Suing a Title Insurance Company in Maryland for Bad Faith Claim Denials

When Title Insurance Fails You

You bought a home or commercial property, paid for title insurance at closing, and felt protected. But months later, a neighbor claims they have a recorded utility easement through your living room, or a previous owner's unpaid tax lien threatens your property. You file a claim, expecting your insurer to step in and pay for the legal defense or settle the lien. Instead, you receive a denial letter. When an insurance company denies a valid claim without a legitimate reason, they may be acting in bad faith.

In Maryland, title insurance companies frequently rely on fine print to avoid paying out claims. They might point to a 'Schedule B Exception' or argue that the public record was not properly indexed. Whether you are a residential homeowner or a commercial real estate investor, fighting a large insurance corporation requires a clear understanding of state insurance laws and litigation procedures.

Step-by-Step Guide to Fighting a Claim Denial in Maryland

If your property is in Baltimore, Towson, or Frederick, the path to holding your title insurer accountable involves administrative complaints and, ultimately, the court system.

Step 1: Review Your Policy and Schedule B Exceptions

Your first step is to carefully read your specific policy. Was it a standard owner's policy or an enhanced policy? Enhanced policies cover post-policy forgeries and zoning issues, whereas standard policies are more limited. Pay close attention to 'Schedule B', which lists specific items the company refuses to cover (like known boundary disputes). If the hidden defect was not explicitly listed in Schedule B, the insurer likely breached their duty to defend you.

Step 2: File a Complaint with the State

Before rushing to court, you should exhaust administrative remedies. You can file a formal grievance using Form Section 27-1001, Maryland, Maryland Insurance Administration, Complaint Information Sheet. Submit this to the Maryland Insurance Administration, Baltimore. The state regulators will investigate whether the insurance company violated Md. Code Ann., Ins. § 27-1001, which prohibits insurers from failing to act in good faith to settle a first-party claim.

Step 3: Send a Formal Demand Letter

If the state investigation does not yield an immediate payout, you need to send a final, aggressive legal demand letter. This letter must outline exactly how the title insurer breached the contract, cite the financial damages you are suffering, and give them a strict deadline to cure the breach and provide legal representation for your underlying property dispute.

Step 4: File a Lawsuit for Breach of Contract

If they still refuse to honor the policy, it is time to sue. Depending on the amount in controversy, you will likely file your lawsuit in a local court, such as the Circuit Court for Baltimore County, Towson, or if it involves a massive commercial policy and out-of-state entities, the U.S. District Court for the District of Maryland, Baltimore. Under Md. Code Ann., Cts. & Jud. Proc. § 5-101, the statute of limitations for a civil breach of contract claim is generally three years from the date you discovered the breach. Maryland courts take these contracts seriously, as demonstrated in precedents like Stewart Title Guaranty Co. v. West, 110 Md. App. 114 (MD Appellate Court 1996), which emphasize the insurer's broad duty to defend.

How Much Will It Cost to Sue?

Taking on an insurance giant involves upfront costs, though many legal fees can potentially be recovered if you prove bad faith.

We highly suggest looking through our directory of legal professionals to find a lawyer who focuses specifically on insurance bad faith and real estate litigation.

How Long Does the Process Take?

Filing an administrative complaint with the Maryland Insurance Administration usually takes 30 to 90 days for an initial finding. If you must proceed to a full civil lawsuit in the Circuit Court, the process of discovery, depositions, and trial can easily take 12 to 18 months. Insurance companies have deep pockets and often intentionally drag out litigation in hopes that you will drop the case or accept a low settlement.

Frequently Asked Questions (FAQ)