There are other laws that come into play in addition to RESPA. As far as I know RESPA requires proper rendition of core services and accurate reporting of the fees for these services. There is nothing contained in RESPA which prohibits a title insurer from attempting to recover its losses for having paid a just claim.

Whether the abstractor is negligent depends on whether his conduct in performing the search met the reasonable standard of care associated with performing a title search. This would be established through the testimony of expert witnesses presented by both the plaintiff and the defendant at trial. Both esperts would offer testimony as to the required "reasonable standard of care" and they would then offer an expert opinion as to whether the defendant abstractor's conduct met the required standard of care. Based on the credibility of this expert testimony the jury or judge (in a trial by the bench) will render a verdict or judgment  (in a trial by the bench)..

The difficult scenario to accept in one in which the case is settled without trial, but the abstractor's policy is cancelled or his premiums go through the roof because the claim was asserted in the first place.

There are defenses available...was the missed encumbrance properly indexed?.... was the missed encumbrance within the time frame of the search ordered by the title insurer?...was the missed encumbrance recorded outside the chain of title?... has the statute of limitations run on the claim (in some states it does not begin to run until the abstrator's failure to report the encumbrance is discovered)? All of this is taken into account in determining whether the proper standard of care has been met.

When the abstractor issues a title abstract the title insurer that hired him is depending upon his abstract to report all encumbrances within the scope of the search that was ordered. It is based upon the abstract that the title insurer issues a title committment and subsequently a title insurance policy. The title insurer is on the hook to pay that claim because the abstractor may have failed to report it. It seems only fair that the abstractor should be held accountable for the damages resulting from his work. This is the risk that the abstractor accepts when he accepts the title search order from his client.

You have expressed some concern with the internet searches of on line systems and electronic title plants. I agree with your concern. The system has severe limitations. You should be careful in performing searches to supplement their systems. Could your work be deemed an extension of their system for which you could be held liable for negligence? I do not know the answer to that, but it does not mean that you could not be swept up as defendant in a suit for damages. Even if you were not negligent in performing your portion of the supplemental search, you would still need to go to the trouble and expenses of defending.

If you think that low prices paid for performing title searches do not justify the risks involved in performing the search, you should increase your prices accordingly.