When buying a parcel of property or a home, most people believe that the searches that they receive from the title insurance company are performed for the buyer and that they are meant to assure the buyer that the buyer is receiving clear title. That is not the case.
The New Jersey Supreme Court has ruled that the title search that the buyer receives, and pays for, is solely for the benefit of the title insurance underwriter. It is performed so that the title insurance company can evaluate its risk and to decide if it will issue a policy. Thus, if there is a mistake in the title search, e.g., the searcher did not find a lien, the buyer has no cause of action against the title company for a "negligent title search". Rather, the only claim that the buyer may assert is a claim under the policy of title insurance. And, importantly, some risks are not covered by the title insurance policy. For example, the presence of a CAFRA or wetlands permit is not a covered risk under a title insurance policy. If a buyer wants to protect his/her interest, they must order a separate search for an abstract of title - at an additional cost.