Nevada Federal Court Holds Title Insurer May Be Able to Reform Policy After Mistakenly Omitting Mortgage

The United States District Court for the District of Nevada recently denied a motion for partial summary judgment by homeowners against their title insurance company for coverage and found that the title insurance company may have a claim for reformation when it mistakenly omitted an exception for a mortgage.  See Bank of New York Mellon v. Christopher Communities at S. Highlands Golf Club Homeowners Ass’n, 2019 WL 4261854 (D. Nev. Sept. 9, 2019).  In the case, the insured homeowners purchased the property at issue after a foreclosure sale for unpaid homeowners association liens.  The lender who held the first mortgage on the property before the sale brought a quiet title action and ultimately prevailed on its claim that the foreclosure sale did not extinguish its lien.  The insureds then brought a claim against the title insurance company who issued their policy, arguing that they are entitled to coverage because the policy does not contain an exception for this lien.  The title insurer did not dispute that this exception was omitted, but filed a counterclaim seeking reformation of the policy.  The insureds then brought this motion for partial summary judgment on coverage.

The Court denied the motion.  The Court found that reformation would be available if there was a mutual mistake in the policy.  In this case, the Court found that an exception for the lien was included in preliminary title reports, and that the title insurer informed the insureds that certain other exceptions (but not this one) would be removed from the final title policy.  Nonetheless, the final title policy did not include this exception.  The Court thus found that “[t]his is necessarily an omission—a mistake—for which reformation is an available remedy” and that there was a genuine issue of material fact as to whether the policy should be reformed.  Accordingly, the Court denied the insureds’ motion.

For a copy of the decision, please contact Michael O’Donnell at, Michael Crowley at, or Dylan Goetsch at