If a lender has an actual loss of $325,000 due to a forged deed, what will the title insurer pay based on indemnity principles?

Under indemnity principles, a title insurance company is obligated to compensate the insured for actual losses caused by covered risks, such as a forged deed. In this scenario, where the lender has sustained an actual loss of $325,000, the title insurer will cover that loss up to the policy limits established in the insurance contract.

The core principle of indemnity in title insurance is to restore the insured to their financial position prior to the loss, rather than profiting from the insurance coverage. Therefore, the insurer's payment is directly linked to the actual loss incurred by the lender, but it cannot exceed the limits set forth in the title insurance policy.

The amount that the title insurer pays may indeed include additional costs related to resolving the loss, but primarily, it focuses on reimbursing the actual loss incurred, ensuring that the lender does not suffer financially from the forgery. This aligns with standard practice in indemnity-based insurance policies, where coverage is restricted to the amount of loss up to specified limits.