The United States District Court for the Eastern District of Pennsylvania recently held that a title insurance company did not breach its policy when it denied an insured’s claim regarding coverage for a litigation about a wall that encroached on a neighbor’s property. See 631 N. Broad St., LP v. Commonwealth Land Title Ins. Co., 2018 WL 4051798 (E.D. Pa. Aug. 23, 2018). In the case, the insured owner purchased the insured property in 2015, and the title insurance company issued a title insurance policy. The insured later requested a zoning variance from the city in order to convert the existing office building on the property into residential apartments, and part of the proposed plan included demolishing a wall on the southern border of the property. The neighbor to the south opposed the application, arguing that the wall was partially on the neighbor’s property and that the insured could not demolish it. The insured then sued the neighbor seeking a declaratory judgment that the insured was the sole owner of the wall and had the right to demolish it. The neighbor opposed the action, arguing that it owned the portion of the wall on its own property. The insured filed a claim with the title insurance company seeking coverage of its litigation expenses. The title insurance company denied coverage, invoking the policy’s survey exception and stating that it “had no obligation to provide coverage under the Policy because an accurate and complete survey would have disclosed the encroachment or boundary dispute relating to the South Wall.” The neighbor—who also had a policy with the same title insurance company—also filed a claim, which the company accepted. After the court in the underlying action held that part of the wall was on the neighbor’s property and that the insured could not demolish it, the insured brought this action against the title insurance company for breach of contract, among other claims. The parties cross-moved for summary judgment.
The Court granted the title insurance company’s motion for summary judgment and denied the insured’s. First, it found that the title insurance company did not have a duty to defend the insured because the neighbor’s claim to ownership of the wall was limited to the portion of the wall on its own property, and “cannot reasonably be construed to be making a claim against land located on” the insured property. Second, the Court found that, even if the title insurer had a duty to defend, the policy’s survey exception applied because “we find it beyond genuine dispute that a complete and accurate survey of the [insured property] in 2015 (had one been obtained) would have revealed to [the insured] that the South Wall encroached onto the [neighboring] Property.” Third, the Court held that the insured’s quasi-estoppel claim also should be dismissed because the title insurer’s decision to defend the neighbor was not inconsistent with its decision to deny coverage to the insured. “[N]ot only did [the insured] claim the portion of the South Wall located on the [insured property], it also claimed the portion of the South Wall located on the [neighboring] Property. This triggered Commonwealth’s duty to defend [the neighbor], whereas [the neighbor] never made a claim that triggered Commonwealth’s duty to defend [the insured].” Finally, the Court found that the bad faith claim should be dismissed because the title insurance company properly denied coverage.