The United States District Court for the District of Colorado recently granted a title insurance company’s motion for summary judgment and found that there was no coverage under a title insurance policy for a neighbor’s monetary set-off claim against the insured regarding a disputed strip of property. See Cherry Hills Farm Court, LLC v. First Am. Title Ins. Co., 2019 WL 6682835 (D. Colo. Dec. 6, 2019). In the case, the plaintiff insured purchased a property in 2015 and obtained a title insurance policy from the defendant insurer. Plaintiff later discovered that its neighbors had constructed a fence, a garden, and an irrigation system on part of the insured property in 2006. Plaintiff brought a quiet title and trespass action against the neighbors, and the neighbors filed counterclaims for adverse possession and, alternatively, for monetary set-off for the improvements the neighbors had made on the disputed parcel. Defendant accepted coverage for the adverse possession claim, but not the set-off claim. Plaintiff ultimately prevailed at trial, and then brought this action against defendant seeking a declaratory judgment that defendant had a duty to defend the monetary set-off claim. The parties cross-moved for summary judgment.
The Court granted defendant’s motion and denied plaintiff’s. The Court first found that the claim for monetary set-off does not “affect title,” and therefore was not covered under the policy. “The set-off counterclaim is not an adverse title claim and does not seek interest in the property. There was no dispute over ownership or possession—it was solely a claim to recover the value of the [neighbors’] admittedly trespassory improvements. It is linked to the title only in that the improvements were located on the property. But this is no greater a link than, for example, a tort that occurred on the property.” Second, the Court found that defendant’s coverage of the adverse possession claim did not require it to cover the set-off claim. Although the Court acknowledged an “in for one, in for all” rule for general liability claims, it found that this rule did not apply to title insurance policies.