January 5, 2016
by John S. Kay and John B. Kelchner
Hutchens Law Firm – USFN Member (North Carolina, South Carolina)
One of the most important hurdles facing a lender or servicer who is contemplating filing a claim against a policy for title insurance, is whether or not the time frame for filing the claim under the applicable statute of limitations (SOL) has expired. South Carolina Code section 15-3-530(1) provides for a three-year statute of limitations for actions based upon a contract. As such, the general consensus in South Carolina has been that this three-year time frame is the applicable SOL for claims on title insurance policies. A recent judicial decision indicates that this may no longer be the situation.
In an appeal rising out of a title insurance policy claim, the South Carolina Court of Appeals found that the affixation of a corporate seal to the title policy evidenced an intent to create a sealed instrument, thus allowing the insured to take advantage of the twenty-year statute of limitations for sealed instruments rather than the three-year statute of limitations allowed under general contract law in South Carolina. Lyons v. Fidelity National Title Insurance Company as successor by merger to Lawyers Title Insurance Corporation, No. 2013-002137 (S.C. Ct. App. Dec. 2, 2015).
South Carolina statute provides for a twenty-year SOL for “an action upon a sealed instrument, other than a sealed note and personal bond for the payment of money only whereon the period of limitation is the same as prescribed in Section 15-3-530.” S.C. Code Ann. section 15-3-520(b) (2005).
In Lyons, the insured homeowners brought their claim and action on their title policy more than three years after they knew of, or should have discovered, the title defect in question. The seal that appeared on the title policy was a corporate seal of the title company placed next to the signature of the president of the company. The title company asserted that the purpose of the seal was to show that the company’s agent was authorized to issue the policy. The court rejected this argument and found that the title polices in question were sealed instruments and the twenty-year statute of limitations afforded under section 15-3-520(b) applied.
This is a significant case in South Carolina because the standard title policy form in use in the state usually contains a corporate seal, ostensibly allowing for a twenty-year statute of limitations for insureds to bring claims for most policies in the state.
© Copyright 2016 USFN. All rights reserved.