Michigan Court Holds No Title Insurance Coverage for Reduced Easement

The Michigan Court of Appeals recently found that a title insurance company was not required to reimburse its insured after the company negotiated a settlement that reduced the size of an easement used by the insured.  See Horwood v. N. Am. Title Ins. Co., 2020 WL 7635765 (Mich. Ct. App. Dec. 22, 2020).  Plaintiffs purchased the real property at issue in this action and obtained a title insurance policy from defendant.  A portion of the property was accessible only through an easement across a neighboring property owned by the Roses, and the legal description to plaintiffs’ property noted that it was “subject to an easement for a 33-foot roadway to be used in common with others.”  After plaintiffs purchased the property, however, the Roses denied that plaintiffs had an easement, and the parties began having a dispute.  The Roses claimed plaintiffs “illegally trespassed on their property, spun the tires of a pickup truck while holding a middle finger up, caused damage to the Roses’ septic field and trees, removed portions of the Roses’ fence, planted vegetation, and placed cameras on the property line facing the Roses’ house.”  The Roses then brought an action alleging quiet title, trespass, malicious destruction of property, conversion, negligence, invasion of privacy, intentional infliction of emotional distress, and injunctive relief.  Plaintiffs sought indemnification from defendant, but defendant determined it could only defend the quiet title and injunctive relief counts.  Defendant then negotiated a settlement with the Roses where the easement would remain but be reduced by 50%.  Plaintiffs signed the agreement, then brought this action against defendant alleging that (i) defendant was obligated to defend the other counts of the Roses’ complaint; and (ii) defendant was required to reimburse them for the reduced value of the easement.  The trial court granted defendant’s motion for summary judgment.

On appeal, the Court affirmed.  First, it found that only one of the policy’s covered risks applied to the dispute over the easement:  the risk that the insured does not have access to the property. In doing so, it rejected plaintiffs’ argument that other covered risks pertaining to land or title applied, holding that “[b]ecause the easement is not plaintiffs’ ‘land’ or ‘title’ for purposes of the title insurance policy . . . the covered risks identified by plaintiffs are inapplicable.”  Second, the Court found that the policy did not cover the causes of action other than quiet title and injunctive relief.  “Defendant did not assume the risk that plaintiffs would purposefully enter onto Rose property, spin the tires of their truck, stake off the easement, remove portions of the Roses’ fence, destroy portions of the Roses’ septic field and tree roots, and place trail cameras on the property line. Further, plaintiffs’ actions occurred after the policy date, which was also specifically exempted under the insurance policy.”  Third, the Court found that the policy did not insure the size of the easement, just the access to the property, and therefore that defendant did not have to reimburse plaintiffs for the reduced size.  Finally, the Court found that defendant did not force plaintiffs to enter the settlement agreement. “Under the terms of the insurance policy, defendant had the option to negotiate a settlement and withdraw representation if plaintiffs chose not to cooperate with the negotiated settlement agreement.”

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, or Andrew Raimondi at araimondi@riker.com.