The United States District Court for the Western District of Louisiana recently held that the lack of access of an insured property did not render title to the property unmarketable, but found that the title insurance company must either cure the access issue or pay the diminution of value caused by the lack of access. See BJD Properties, LLC v. Stewart Title Guar. Co., 2019 WL 2061972 (W.D. La. Mar. 29, 2019). In 2006, the plaintiff-insured purchased a 27-acre property. Although the property did not abut any public roadways, the insured had an oral agreement with a related entity that owned the neighboring property (the “Related Entity”) under which the insured could access its property via a road through the Related Entity’s property (“Lot 16”). In January 2016, the homeowners’ association (the “HOA”) on Lot 16 demanded that the insured stop using Lot 16 to access its property, claiming that the oral agreement violated the HOA’s subdivision restrictions. The insured did not notify the insurer of this issue at the time. The HOA then brought an action against the Related Entity and, in June 2016, the Court enjoined the construction of the road through Lot 16. In July 2016, the purchasers of one of the insured’s lots demanded a refund of their purchase price, which the insured provided. The insured filed a claim with the title insurance company and, after the title insurance company tried unsuccessfully to cure the lack of access, brought this action seeking damages.
The Court first found that the insured did not have a claim that title to the property was “unmarketable.” It found that the policy explicitly covers losses for “lack of right of access,” and the insured’s argument that a lack of access would render title unmarketable would make the access coverage provision superfluous. The Court also cited Fid. Natl. Title Ins. Co. v. Woody Creek Ventures, LLC, 830 F.3d 1209 (10th Cir. 2016), finding that unmarketability refers to defects affecting rights of ownership, not defects affecting physical condition. Second, the Court found that the insured cannot recover damages based on the claim that it does not have a “preferred” right of access. The insured retained two experts who opined that an access route through the neighboring property to the north caused a diminution of value of $243,500 when compared with access through Lot 16. However, the Court found that the insured was not entitled to these damages—and that as long as the insurer could provide some access, that was sufficient under the policy. Third, the Court found that the insurer was not liable for the refund the insured provided to the purchasers because the policy expressly excepts losses “voluntarily assumed by the insured in settling any claim or suit without the prior written consent of” the insurer. Fourth, the Court found that the insurer could not be liable for monies the insured expended in developing the property because the insured could not point to any policy provision under which these losses would be covered. Fifth, the Court found that the insured was not entitled to its costs incurred in this litigation because there was no evidence the insurer acted in bad faith.
Finally, although the Court found that “none of the categories of damages enumerated by the insured are recoverable under the Policy,” it held that the insured was still entitled to its damages from any actual loss caused by the lack of access. The Court rejected the insurer’s claim that a loss did not occur until the insured purchased a right of access or sold the property at a loss, and instead found that it “has suffered an ‘actual loss’ if it can prove that the lack of access has caused a diminution in the value of the Property.” In this case, the Court recognized that there was some dispute under Louisiana law as to how the lack of access could be cured, but left that question unresolved on this summary judgment motion: “The determination of this cost to cure and the correlative diminution in value of the property is left to the trier of fact—that is, unless the insurer satisfies its obligations under the Policy by curing the access problem.”