The Docket: Federal Court Rules in Case Accusing Title Company of ‘Upselling'
|January 10, 2012
The Docket is a monthly TitleNews Online feature provided by ALTA’s Title Counsel Committee that reviews significant court rulings and other legal developments, and explains the relevance to the title insurance industry.
Today’s review of an U.S. district court decision of an Ohio lawsuit addressing accusations that a title company and its issuing agent of selling a more expensive policy to an Ohio homebuyer was provided by Raighne C. Delaney of the law firm Bean, Kinney & Korman. She can be reached at firstname.lastname@example.org.
Citation: Trohoske v. Chicago Title Insurance Company, 2011 U.S. Dist. Lexis (N.D. Ohio 2011).
Facts: The plaintiff purchased a home and as part of the sales contract, the seller agreed to pay half of the cost of an Owner’s Policy of Title Insurance. However, the plaintiff instead purchased a Homeowner’s Policy of Title Insurance. The Homeowner’s Policy provides superior protection to a purchaser, but with an estimated 30 percent increase in the premium. The seller was not required to contribute to the increase in price. After the transaction, the plaintiff asserted that Chicago Title and its policy issuing agent (defendants) failed to disclose that:
- it was only supposed to sell him the cheaper Owner’s Policy;
- that the Homeowner’s Policy was 30 percent more expensive; and
- that the plaintiff would bear the full incremental cost of the Homeowner’s Policy.
The plaintiff then filed a putative class action suit allegedly that the defendants were guilty of “upselling” to him and were therefore liable for breach of contract, fraud and/or unjust enrichment.
The Court granted the defendants’ motion for judgment on the pleadings. In this case, as for the breach of contract claim, the real estate sales contract did not require the purchase of an Owner’s Policy, rather it only simply limited the amount that the seller would contribute to the purchase of a title insurance policy. As for the fraud claim, under Ohio law, as elsewhere, one may be liable for a false statement (or concealment of information material to a transaction) that was made with the intention to induce justifiable reliance, to the plaintiff’s detriment. However, the court held that the comparison statements and HUD-1 contained all of the material information necessary to show the difference between the two policies, and that the defendants had no duty to tell the plaintiff that he was to bear solely the incremental cost of the more expensive policy. Finally, the court dismissed the unjust enrichment claim because a plaintiff may not recover under that theory when an express contract governs the same subject.
Relevance to the Title Industry:
Judging subjectively from the number of reported decisions on class actions in the past year, the industry has been targeted for class action suits. This case is important for three reasons. First, it is another rejection of class action suits against title insurers. Second, it validates a practice of advising potential insureds on a superior, but more expensive, type of title insurance. Finally, the case makes clear that the industry should advise potential insureds about all of the material differences between the alternative types of title insurance. Here, the provision of the comparison sheet and the HUD-1 to the insured met the standard.