The Montana Supreme Court recently held that there is no duty to conduct a reasonable search when a title insurer prepares a preliminary title commitment. Phipps v. Old Republic Nat’l Title Ins. Co., 2021 MT 152 (Mont. 2021). In the case, a couple (“Plaintiff”) acquired parcels of real property, used for ranching, through multiple transactions. The property was physically accessible using certain roads, but the legal accessibility was uncertain, as the public records of the county in which the property was located lacked records establishing these two roads as public roadways. In 2017, Plaintiff entered into an agreement with another couple to sell the property, which was conditioned in part on the provision of title insurance, as well as Buyer’s approval of a preliminary title commitment. A preliminary title commitment was ordered from an abstract company, and due to the lack of records concerning the roads, legal access to the property was listed as an exception to the policy. Buyer was unsatisfied with the commitment and walked away from the deal for the property, despite the county at issue later adopting a resolution declaring the two roads at issue to be public roadways, which resulted in a revised title commitment removing legal accessibility as an exception. Plaintiff filed an action in Montana District Court, alleging negligence, professional negligence, and negligent misrepresentation against the title insurer and title agent. More precisely, they alleged that certain documents in the County Road Books (which are not part of a standard title search) would have shown that the roads in question were, in fact, public roads. Defendants argued, in part, that they had no duty to Plaintiff in preparing a preliminary commitment. The District Court granted summary judgment for the Defendants, and in an “Order on Threshold Legal Issue,” found that relevant Montana statutes “do not impose a duty with respect to the offer of title insurance in a preliminary commitment, thus foreclosing [Plaintiff’s claims].” Plaintiff appealed.
The Montana Supreme Court upheld the findings of the District Court. The Court began by tracing the history of title insurance law in the State, finding that for many years, courts found “a duty on the part of the title insurer when it issues a title commitment . . . to base its title commitment and report upon a reasonably diligent title search of the public records. A breach of that duty would constitute negligence.” Malinak v. Safeco Title Ins. Co., 661 P.2d 12 (Mont. 1983). However, the Court found, when the Montana Legislature enacted the Montana Title Insurance Act (“MTIA”) in 1985, it expressly provided that “[t]he rights, duties, and liabilities applicable to the preparation and issuance of an abstract of title are not applicable to the issuance of a preliminary report.” Section 33-25-111 (2), MCA. Based on this, the Court found that “it [was] clear that the enactment of the MTIA removed the common law ground for the particular claims [Plaintiff] has made herein, based upon the preliminary commitment,” including the common law claim elucidated in Malinak. Plaintiff’s argument “regarding the practical importance of the preliminary commitment to real estate transactions [was] well taken, but [the Court] cannot impose duties upon that process as a matter of common law when the legislature has acted otherwise . . . [and] the District Court correctly entered summary judgment.”