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Balancing Risk in Title Opinions

Angela L. Franklin, Amy M. Mowry, Advanced Mineral Title Examination – Oil, Gas, and Mining

To a title examiner or an oil and gas operator, the idea of embracing risk may seem as natural as jumping off a very tall building. In the context of a title opinion, risk is met not with excitement, but with trepidation or even fear, and sometimes loathing. This paper will discuss the challenge of identifying risk in the context of a title opinion, both for the attorneys preparing those opinions and for the operators using them. It will also weigh the companion challenges of recognizing when big risks posed by serious title problems need serious cures, and where hidden risks lurk beneath what appear to be small issues. In exploring these differences we will attempt to identify where actual costs and potential costs must be reconciled, and where the risk of exposure to liability for potentially devastating costs plays its part in striking that balance.

II. Identifying Risk

(a) Risk Defined

Risk has been defined as “[a] probability or threat of damage, injury, liability, loss, or any other negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through preemptive action.”4 In a broader sense, “risk” can be technically applied in a [15-3] number of contexts to denote some aspect of undesirability, including (1) an unwanted event which may or may not occur; (2) the cause of such an event; (3) the probability