Title Company Liable For Attorney Theft

The New Jersey Appellate Division reversed a trial court determination and held that a title insurance company is liable to its insureds for defalcations by the closing attorney in a real estate transaction. A notice of disclaimer of an agency relationship between the company and the attorney was sent only to the attorney and could not operate to avoid liability on the part of the insurer. If the title company wishes to rely on a disclaimer of liability for an attorney's actions, it must take affirmative steps to provide such notice to its client, the insured.

The lawyer was a neighbor of the seller/victims. The theft had taken place prior to the retention of the title company. (Mike Frisch)