Simpson and Seiter Win Precedent-Setting Title Insurance Case

On September 19, 2012, the U.S. District Court for the Northern District of Alabama granted judgment in favor of Mississippi Valley Title Insurance Company and dismissed the claims of a bank that complained it was left with a worthless piece of real estate after it foreclosed on the property. The bank made a construction loan to borrowers who built a home on acreage that was part of a long-shuttered Army base called Camp Sibert. Mississippi Valley issued a title insurance policy to the bank as part of the construction loan transaction. During World War II, the Army conducted chemical warfare training at Camp Sibert, and the Corps of Engineers had more recently performed environmental testing and cleanup in the Camp Sibert area, including the land immediately adjacent to the lot on which the bank foreclosed. After foreclosure, the bank noticed that the deed restricted use of the property to “grazing purposes only.” The bank blamed Mississippi Valley for not informing it of the restriction at the time of the loan transaction, and sued it for the difference between land that could be used only for grazing and land with no such restriction. The federal court, however, agreed with Simpson and Seiter’s interpretation of relatively new Alabama legislation, The Alabama Title Insurance Act of 2001, and ruled that the Act prevented the bank from recovering from Mississippi Valley for the mistakes of its title agent in researching title to the property and reporting to Mississippi Valley. This is the first case out of either an Alabama state or federal court interpreting and applying the Act to bar such claims, and it changes the law as it had been set forth in several Alabama Supreme Court cases over the previous fifty years. This ruling was noted in the November 2012 edition of the Title Insurance Law Newsletter. The slip opinion can be found at 2012 WL 4344600.