That's a risk title insurers accept when insuring based on limited information.  The insurer chose to save time and/or money by purchaing a less expensive current owner search as a means to insure first lien position, presumably.  Maybe a $40 or $50 savings between the cost of a current owner and a full statutory search adds up over time to a significant amount, making a claim or two palatable.  Or, maybe the savings evaporate, and then some, when the claims start rolling in.

If a current owner search is all that was needed to satisfy the title underwriter's standards, then maybe the agent, if it is an agent who suffered the claim, is not even on the hook.  Maybe the underwriter takes the hit.  But, in the end, if somebody insured a lender's lien position, and that lender now finds he has no standing to enforce his lien, then the insurer needs to make that lender whole.