What You Need to Know:

• The survey exception in a title policy bars coverage when property boundary issues would have been revealed by an accurate survey prior to closing.
• Courts will enforce the survey exception in standard title insurance policies, emphasizing that purchasers must perform due diligence before acquiring real estate.
• Obtaining a survey and purchasing a survey endorsement helps to avoid this risk, as the endorsement provides coverage for the accuracy of the survey.
• Contract-based claims cannot be reframed as tort claims under Pennsylvania’s gist-of-the-action doctrine.

In Messersmith v. CATIC Title Insurance Company, 2025 WL 3530275 (M.D. Pa. 2025), the United States District Court for the Middle District of Pennsylvania granted a title insurer’s motion to dismiss based on the survey exception present in the standard title policy, which precludes coverage for “[a]ny variation in location of lines or dimensions or other matters which any accurate survey would disclose.” Namely, the Court found because the insured opted not to obtain a survey, she was not covered when the house that she was living in was on a neighbor’s property.

Background of the Messersmith v. CATIC Title Insurance Dispute

Whitney Messersmith (“Plaintiff”) filed suit against CATIC Title Insurance Company after being notified the house she was living in was on her neighbor’s property. Plaintiff filed a title claim with defendant CATIC Title Insurance Company (“Defendant” or “CATIC”) and was told a survey was needed. After the survey was done, however, it revealed that the home was on the neighbor’s property. CATIC then denied the claim as Plaintiff had not obtained a survey prior to closing on the property and the home was not located on the insured property. In that vein, the standard Title Policy has what is commonly known in the industry as the Survey Exception.  The Survey Exception precludes coverage for “[a]ny variation in location of lines or dimensions or other matters which any accurate survey would disclose.”  To avoid this exception, the insured can obtain a survey and purchase a survey endorsement that insures the accuracy of the survey.

Plaintiff sued CATIC in the Pennsylvania Court of Common Pleas. CATIC removed the matter to the United States District Court for the Middle District of Pennsylvania.  CATIC then filed a motion to dismiss. Messersmith filed a cross-motion to remand. The Court first addressed the remand motion to confirm jurisdiction and then the motion to dismiss.

Federal Court Rejects “Direct Action” Argument and Confirms Jurisdiction

In the remand motion, Plaintiff argues that there was no diversity of citizenship required under 28 U.S.C. 1332 because this matter was a direct action against an insurer and in those actions, the insurer is deemed to have the same citizenship of the insurer. 28 U.S.C. 1332(c)(1)(a). The Court summarily rejected the argument. Relying on Third Circuit precedent, it found a direct action does not exist unless the cause of action is one where the liability to be imposed is one that could be imposed on the insured. That was not the case here. 

The Survey Exception Triumphs

As to the merits of the claim, Plaintiff argued that the subject policy’s Covered Risk 31 controlled, which provided coverage for “[t]he residence with the property address shown in Schedule A is not located on the land at the date of the policy.” CATIC argued the survey exception applied as an accurate survey would have shown that the land was not on the insured property. Thus CATIC argued that there was no coverage. Plaintiff countered that argument essentially reading Covered Risk 31 out of the policy.

The Court first noted that the title documents did show the house was located on the neighbor’s property and that meant the house was not on the property covered by the title policy. As such, the Court found the survey exception was applicable.  It noted that the exception was designed to “discourage homeowners from neglecting their due diligence when purchasing property – such as foregoing a survey or other matter to validate the purchase – simply because they have obtained a title policy.”  An accurate survey would have revealed that the home was on the neighbor’s land and that there was no coverage. The Court then also dismissed Plaintiff’s unjust enrichment and negligence claims as Pennsylvania’s “gist of action doctrine prevents purely contractual duty from serving the basis of a tort claim.”

Key Takeaways on Purchasing Property and Surveys

This decision is a powerful reminder of the importance of obtaining a survey in any purchase of real estate. The unfortunate circumstances of this case could have been eliminated if the insured had obtained a survey and had a survey endorsement added to the Title Policy. A survey endorsement to a title policy provides coverage for that survey’s accuracy in defining the insured property.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.