From the December, 2003 issue of The Title Insurance Law Newsletter
A title insurer is not responsible for telling a buyer that the property is located in a flood plain, especially when there is no evidence that it even knew that fact, according to a Texas court.
Joe Wayne and Ernestine Owings contracted to sell their mobile home park to David Reynolds. They told him the property was not in a flood plain, and showed him a map to that effect. Reynolds assigned the contract to Mardoche Abdelhak at closing. A few months after closing, Abdelhak learned that the property was in a flood plain. He had to sue the City of San Antonio to prevent it from shutting the park down. He sued the Owingses and his title insurer, Stewart Title Company, for negligence and deceptive trade practices. The jury let Stewart off the hook, but not the Owingses. They appealed.
The appeals court affirmed Stewart's dismissal. It agreed that Stewart had not engaged in any false, misleading, or deceptive act or practice that produced damages to Abdelhak. It noted that no one asked Stewart to obtain a flood certificate for the property. Also, Reynolds, a real estate broker, testified that he would not expect a title company to verify that property was not within a flood plain unless asked, and said that there was no discussion at closing regarding the flood plain. The court also found no evidence that Stewart actually knew the property was in a flood plain. It noted that the insurer invited the insured to obtain a survey, but apparently he did not.
In Chicago Title Ins. Co. v. Investguard, Ltd., 215 Ga.App. 121, 449 S.E.2d 681, 683 (Ga.App. 1994), similarly, the court found no coverage against the risk that the property might be located in a flood plain. It further ruled that the fact that a flood plain designation may or may not appear on a survey does not invoke coverage, because it is not a defect in title.
Owings v. Abdelhak, 2003 WL 22438320 (Tex.App. San Antonio) (unpublished).
