“They are 100 percent protected by their title insurance,” is what John Carroll, CEO of Kirk Homes, said of homeowners who’ve had contractor lien claims filed against their property, according to an article in today’s Sun-Times. Kirk Homes, of course, is in bankruptcy.
In a sidebar to the article, attorney Mark Nora suggests that buyers “work with a qualified attorney, make sure you have title insurance from a company with sufficient reserves to handle claims and read the fine print.”
Nora’s advice is solid, but hardly ever considered by buyers or their attorneys. There are title insurance companies – and there are title insurance companies. The motto of one represented by my old law firm was said to be “We’re in business to collect premiums, not to pay claims. So sue us. We appeal all adverse judgments.”
Buyers and sellers are often steered to title companies that have special “arrangements” with brokers and attorneys. Some of those companies have a dismal history of honoring claims, and some of them lack sufficient reserves to pay more than a handful of sizable claims. You might think that the insurance company regulatory scheme provides you adequate protection – until you remind yourself that you’re in Illinois.