The Birth of Land Title Insurance: 1876
In 1868, in Philadelphia, a transaction was consummated which demonstrated very forcefully the necessity of having some further type of protection than there mere examination of the records. This very transaction can be traced to reveal the coming into existence of the land title insurance industry.
All the facts are to be found in the Pennsylvania Supreme Court case of Watson vs. Muirhead, 57 Pa 161.
In this case, a conveyancer conducted a title search and disclosed the existence of a judgment. He noted the judgment and turned the abstract over to a well-qualified attorney for a legal opinion as to the effect of the judgment. The attorney advised that the judgment was not a valid lien on the property and, based on the information, the purchaser completed the deal.
Shortly afterward, execution was issued on the judgment and the property was sold at Sheriff's Sale. There was some later litigation and the courts held that the judgment was a valid lien and the Sheriff's Sale was good.
As a result of the loss incurred in this transaction, for which the attorney
and the conveyancer were held not liable, a group of individuals interested
in the law of real estate decided that something should be done to protect
innocent investors from such similar hazards.