One of the most important hurdles facing a lender or servicer 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 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 statute of limitations for claims on policies of title insurance. A recent decision by the South Carolina Court of Appeals indicates that this may no longer be the case.
In an appeal arising out of a claim upon a title insurance policy, 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, 2015 WL 7756187 (S.C. Ct. App. Dec. 2, 2015).
South Carolina Code section 15-3-520(b) provides for a twenty-year statute of limitations 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 argued 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 policies 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 an insured to bring a claim under their policy for most policies in the state.