I don't think there is any doubt that the abstractor is liable for the full amount.  In a Pennsylvania lawsuit an abstractor was held liable for a $176,000 loss for missing a judgment lien. (see Searcher Owes Insurer for Missed Judgment) That searcher even used a disclaimer on his search attempting to limit the liability to $25.

The real issue is - why aren't the abstractors compensated for the liability?  If I do a search and the client issues a $50,000 loan policy, I don't have nearly as much liability as I do if they issue a $500,000 owner's policy.  However, assuming I did a full search for both - I am not compensated any more for the additional liability.

On the other hand, the insurer is charging the consumer a lot more for the $500,000 owner's policy.  The agent is paid very well for the increased liability and they are still able to pass most of that liability off to the searcher.

I think that before a company decides to ask the abstractor for a penny they should think about the ethics involved.  If they aren't sharing the profits, they shouldn't be expecting to offload the liability. But that is just my opinion.

There is a big difference between what's legal and what's ethical.  Unfortunately, even if a company chooses not to seek damages from the abstractor, their E&O company may if they pay the claim.

Bottom line, there is a lot of liability in this business and the fees do not justify it.  It is just something we all have to deal with.

Best,
Robert A. Franco
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