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Real Estate: A Tale of Two Citadels; the fall of Guaranty Title and Trust and the Shoring up of Commonwealth and Lawyers Title.

Posted By Cliff Tuttle | November 28, 2008

Posted by Cliff Tuttle

“We just learned that all of our title policies issued by Guaranty and Trust are now void,” wrote Nancy Sparrow, General Counsel of Farm Credit Services of Mid-America in DIRT, a Real Estate Lawyers Listserv, in an email posted on Wednesday November 26 at 9:32 AM.

Meanwhile, the news of the LandAmerica bankruptcy and sale of title insurance giants Commonwealth Title and Lawyers Title was just beginning to break. It was going to be a very big  news day for real estate lawyers. [See the related article below on the LandAmerica Bankruptcy and sale of Commonwealth Title and Lawyer’s Title.]

Rumors began to fly.  Would claims under Commonwealth and Lawyers policies be honored? LandAmerica moved to reassure its customers with bulletins stating that its claims would be paid. Fidelity National which acquired Commonwealth and Lawyers, announced a reinsurance agreement covering all outstanding Commonwealth and Lawyers policies until the conclusion of the acquisition.

In response to Nancy Sparrow, a DIRT contributor posted a copy of a Final Order of the Court of Common Pleas of Franklin County, Ohio that had been entered on October 27, 2008 (a month ago) appointing a liquidator of Guaranty Title and Trust.  By virtue of its Ohio domicile, the company was regulated by the Ohio Department of Insurance with jurisdiction in the Common Pleas Court of Franklin County. After protracted proceedings, which began in the summer, the Ohio Department of Insurance had shut down Guarantee Title and Trust and its assets were to be marshaled for distribution. However, several states had already revoked GTT’s right to issue policies and the handwriting had clearly been on the wall for some time. Proofs of claim will be accepted until October 27, 2009.

Under the Order, title policies issued by GTT throughout the United States (not just in Ohio) were rescinded, effective in 30 days. So, Guaranty sent a notice to policy holders that arrived just as the policies were terminating. Quite a shock for a lender who, to remain in compliance with its underwriting guidelines, must purchase replacement coverage for every GTT title policy.

GTT was also licensed to write title insurance in Pennsylvania and there will undoubtedly be some disappointed policyholders here. Perhaps the impact here will be modest — GTT is a smaller company and its presence in Pennsylvania is probably not very great. But is this a harbinger of future troubles elsewhere?

Commonwealth and Lawyers, it turns out, are both domiciled in the State of Nebraska. The Nebraska Department of Insurance announced that the two companies are solvent and will continue to write insurance. However, while the sale agreement is pending, the Department has obtained an Order of Court placing both companies into rehabilitation under state law. This will not inhibit operation of the companies, except that there will be enhanced oversight.

So, Citadel GTT has fallen. Citadel LandAmerica is holding. However, if the purchase by FNF does not happen, there is speculation that Nebraska may take further action. The fact that LandAmerica lost $599.6 million in the third quarter cannot have escaped the attention of the Nebraska Insurance Commission. What happens in Nebraska could have a massive impact in Pennsylvania where there are millions of Commonwealth and Lawyers policies in force.



CLIFF TUTTLE has been a Pennsylvania lawyer for over 45 years and (inter alia) is a real estate litigator and legal writer. The posts in this blog are intended to provide general information about legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus. However, this information does not constitute legal advice and there is no lawyer-client relationship created when you read this blog. You are encouraged to leave comments but be aware that posted comments can be read by others. If you wish to contact me in privacy, please use the Contact Form located immediately below this message. I will reply promptly and in strict confidence.

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