It was hell on earth trying to sort it out, and the sale almost fell through because of it. The real kicker was that our lawyer basically told me he wished I hadn't noticed it because the sale would have just gone through and nobody would have cared... but since I did, we were legally obligated to fix it.
Perhaps this is why 'nobody noticed'?
An ethical breach by a title insurance company likely violates its bylaws, and at the very least opens them up to liability.
It seems like this is a title error so the insurance company would be responsible. I don't see why a lawyer wouldn't report the error to the insurance company. It's billable time that the insurance company would need to pay for and they'd be working to keep their industry with clear deeds instead of faulty ones.
Also, as in any client relationship, a lawyer’s first priority is the person paying his bills, not necessarily the industry. Even if it would be better in the long run and more ethical, when someone pays you there is a natural obligation attached to the relationship.
I used to be idealistic, but experience has shown me that people do what is expedient.
I actually called the title insurance company at one point to ask what the heck something was, and was connected to an experienced person who was very happy to fully explain what they'd found.
My guess is that because the history of our house was pretty complicated, the title searcher was relieved to have something out of the ordinary to work on.
The upshot? That title search is really important, particularly if you're buying a property that predates electronic property systems.