I Can See For Miles – Title Insurance Covers More Than You Might Think
Although the duty to defend may not be the first thing that springs to mind when you think of title insurance, a recent dispute about a view easement in Kennebunkport provides a reminder that owner’s title insurance may provide a property owner with coverage for the defense of a property rights dispute with a neighbor. The Maine Supreme Court resolved this title insurance coverage action on January 14.
The policyholder owned a condo unit. The Condominium Declarations referred to the view easement, but a subsequent Easement Agreement had released it. Nevertheless, a neighbor sued to enforce the released easement. After the trial court determined that the easement was in fact terminated, the policyholder sued her title insurer to recover the cost of her successful defense of the claim. The trial court ruled for the insurer, and the policyholder appealed.
The Maine Supreme Court held that the insured was entitled to a defense. Interestingly, they came to this decision despite specific exclusions in the contract referring to the documents that mentioned the view easement. The split decision is a cautionary tale about the need for extreme specificity in drafting manuscript exclusions.
The majority viewed the title policy as ambiguous and reversed the ruling in favor of the insurer. A general exclusion for encumbrances “created, suffered, assumed or agreed” to by the insured did not clearly exclude a claim based on the easement. Neither, according to the majority, did specific exclusions referring to easements in the Condominium Declarations and the Easement Agreement. “Construing the ambiguous policy language in favor of the policyholder,” said the Court, “the policy does not exclude coverage for claims involving a view easement that does not exist.” Significantly, although the specific exclusions listed documents that referenced the view easement, the policy did not expressly exclude coverage for disputes over the view easement as it did for some other easements and encumbrances. Since the policy was ambiguous, the condo owner was entitled to recover her defense costs.
The dissent saw it another way. They agreed that the general exclusion did not apply, but viewed the specific exclusions as unambiguously excluding claims involving the view easement. Indeed, the dissenters observed, the very fact that one of the referenced documents acknowledged the easement and another extinguished it provided a good reason for the carrier to exclude coverage for a dispute over the documents that created the easement.
The case is Kay H. Cox v. Commonwealth Land Title Ins. Co., 2013 ME 8, _ A.3d _ (slip op., January 15, 2013).
About Me: I specialize in Insurance Law and Litigation at Anderson & Kreiger. I recently won an insurance case in the First Circuit, which established useful new law concerning indemnification requirements for settlements. I blogged about that case for Between the Lines here.
Kennebunkport Photo credit: InAweofGod’sCreation