legal guidance. A real estate lawyer who has experience in overseeing title insurance fraud cases will be able to explain your rights and can help you file a lawsuit against the offending party. 

Also, if no fraud issue has occurred yet and you are a prospective homebuyer, then you should consult a lawyer prior to obtaining a title insurance policy. Some benefits of working with a lawyer for protection against home title fraud include:

  • Having someone with knowledge of the law and procedural requirements to review your documents;
  • Being able to immediately be alerted to a fraud issue before you suffer any serious financial losses; 
  • Knowing the exact steps you should take to minimize your losses; and
  • Having an individual who can provide legal representation both in court or at a settlement conference should a title insurance fraud issue arise and you wish to recover damages. 

Lastly, your lawyer will also be familiar with the agencies you need to contact and can advise you as to when you may need to report the fraud incident to law enforcement.

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