Final answer:
The title insurance company is recovering costs from the property owner due to an alleged breach of an implied covenant in the grant deed, which led to a claim payment. An implied covenant is one not explicitly stated but legally inferred in the agreement.
Step-by-step explanation:
The situation described involves a title insurance company seeking compensation from a property owner after paying a claim, presumably because the property owner breached an implied covenant with the buyer as stated in the grant deed. In real estate transactions, a grant deed includes covenants, which are promises that the grantor makes to the grantee. An implied covenant is one that is not explicitly stated in the contract but is assumed to be included by law or due to the nature of the agreement. When a property owner sells a property, they typically assure the buyer through the grant deed that they have the legal right to sell the property, and there are no undisclosed encumbrances or legal issues with the title.
If the title insurance company had to pay out a claim due to a breach of this covenant, such as the discovery of a previously unknown encumbrance or other defect in the title, it might seek to recover the costs from the original owner, as they failed to uphold their end of the agreement. This would often involve legal action where the title insurance company would attempt to prove that the property owner indeed breached the implied covenant, which caused the title insurance company to incur losses. It is worth noting that the specifics of such a situation could vary depending on the exact terms of the deed, the insurance policy, and the nature of the breach.