Specific Closing Instructions Required to Impose Extraordinary Escrow Duties

An Ohio Court of Appeals recently ruled in favor of a major title insurance underwriter on title coverage and closing protection coverage issues.  See Johnson v. U.S. Title Agency, Inc., 2020-Ohio-4056.  In that case, Plaintiff asserted claims for breach of contract and bad faith arising from mechanic’s liens that were recorded after the issuance of an Owner’s Policy of Title Insurance.   The jury specifically found that the underwriter did not breach the terms of the Policy or Closing Protection Letter, and entered a defense verdict on all claims.

The Court of Appeals unanimously affirmed the jury’s verdict.  The Court of Appeals held that the mechanic’s liens were not covered matters under the Owner’s Policy because those liens arose after the Owner’s Policy was issued.  Plaintiff’s transactional counsel claimed to have given vague, oral closing instructions to the closing agent, and the Court of Appeals recognized that was not enough evidence to entitle Plaintiff to the extraordinary relief that Plaintiff sought.

Certain fundamental escrow duties exist on commercial real estate deals as a matter of custom and practice.  The Johnson case recognizes that any duties beyond those fundamental duties require specific closing instructions stating those additional duties.