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The History Of Title Insurance

In our previous posts we have broken down what a title company does and the importance of doing your due diligence when choosing the right title company for your closing, but do you know how the title insurance industry got started? Knowing the history of title insurance can actually give you a deeper perspective as to why title insurance companies are such an integral part of the home buying process. Read our quick history lesson below to gain further insight:

woman studying history in library

Prior to the invention of title insurance, buyers in real estate transactions bore sole responsibility for ensuring the validity of the property title held by the seller. If the title was later deemed invalid or found to be fraudulent, the buyer lost his investment and unfortunately there was nothing they could do about it.

In some aspects this still holds true today, however due to one incident in history known as the Watson vs. Muirhead case, you now have the ability to utilize a title company to investigate the validity of a property and invest in title insurance to protect your assets.

  • In 1868, the case of Watson vs. Muirhead was heard by the Pennsylvania Supreme Court. The plaintiff (buyer) had lost his investment in a real estate transaction as the result of a prior lien. The defendant (seller) had discovered the lien prior to the sale but his lawyer had erroneously determined that the lien was not valid. Due to the opinion of his lawyer, the defendant told the plaintiff that the title was clear. The courts ruled in his favor and the defendant was not liable for mistakes based on his lawyer's professional opinion.

  • In 1874, the Pennsylvania legislature passed an act allowing for the incorporation of title insurance companies.

  • In 1876, Joshua Morris, a conveyancer in Philadelphia, and several colleagues met and incorporated the first title insurance company, Real Estate Title Insurance Company of Philadelphia. They issued the first title insurance policy to Morris’ aunt for $1,500, to cover her home in Philadelphia.

Knowing how title insurance first came about really puts into perspective how far we have come and the very importance that title companies bring to the real estate industry. Don't lose your property like poor Watson did. Have a title and municipal lien search ran by our team of experts at Willow Bend Title so you can rest assured that you are protected.


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