Suing a Title Insurance Company for Denied Claims in Nebraska

Purchasing real estate in Nebraska is a major financial milestone. To protect this investment, property owners rely on title insurance, which is designed to cover financial losses caused by hidden defects in the property's legal ownership. Unfortunately, when a serious issue arises-such as a boundary dispute, a hidden lien, or an unrecorded easement-title insurance companies sometimes deny the claim. They may argue that the defect was excluded from the policy, was a matter of public record that you should have known about, or does not technically affect the marketability of your title.

Receiving a denial letter from your insurer is incredibly stressful, but it is not the final word. Title insurance policies are legally binding contracts, and insurance companies are strictly bound by the Nebraska Unfair Claims Settlement Practices Act. If they act in bad faith or wrongly interpret their own policy language, you have the legal right to challenge their decision, demand a payout, and, if necessary, take them to court.

Step-by-Step Process for Disputing a Denied Claim in Nebraska

Whether you own a historic home in Omaha or commercial acreage in Grand Island, challenging a denied title claim requires a systematic approach, solid evidence, and a clear understanding of your legal timeline.

Step 1: Understanding the 'Discovery Rule'

One of the most critical aspects of suing a title insurance company in Nebraska is the statute of limitations. Under Neb. Rev. Stat. § 25-205, the standard deadline to file a lawsuit for a breach of a written contract is five years. However, title defects are inherently hidden. Nebraska courts typically apply the 'discovery rule,' meaning the five-year clock does not start ticking on the day you closed on the house, but rather on the day you reasonably discovered (or should have discovered) the title defect that triggered the claim.

Step 2: Challenging Missed Tax Liens

A common reason for filing a claim is discovering a missed property tax lien. If the previous owner failed to pay county taxes and the title company's abstractor missed the recorded lien during their search, the insurer is generally obligated to clear the debt. If the company denies the claim by pointing to boilerplate exclusions, your attorney can demand they cover the back taxes, as locating recorded liens is the fundamental purpose of purchasing title insurance.

Step 3: Fighting Undisclosed Utility Easements

Imagine planning to build a garage on your property, only to discover that a utility company holds an underground pipeline easement straight through your backyard. If this easement was properly recorded but not listed as an exception in your title policy, the insurer is liable for the resulting loss in your property's value. You will need a professional appraiser to calculate the exact financial damage the undisclosed utility easement causes to your land.

Step 4: Addressing Public Record Indexing Errors by the County Register of Deeds

Sometimes, the defect is the fault of the government. If a clerk at the Douglas County Register of Deeds, Omaha or the Sarpy County Register of Deeds, Papillion misfiled a mortgage or lien document, the title searcher may have genuinely missed it. However, the title insurance policy is intended to protect you from exactly these types of public record indexing errors. Your lawyer can argue that the insurer must defend your title against the misfiled claim regardless of the county's mistake.

Step 5: Filing a Bad Faith Lawsuit and Regulatory Complaint

If the insurer refuses to negotiate reasonably, you may have grounds to sue for bad faith. While unfair claims practices are regulated under Neb. Rev. Stat. § 44-1540, that statute does not create a private cause of action. Instead, a bad faith claim in Nebraska is pursued as a common-law tort established in precedents like Braesch v. Union Ins. Co., 237 Neb. 44 (NE Supreme Court 1991), alongside Heyd v. Chicago Title Ins. Co., 218 Neb. 296 (NE Supreme Court 1984), which defines the duties title insurers owe to policyholders. Before heading to trial, it is often wise to formally submit an official Consumer Complaint Form to the Nebraska Department of Insurance, Lincoln to trigger a state-level administrative inquiry into the denial.

How Much Does it Cost in Nebraska?

Taking on a major insurance company involves significant financial strategy. Be prepared for the following typical expenses during a title insurance dispute:

How Long Does the Process Take?

Resolving a title insurance claim dispute is rarely a quick process. A forceful demand letter from your real estate attorney might prompt a settlement offer within 30 to 60 days. However, if the insurer digs in their heels and the case proceeds to a full civil lawsuit in the Douglas County District Court, Omaha, the discovery phase, depositions, and trial preparation can stretch the timeline to 12 to 24 months before reaching a judge's final verdict.