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Arbitration – Real Property – Title Insurance – Borrower – Statutory Violation Claims – Class Action

Arbitration – Real Property – Title Insurance – Borrower – Statutory Violation Claims – Class Action

Hamilton v. Mortgage Information Services, Inc. (Lawyers Weekly No. 12-16-1252, 11 pp.) (Rick Elmore, J.) Appealed from Wake County Superior Court (Lucy N. Inman, J.) N.C. App. Unpub.

Holding: The plaintiff-borrower, who didn’t negotiate or sign the title insurance contract, is not bound by its arbitration clause when she sues for statutory violations.

We affirm the trial court’s denial of defendants’ motions to stay, to compel arbitration, and to decertify the plaintiff class.


Plaintiff refinanced her mortgage, and her lender retained defendant Mortgage Information Services, Inc. (MIS) to provide settlement services and issue a title insurance policy. The policy contained an arbitration clause. Plaintiff was neither a named insured, nor did she sign the policy, negotiate its terms, or have knowledge of the arbitration clause at closing.

Plaintiff filed this unfair trade practices class action against MIS and its underwriter. Defendants sought to compel arbitration pursuant to the clause in the policy.

Motion to Compel

Someone who is not a party to an arbitration clause may still be subject to it if she seeks or receives a direct benefit from the contract containing the arbitration clause.

Defendants assert that plaintiff received a “direct benefit” from the mere existence of the title insurance policy because, without such, her cause of action would cease to exist. Additionally, defendants argue that plaintiff seeks to enforce the price term contained in the policy while simultaneously disavowing the arbitration clause. We disagree.

Five of plaintiffs claims allege that MIS’s and/or the underwriter’s violations of G.S § 24-8(d) contravened public policy and constituted unfair and deceptive trade practices pursuant to G.S § 71-1.1.

Plaintiff’s sixth claim alleges that defendants failed to offer the “reissue” rate set forth in the underwriter’s rate filing at the N.C. Department of Insurance.  Additionally, the trial court granted class certification with respect to four of plaintiff’s claims, including (1) whether the signing fee imposed by MIS was in excess of that prescribed by the Notary Public Act, (2) whether defendants failed to provide the services associated with the signing fee, (3) whether defendants violated the filed rate doctrine by failing to offer the correct “reissue rate” for a title insurance policy, and (4) whether MIS failed to provide the services associated with its courier fee.

Plaintiff’s claims are not dependent upon the policy; instead, they stem from legal duties imposed by N.C. statutory law. Furthermore, we find no evidence that plaintiff consistently maintained that certain provisions within the policy, including the price term, should be enforced to benefit her. As such, plaintiff never received “direct benefit” from the mere existence of the policy.  Accordingly, plaintiff is not estopped to deny that she is required to participate in arbitration.

Moreover, plaintiff’s claims are not within the scope of the arbitration clause. The clause provides in part, “Arbitrable matters may include, but are not limited to, any controversy or claim between the Company and the insured arising out of or relating to this policy, and service of the Company in connection with its issuance or the breach of a policy provision or other obligation.”

Plaintiff’s claims do not arise out of or relate to the contract. Furthermore, the arbitration provision refers to “any controversy or claim between the Company and the insured.” Thus, the language of the arbitration provision was not intended to encompass plaintiff’s claims. Finally, plaintiff’s payment of the required premium did not trigger the enforcement of the arbitration provision as  she neither signed nor negotiated the contract and was unaware of the arbitration clause contained therein.


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