New Jersey Appellate Division Holds That Title Company Has No Duty to Defend Allegations That Insured Had Undisclosed Agreement with Third Parties

The New Jersey Appellate Division recently affirmed a trial court’s grant of summary judgment to a title insurer, holding that the title insurer had no duty to defend a lawsuit initiated against the insured that was based on an alleged agreement with the insured regarding title to the subject property.  See Carrington v. Chicago Title Ins. Co., 2015 WL 6758365 (N.J. Super. Ct. App. Div. Nov. 6, 2015).  In the case, the insured purchased a property and obtained title insurance.  A decade later, her siblings claimed that they had an agreement with the insured in which they would all purchase the property in the insured’s name due to their poor credit history.  Title would be put in everyone’s names once the siblings’ credit had improved.  The insured sought coverage from the title company, who denied the claim based on the fact that: (i) the alleged title issue was created by the insured and was excluded under Exclusion 3(a) of the policy; and (ii) the alleged title issue was known to the insured and not disclosed to the title company, and was excluded under Exclusion 3(b) of the policy.  The insured then sued the title company, alleging that the title company had unlawfully failed to provide a defense, had acted in bad faith, and had violated the Consumer Fraud Act.  She also alleged that she had purchased the property on the advice of the title company’s agent and that the title company therefore was estopped from denying coverage.  The trial court granted summary judgment for the title company, and the insured appealed.  In a succinct opinion, the Appellate Division affirmed the decision, holding the claims were “clearly excluded under the policy,” primarily under Exclusion 3(b), and that the title company had no duty to defend.  It further held that the estoppel claim was denied because the agent “was designated solely as issuing agent or attorney for the closing, and the attorney’s responsibilities regarding the transaction were limited to obtaining the necessary documents, disbursing funds necessary to establish title, and paying funds due to the policyholder.”

For a copy of the decision, please contact Michael O’Donnell at