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The Docket: Michigan District Court Rules CPL Does Not Limit Actual Loss to Policy

November 20, 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 a ruling by a Michigan district court addressing liability under the title insurance policy and closing protection letters was provided by Christopher Smart, an attorney with the law firm Carlton Fields P.A. He can be reached at

CITATION: JP Morgan Chase Bank, N.A. v. Federal Deposit Insurance Corp., Case No. 09-14891 (S.D. Mich. June 20, 2012) (order denying renewed motion for judgment as a matter of law)

SHORT FACTS: First American Title Insurance Co. (FATCO) paid more than $3 million to satisfy a claim under a title insurance policy and the Federal Deposit Insurance Co. (FDIC) sought indemnification under the closing protection letter (CPL) issued in connection with the closing of the insured loan. After trial, the jury awarded in excess of $1.8 million in “actual loss” sustained by the FDIC. FATCO moved to modify the judgment arguing that the judgment would amount to double liability because, together, the $3 million and $1.8 million, exceed the limits of the title insurance policy.

HOLDING:The district court held that the terms of the Michigan CPL did not limit FDIC’s actual loss to the policy limits and that the CPL contains indemnification obligations separate and distinct from the title policy.

RELEVANCE TO THE TITLE INDUSTRY: The district court’s holding in this case is significant because, by bifurcating the amount of liability under the title insurance policy and the CPL, it suggests that a title insurer’s liability may exceed policy limits.

If independent liability under the title policy and CPL had been contemplated by the parties, there would have been a separate charge for the CPL or the premium for the policy would have been based on more than simply the amount of the mortgage loan. This did not happen because the parties did not contemplate independent liability.

In fact, certain forms of the CPL expressly provide that liability under the CPL is co-extensive with liability under the title insurance policy.

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