The limits of title insurance

The septic endorsement of a title insurance policy only protected the insured with respect to risks associated with the septic system, to the extent a lawyer could do so by searching the local authorities.

Insurance law – Title insurance; Practice – Summary judgments

Vogt v. Stewart Title Guaranty Co., [2024] BCJ No. 1262, British Columbia Supreme Court, July 8, 2024, L.M. Lyster J.

The insured discovered that permits were not obtained for a rebuild of the septic system on her property by a previous owner in 1995. The rebuild violated the Building Code. The insured sought coverage under the septic endorsement in her title insurance policy, which she had purchased in 2012 when she purchased the property. The insurer denied coverage on the basis that the unpermitted rebuild in 1995 was not something that a Local Authority Search would have discovered. The Court found that the insurer was entitled to deny coverage. The Court noted that title insurance is intended to eliminate the need for certain off-title searches at the time of purchase of a property, which can result in savings to the insured. The septic endorsement was intended to protect the insured with respect to risks associated with the septic system, to the extent a lawyer could do so by searching the local authorities, and no further. The Court noted that the septic endorsement clearly stated that insurance was provided for loss or damage in the event that a Local Authority Search would have disclosed either that a permit issued for the septic system does not conform with the current as-built nature of the construction or that a permit had not been issued at the time the septic system was constructed. A search of the relevant local authorities would not have revealed either the absence of a permit or that construction was non-conforming.

This case was digested by Dionne H. Liu and edited by Steven W. Abramson of Harper Grey LLP.  If you would like to discuss this case further, please feel free to contact them directly at [email protected] or [email protected].