Greenberg v. Stewart Title Guaranty Co.

Wisconsin Supreme Court
492 N.W.2d 147, 171 Wis. 2d 485 (1992)

ELI5:

Rule of Law:

A title insurer's liability is limited to its contractual obligation to indemnify the insured against title defects up to the policy limits; no separate tort duty to search for and disclose defects arises from the issuance of a title commitment or policy unless the insurer voluntarily assumes such a duty.

Facts:

Martin J. Greenberg and John Huber contracted to purchase four condominium units in Lake Geneva, Wisconsin.
Before the purchase, they obtained title commitments from Stewart Title Guaranty Company through its agent, Southeastern Wisconsin Title Company.
Subsequently, Stewart, through its agent Southeastern, issued four owner's title insurance policies to Greenberg and Huber.
After acquiring the properties, Greenberg attempted to sell the units but was unable to do so.
Greenberg discovered that certain liens and encumbrances against the property made it impossible for him to transfer marketable title.
As a result of his inability to sell, Greenberg's lending institutions foreclosed on the units, and deficiency judgments were entered against him.

Procedural Posture:

Martin J. Greenberg sued Stewart Title Guaranty Company and its agent, Southeastern Wisconsin Title Company, in the circuit court (trial court).
The complaint included claims for negligent misrepresentation, negligence, and breach of fiduciary duty, alongside a breach of contract claim.
The circuit court dismissed the tort claims, holding that the relationship was purely contractual and no tort liability existed.
The circuit court also dismissed Southeastern as a party, finding that as an agent, it was not a party to the insurance contract.
Greenberg appealed the circuit court's judgment to the court of appeals.
The court of appeals certified the primary legal question regarding tort liability to the Supreme Court of Wisconsin.

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Issue:

Does the issuance of a title commitment and a subsequent title insurance policy create a tort duty for a title insurer or its agent to search for and disclose reasonably discoverable title defects, separate from their contractual obligation to indemnify?

Opinions:

Majority - Bablitch, J.

No. The issuance of a title insurance policy does not create a tort duty for an insurer to search for and disclose title defects, as the relationship between an insurer and insured is purely contractual and one of indemnity. A title insurance policy is a contract to indemnify against loss due to a defect in title, not a contract to provide a title search service. The court reasoned that unlike an abstractor, a title insurer does not represent that it is providing information but rather is assuming a risk and agreeing to pay for losses resulting from a cloud on title, up to the policy limits. Any search conducted by the insurer is for its own benefit to assess risk, not for the insured. Citing its precedent in Landwehr, the court affirmed that for a tort cause of action to exist in a contractual setting, there must be a duty that exists independently of the contract's performance, which was not present here.

Analysis:

This decision clarifies the scope of a title insurer's liability in Wisconsin, firmly establishing that its role is one of indemnification, not professional service. By refusing to impose a tort duty for a negligent title search, the court shields insurers from damages that could far exceed their contractual policy limits, maintaining a clear distinction between contract and tort law. The ruling places the onus on property buyers to secure a separate abstract of title or legal opinion if they desire a guaranteed, comprehensive title search, rather than relying on the insurer's internal risk-assessment process. This precedent reinforces the idea that the title policy's explicit terms define the entirety of the insurer's obligations.

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