The United States Bankruptcy Court for the District of New Mexico recently found that an insured’s claim regarding a prior mortgage was barred by the title insurance policy’s Exclusion 3(a) and the fact that the insured could not prove any damages. See In re: Lamey, 2020 WL 4045254 (Bankr. D.N.M. July 17, 2020). Plaintiff is an LLC and the insured owner of a property, and defendant issued a title insurance policy on the property. Plaintiff later discovered that a prior mortgage—which had been disclosed in the title commitment but not listed as an exception in the policy—was not discharged. Plaintiff brought a claim and defendant denied it, stating that plaintiff knew about the prior mortgage and that plaintiff’s agent had agreed to handle to discharge. Plaintiff then brought this claim alleging a breach of contract, and defendant moved for summary judgment.
The Court granted the summary judgment motion. First, the Court found that there is no reasonable dispute that the individual tasked with discharging the mortgage was plaintiff’s agent. Second, it found that the agent had executed the mortgage, and his knowledge was imputed to plaintiff so there could be no question plaintiff was aware of the mortgage. Third, the Court found that both the agent and plaintiff knew the prior mortgage would not be discharged because they signed a HUD showing no disbursement to the prior lienholder. Accordingly, the Court found that plaintiff’s claim was barred by Exclusion 3(a) of the policy, which prohibits claims “created, suffered, assumed, or agreed to” by the insured. Finally, the Court found that plaintiff also did not have a claim because it did not show that it suffered any damages. Defendant paid off the prior mortgage, and there was no evidence connecting any alleged delay in the discharge with any losses suffered by plaintiff. “If [plaintiff] wanted to avoid summary judgment on this issue, it was required to provide some evidence that [defendant’s] alleged delay in getting the KZRV Mortgage released proximately caused damages recoverable under the Owner’s Policy.”