Suing a Title Insurance Company for Denied Claims in Washington State
If a title insurance company wrongfully denies your claim in Washington State, you can file a lawsuit to force them to cover the damages. Under Washington law, you may also be entitled to recover your attorney fees and treble (triple) damages if the insurer acted in bad faith.
Purchasing real estate is often the largest financial investment a person will make. To protect this investment, property buyers in Washington State rely on title insurance. This policy is supposed to guarantee that you own your home free and clear of hidden defects, old mortgages, or boundary disputes. Unfortunately, title insurance companies sometimes deny valid claims, leaving homeowners facing massive legal bills or the loss of their property rights. If your title insurer refuses to step up when a property dispute arises, you have legal rights to fight back.
Step-by-Step Process to Sue a Title Insurer in Washington State
Whether your property is located in Seattle, Tacoma, or Bellevue, the process for holding a title insurance company accountable goes through the civil court system. Insurance disputes can be highly technical, so we strongly recommend browsing our catalog of US Lawyers to find an experienced local real estate attorney.
Step 1: Reviewing the Denial and 'Schedule B' Exceptions
When an insurer denies your claim, they will usually send a formal denial letter citing 'Schedule B' exceptions. Schedule B is the section of your title policy that lists specific items the company will not cover, such as unrecorded easements (agreements not filed with the county) or specific boundary lines. However, title companies often misuse Schedule B to deny claims that stem from public records they simply failed to find. An attorney can review the exact language of your policy against the public records held at a local government office, such as the King County Recorder's Office, Seattle or the Pierce County Auditor, Tacoma, to determine if the denial is legally justified.
Step 2: Sending an IFCA Notice
Before filing a lawsuit for bad faith, Washington law requires you to send a formal 20-day notice to the insurer and the Washington State Office of the Insurance Commissioner, Olympia. This is governed by the Insurance Fair Conduct Act (IFCA), found at Wash. Rev. Code § 48.30.015. This notice gives the title company a final 20-day window to cure the defect, pay the claim, or correct their unreasonable denial before you sue them for extra damages.
Step 3: Filing the Lawsuit for Breach of Duty to Defend
If the title company ignores the IFCA notice or refuses to change their position, you can file a civil lawsuit. You will generally file a Summons and Complaint at your local superior court, such as the Spokane County Superior Court, Spokane. The lawsuit will typically allege breach of contract and breach of the 'duty to defend.' Under Washington law, a title insurer's duty to defend you in a property lawsuit is much broader than their duty to pay a claim. If a neighbor sues you over a boundary dispute, the title company generally must hire a lawyer for you if there is even a possibility that the claim is covered.
The Olympic Steamship Doctrine: Recovering Attorney Fees
One of the most powerful tools for policyholders in Washington State is the Olympic Steamship doctrine. Stemming from the landmark precedent Olympic Steamship Co. v. Centennial Ins. Co., 117 Wash. 2d 37 (WA Supreme Court 1991), this legal rule dictates that if an insured person is forced to sue their own insurance company to obtain the benefits of their policy, and the insured wins, the insurance company must pay the insured's attorney fees. This levels the playing field, making it financially feasible for everyday homeowners to sue large title insurance corporations.
Unrecorded Easements vs. Missed Public Records
Title companies frequently try to deny claims based on the 'unrecorded defects' exception. If a previous owner made a handshake deal with a neighbor to share a driveway, and it was never recorded in the county files, the title company is generally not liable. However, if the easement was properly recorded, but the title company's examiner simply missed it during the title search, the company is almost always liable for the resulting loss of property value or the cost to remove the defect.
| Type of Defect | Typically Covered by Standard Policy? | Common Insurer Excuse |
|---|---|---|
| Forged Deeds in History | Yes | Known to buyer prior to closing |
| Recorded Easements Missed | Yes | Misclassified as an unrecorded boundary issue |
| Unrecorded Boundary Deals | No (Unless Extended Policy) | Standard Schedule B Exception |
| Unknown Mechanic Liens | Yes | Work started after policy date |
How Long Does the Process Take and What Are the Costs?
Resolving a title insurance dispute in Washington State takes time. A straightforward negotiation after sending an IFCA notice might take 30 to 90 days. However, if a lawsuit is filed in a busy jurisdiction like King County, litigating a bad-faith insurance claim can take 12 to 24 months before reaching a trial. Filing a civil case typically costs around $240 in court fees. Attorney fees vary; many insurance bad faith lawyers work on a contingency fee basis (taking a percentage of the winnings) or rely on the Olympic Steamship doctrine to recover their hourly fees directly from the insurer if they win the case.
Frequently Asked Questions (FAQ)
What is the Insurance Fair Conduct Act (IFCA)?
IFCA is a Washington State law that allows policyholders to sue their insurance companies for unreasonably denying a claim or violating claim-handling regulations, potentially recovering up to three times their actual damages.
Does title insurance cover property line disputes?
It depends on your policy. Standard policies often exclude boundary disputes unless a recorded survey was ignored. Extended policies (commonly required by mortgage lenders) generally do cover boundary disputes.
What happens if the title company refuses to hire a lawyer for me?
If they breach their duty to defend, you may have to hire your own attorney. If a judge later determines the title company was wrong, the insurer can be forced to reimburse you for all legal fees spent defending the property.
Do I sue the title agent or the underwriter?
Generally, lawsuits for denied claims are filed against the national title underwriter (the company that holds the actual financial risk), rather than the local title escrow agency that merely facilitated the closing.
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