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Canadian Title Insurance Article Brings Reply from Counsel

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The January-February, 1998, Title News cover article, "American Title Insurance: An Emerging Presence in Canada," written by Bruce A. McKenna, a Toronto attorney, has brought a reply from Kathleen A. Waters, legal counsel for TitlePLUS and Lawyers’ Professional Indemnity Company, also with offices in Toronto.

In her written response sent to Title News, Counsel Waters states: "I am concerned that it (the article) may leave an incorrect impression of TitlePLUS and the Lawyers’ Professional Idemnity Company (LPIC) in several areas."

She continues: "Contrary to Mr. McKenna’s statements, the deficit is not an LPIC issue. The errors and omissions program deficit to which he refers resides with the Law Society of Upper Canada, which is a legally separate entity from LPIC. LPIC is a fully capitalized insurance company, governed by the Ontario Insurance Act and regulated by the Ontario Insurance Commission.

"TitlePLUS (a form of title insurance plus legal services coverage available to home purchasers only through lawyers) has been available throughout Ontario since the fall of 1997. TitlePLUS policies have already been issued to homeowners in over 70 Ontario communities. Contrary to Mr. McKenna’s assertion that only a small number of lawyers are trained to use the automated application software, by the end of 1997 approximately 2000 lawyers had been trained , as well as 2000 lawyers and support staff. Those numbers represent a significant portion of the Ontario Real Estate Bar.

"TitlePLUS employs an automated application system which guides the lawyer on an interactive basis through the residential real estate transaction. The requirements for the insurance are customized as the lawyer proceeds through the software. However, on any file where the lawyer encounters difficulties meeting the specified criteria, the lawyer may make an "insure over" request, which automatically flags the transaction for manual (or individual) support and underwriting.

"The TitlePLUS policy defines ?actual loss’ in order to clarify expectations on both sides of the transaction," Counsel Waters continues. "There was no attempt to avoid typical title insurance damages by this codification. Damages for dealing with an insured’s claim in bad faith (which is the essence of the Jarchow case) would still be available under the general principles of insurance law in Ontario."

When advised of the Waters response, Author McKenna provided Title News with the following comments:

"I thank LPIC for the clarification on certain points relating to its statistics and procedures. It has not always been possible for the writer to get the latest information from each insurer.

"I did not expand in the January-February edition of Title News on the LPIC codification’ of the basic scope language under the TitlePLUS version of the 1987 ALTA® plain language policy, as it seemed to be largely a technical Ontario issue under Rule 30 of Ontario’s Rules of Professional Conduct.

In simple terms, what LPIC has done is define the term ?ACTUAL LOSS’ to have the following specific meaning:

"ACTUAL LOSS’ means any direct financial loss incurred by you or any MORTGAGE


"(a) due to a decrease in the value of your TITLE or the LAND;

"(b) due to bringing your LAND into compliance with any of the title risks outlined in items (10), (11), (12), or (13) of your Title Coverage;

"(c) arising directly from a delay in the sale, mortgaging or leasing of your LAND; or

"(d) arising from any of the risks listed under the Legal Service Coverage.

"Under either the traditional Canadian contra proferendum maxim or the newer (for Canadians) reasonable expectation’ approach to insurance policy analysis, this definition is likely to have narrowed the scope of coverage when compared to the undefined ALTA® ?actual loss’ term. We will not know what the exact difference is until Canadian courts analyze and compare these policies.

"If anyone is interested in a more detailed analysis of this technical point and the possible result under Canadian law, I would be happy to forward them a copy of my paper, ?Coverage Afforded by Title Insurance- -Title Risks Covered,’ originally presented in May of 1997 in Toronto, Ontario."

(Author McKenna can be reached at Lang Michener, BCE Place, P. O. Box 747, Suite 2500, 181 Bay Street, Toronto, Ontario, Canada M5J 2T7.)

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