What to Do When Your Title Insurance Company Denies a Claim in Indiana
If your title insurance company denies a claim in Indiana, you can appeal their decision or sue for breach of contract. Understanding policy exclusions like Schedule B exceptions is critical. You also have the right to file a bad faith complaint with the Indiana Department of Insurance.
You paid for title insurance when you bought your home to protect yourself from hidden ownership disputes, unrecorded liens, and old surveying errors. So, when a boundary dispute erupts or a contractor suddenly places a lien on your house, you expect your title company to defend you. Unfortunately, title insurance companies frequently deny claims, leaving homeowners in Carmel, Bloomington, and South Bend facing thousands of dollars in unexpected legal fees and property losses.
A denial letter is not the final word. Title insurance policies are dense legal contracts filled with confusing exceptions and loopholes that insurance adjusters use to protect their profit margins. If your claim was denied, we strongly advise you to contact a skilled local attorney from our USA Lawyer Directory to review the policy and fight the underwriter on your behalf.
Understanding Title Insurance Exclusions in Indiana
When an insurance company denies a claim, they usually point to specific exclusions listed in your policy. Understanding what these clauses mean is the first step in building an appeal.
Schedule B Exceptions
Every title policy contains a "Schedule B" section. This part of the document specifically lists known defects, easements, and covenants that the insurance company explicitly refuses to cover. For instance, if there is a known utility easement running through your backyard that was properly recorded before you bought the home, it will be listed in Schedule B. If you later build a shed over that easement and the utility company forces you to tear it down, the title company will deny your claim based on this exception.
Post-Policy Events
Title insurance is unique because it only protects you against events that occurred before the date your policy was issued. If your neighbor puts up a fence on your property two years after you move in, that is a post-policy event. The title insurance company will deny the claim because the boundary encroachment did not exist when they insured the title.
Unrecorded Mechanic's Liens
If the previous owner hired a roofer who never got paid, that roofer might file a mechanic's lien against your home. If the lien was not officially recorded with the county recorder at the time you closed on the house, the title company might attempt to deny coverage. However, depending on the specific "mechanic's lien coverage" rider you purchased, an attorney can often fight this denial, forcing the insurer to pay off the old contractor.
Step-by-Step Process to Fight a Denied Claim
If you believe the denial was unfair, you have several legal avenues to force the insurance company to honor their contract.
Step 1: Request the Full Claim File
First, write a formal letter to the insurance adjuster demanding a complete copy of your claim file, the full policy (including all jackets and endorsements), and a detailed explanation of the denial. You need to see exactly which documents they relied upon to reject your claim.
Step 2: Filing a Complaint with the Indiana Department of Insurance
If the company is acting unreasonably, you can file a formal grievance with the state regulator. You will need to submit an official complaint online or file a Form Unnumbered, Indiana, Department of Insurance, Title Insurance Complaint Form with the Indiana Department of Insurance, Indianapolis. The state will investigate whether the underwriter violated Indiana insurance regulations. While the state cannot always force them to pay, an official inquiry often pressures the company to take a second look at your claim.
Step 3: Suing for Breach of Contract and Bad Faith
If administrative appeals fail, your attorney can file a civil lawsuit in a local court, such as the St. Joseph County Superior Court, South Bend or the Monroe County Circuit Court, Bloomington. You can sue the company for breach of contract. Furthermore, under landmark precedents like Erie Insurance Co. v. Hickman, 622 N.E.2d 515 (IN Supreme Court 1993), Indiana recognizes the tort of "bad faith." If the insurer maliciously or recklessly denied a perfectly valid claim, the court may award you punitive damages far beyond the value of the original property defect.
| Common Reason for Denial | What It Means | Potential Legal Remedy |
|---|---|---|
| Schedule B Exception | The defect was a known issue excluded from the contract. | Review the closing documents; if the title agent missed it, you may sue the agent directly for negligence. |
| Post-Policy Encroachment | The issue happened after you bought the home. | Title insurance will not cover it, but you can sue the neighbor directly for trespass. |
| Bad Faith Denial | The insurer is ignoring clear evidence of coverage. | File a civil lawsuit for breach of contract and bad faith damages. |
How Much Does it Cost in Indiana?
Fighting an insurance giant requires financial preparation.
- Lawyer Fees: Many attorneys will review a denied claim on an hourly basis (usually $250 to $500 per hour). If the case proceeds to a bad faith lawsuit, some lawyers may take it on a contingency fee, taking a percentage of the final settlement.
- Filing Fees: Filing a lawsuit in an Indiana civil court costs roughly $157. Filing a complaint with the Department of Insurance is free.
How Long Does the Process Take?
A Consumer Complaint with the Indiana Department of Insurance typically takes 30 to 60 days for a response. If you must file a breach of contract lawsuit, litigation against a major insurance company generally takes 1 to 2 years to reach a settlement or trial verdict.
Frequently Asked Questions (FAQ)
What is the difference between an owner's policy and a lender's policy?
A lender's policy only protects the bank's financial interest in your mortgage. An owner's policy protects your personal financial investment in the property. You must have an owner's policy to file a claim for your own losses.
Does title insurance cover zoning violations?
Generally, standard title insurance policies do not cover zoning restrictions or building code violations. You would need a specific and costly endorsement added to your policy to cover those issues.
If I win my lawsuit, will the insurance company pay my lawyer's fees?
In Indiana, if you successfully prove that the insurance company acted in bad faith, the judge has the discretion to order the insurance company to pay your attorney's fees as part of the damages.
Can they cancel my policy if I complain?
No. Title insurance is paid entirely upfront with a single premium at closing. As long as you own the property, the policy remains active, and they cannot cancel it simply because you filed a claim or a regulatory complaint.
When title insurance companies wrongfully deny claims, policyholders have clear avenues for appeal and litigation. Connect with an experienced Indiana real estate litigation attorney today to protect your home and recover your losses.
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