Seventh Circuit Finds Insured Owners Suffered No Loss Under Title Insurance Policy After Insurer Settled With Lender

The United States Court of Appeals for the Seventh Circuit recently affirmed a district court’s grant of summary judgment to a title insurer denying the insured owners’ claim for coverage under a title insurance policy, finding that the insureds suffered no loss because the insurer reached a settlement with the lender and the insureds no longer owed any money on their loan.  See Marchetti v. Chicago Title Ins. Co., 2016 WL 3732081 (7th Cir. July 12, 2016).  In the case, the insureds nominally purchased a property from a fraudster who did not have title to the property.  A lender, who also had a title insurance policy from the insurer, lent the entire $180,000 purchase price, plus an additional $155,000 for construction.  When the actual owner filed a quiet title suit, the title insurer and the lender agreed to settle the issue for the appraised value of the property, $110,000.  The title insurer was subrogated to the insured owners’ claim and was able to obtain $37,500 in restitution from the fraudster.  The insured owners then conducted their own appraisal and determined the property was worth $202,000.  They then sued the title insurance company, claiming that the insurer owed them: (i) $88,000, which was the difference between the $198,000 maximum value of the policy and the amount paid to the lender; and (ii) the $37,500 in restitution.  Among their other claims, the insureds argued that they suffered a loss because they were entitled to the full market value of the property as well as the lost profits they would have received when they rented the property.  The United States District Court for the Northern District of Illinois granted the title insurer summary judgment.  On appeal, the Seventh Circuit affirmed, finding that the policy only covers “actual monetary loss or damage sustained or incurred by the Insured Claimant” and not the full market value of the property or consequential damages, like anticipated profits.  Because the owners had not paid any money for the property and, after the settlement, did not owe any money, they lost nothing and did not have a claim.

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