The California Court of Appeals recently affirmed a trial court’s order dismissing breach of contract and negligence claims against a title insurance company and holding that the issuance of a preliminary title report does not require the insurance company to issue a policy.  See Abikasis v. Provident Title Co., 2016 WL 3611016 (Cal. Ct. App. June 28, 2016).  In the case, the title insurance company issued a preliminary title report to an escrow company stating that it was prepared to issue a title policy subject to certain exceptions, including a lis pendens filed against the property arising from a separate litigation.  The party who filed the lis pendens, a co-owner of the property with the plaintiffs, then sent the escrow company a notarized withdrawal of lis pendens and instructions to not record it until (i) the escrow company received confirmation that the separate litigation had settled; and (ii) the escrow company disbursed $525,000 to the co-owner as part of the settlement.  Before it received this confirmation, however, the escrow company received a seizure warrant from the DEA on the funds.  The title company then demanded that the co-owner send new instructions unconditionally authorizing the recording of the withdrawal of lis pendens, at which point it would record the withdrawal and issue the policy.  The new instructions were not sent, the title company never issued a policy, and the sale of the property failed.  Plaintiffs sued the title company for breach of contract and negligence, arguing that it breached its contractual duty to issue the policy and was negligent in not recording the withdrawal of lis pendens.  The trial court dismissed the complaint, and the appellate court affirmed.  First, it affirmed the dismissal of the breach of contract claim, finding that the first page of the preliminary report expressly “disclaim[ed] an intent to be contractually bound” and that other California decisions likewise had found that a preliminary report is not a contract.  Second, it affirmed the dismissal of the negligence claim, holding that the preliminary report simply advised plaintiffs of the proposed terms of the title insurance policy, and that “plaintiffs’ unwillingness to accept those terms cannot be a basis for liability” against the title insurer.

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