Suing a Title Insurance Company for Denied Claims in New Jersey
If a New Jersey title insurance company wrongfully denies your claim, you can file a lawsuit for breach of contract. A successful lawsuit forces the insurer to cover the hidden defect and pay for your legal defense in property disputes.
Title insurance is supposed to be your safety net when you buy real estate in New Jersey. You pay a one-time premium at closing, trusting that the insurer has thoroughly searched the public records and guaranteed your clear ownership. But what happens when you decide to build a pool, only to discover a massive, undisclosed utility easement running through your backyard? Or worse, what if a neighbor sues you over a property line, and your title insurance company flatly denies your claim for help?
Title insurers are notorious for finding loopholes to deny coverage. The Title Insurance Act, N.J.S.A. § 17:46B-1, governs the industry in the state, but companies still aggressively protect their bottom line. A denied claim can leave you facing tens of thousands of dollars in legal fees or diminished property value. However, you do not have to accept a rejection letter as the final answer. We will explain how to fight back, hold your insurer accountable, and sue them for wrongfully denying your claim.
Step-by-Step Process in New Jersey
Taking on a massive insurance corporation requires a strategic approach. Whether your property is located in Paterson, Elizabeth, or Toms River, you must meticulously build your case before stepping into a courtroom.
Understanding Schedule B Exceptions
The most common reason title companies deny claims is by pointing to "Schedule B" of your title policy. Schedule B lists all the specific exceptions that the policy does not cover, such as known easements, standard utility lines, or unrecorded municipal restrictions. Your first step is to demand a full copy of your policy and have an independent attorney review it. If the defect that caused your financial loss is not explicitly listed in Schedule B, the insurer's denial is likely improper.
What to Do if the Insurer Refuses to Defend a Title Lawsuit
Under New Jersey law, title insurance policies generally include a "duty to defend." If a third party sues you claiming they own part of your land, your insurer is contractually obligated to hire a lawyer to defend you in court. As established in Sears Mortgage Corp. v. Rose, 134 N.J. 326 (NJ Supreme Court 1993), title companies owe a high duty to their insureds. If they refuse to defend you, you must hire your own lawyer from our directory immediately to protect your property, but you can later sue the insurer to recoup every dollar you spent on legal fees.
Breach of Contract vs. Bad Faith Claims in NJ
If you must sue your title insurer, your primary claim will be for "breach of contract." You are arguing that they broke the promises made in the insurance policy. You will file your lawsuit, utilizing Form CN 10517, New Jersey, Administrative Office of the Courts, Civil Case Information Statement (CIS), at a civil court like the Superior Court of New Jersey, Law Division, Paterson.
In rare cases, you may also sue for "bad faith." A bad faith claim asserts that the insurer maliciously or recklessly denied a perfectly valid claim without conducting a proper investigation. Bad faith claims are difficult to win in New Jersey, but if successful, they can result in additional punitive damages against the insurer.
Statute of Limitations for Suing Your Title Insurer
Do not wait to take action. In New Jersey, a lawsuit against a title insurance company for breach of contract is generally governed by the six-year statute of limitations under N.J.S.A. § 2A:14-1. This means you have six years from the date the insurer formally breached the contract (usually the date of the final denial letter) to file your lawsuit.
How Much Does it Cost in New Jersey?
Suing an insurance company is a complex civil litigation process. Many attorneys handle these cases on an hourly basis, though some may consider a contingency fee if the bad faith claim is exceptionally strong.
| Type of Expense | Estimated Cost in New Jersey |
|---|---|
| Court Filing Fee (Law Division) | $250 |
| Initial Attorney Policy Review | $300 - $800 |
| Expert Title Witness Fees | $2,000 - $5,000 |
| Attorney Fees (Civil Litigation) | $10,000 - $25,000+ |
How Long Does the Process Take?
Litigating against a major title insurance company is not a fast process. After filing the complaint, the insurer will likely file motions to dismiss. If the case proceeds to the discovery phase, both sides will exchange thousands of documents and take depositions of the claims adjusters. A breach of contract lawsuit in the New Jersey Law Division typically takes 18 to 24 months to reach a settlement or trial.
Frequently Asked Questions (FAQ)
Can I complain to a state agency about my title company?
Yes. You can file a formal consumer complaint with the New Jersey Department of Banking and Insurance, Trenton. While they cannot force the company to pay, a regulatory investigation often pressures the insurer to reconsider their denial.
What is a 'Notice of Claim'?
Before suing, you must submit a formal Notice of Claim to the insurer, detailing the defect and your financial loss. The policy usually requires you to submit this within a specific timeframe after discovering the defect.
Will the title company pay to remove the easement?
If the easement is covered under your policy, the insurer can choose to either pay the cost of removing the easement (if possible) or write you a check for the diminished value the easement causes to your property.
Does title insurance cover issues that arise after I bought the house?
No. Title insurance only covers defects, liens, and issues that existed on the public record prior to the exact date you purchased the policy. It does not cover a new lien placed by a contractor tomorrow.
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