Eastlake, Ohio – In this Cleveland suburb First American insured a first mortgage against a residence for $52,800. The borrowers were Robert and Mary, husband and wife. Since the lender's office was in Pittsburgh, about 130 miles from Cleveland, and the title company was in distant Columbus, a local firm was hired to get borrower signatures and record the mortgage. Despite local assistance the mortgage was somehow recorded in the wrong county, Cuyahoga, while the insured property is actually in Lake County, about four miles from the Cuyahoga County line.

The Runner Stumbleth: No one noticed where the mortgage got recorded, until it was too late.

After Robert's untimely death Mary sold the property and moved away. Payments to the lender stopped. The lender ordered a title search in contemplation of foreclosure and learned of the botched recording.

The mortgage can no longer be enforced. The new owners are bonafide purchasers without knowledge of the mortgage when they bought the property.

First American purchased the insured mortgage for $52,800.

Much like the risk of mis-indexing or adverse matters being recorded in "the gap," title insurance provides coverage against mishandling of documents by independent contractors which results in defective recording.

Providers of attorney opinion letters and other forms of title assurance will not be liable for these risks unless they also accept closing and post-closing responsibilities.