In an action arising out of a failed real estate transaction, the Superior Court of Pennsylvania vacated an order from the Court of Common Pleas denying appellant-insured’s motion for partial summary judgment and granting a cross-motion for summary judgment by appellee-title insurance company on appellant’s claims.  See Michael v. Stock, 2017 PA Super 99 (Super. Ct. 2017), reargument denied (June 13, 2017).  In Stock, the insured purchased what she believed were two lots (A and B).  However, the metes and bounds set forth in the insured’s title insurance commitment and deed only described Lot A.  She then attempted to sell both lots to a potential buyer.  Before closing, the potential buyer discovered that the insured did not have title to Lot B.  The buyer then withdrew from the transaction and sued the insured, who then filed a third-party complaint against the title insurance company that issued her a title insurance policy, alleging breach of the insurance policy and commitment (Count I); bad faith (Count II); breach of a contract to provide professional services (Count III); negligence (Count IV); and indemnification (Count V).  The insured filed a motion for partial summary judgment with respect to Counts I and II.  The title insurance company filed a cross-motion with respect to all five claims brought against it.  In denying the insured’s motion and granting the title insurance company’s cross-motion, the trial court found that the title insurance company did not have any obligation to the insured to indemnify or defend her title to Lot B because the policy insured only Lot A, and further, the insured could not recover on her claims for negligence and bad faith because the title insurance company had no duty to insure the title to Lot B.

On appeal, the insured argued that even though the commitment’s metes and bounds description covered only Lot A, there were ambiguities in the property descriptions in the policy.  Specifically, the insured noted the references in the enclosed schedules to “County Parcel Number 4-18-28” because, at the time the policy was issued, Tax Parcel Number 4-18-28 included both Lots A and B.  The appellate court found that the trial court’s rejection of the insured’s ambiguity argument regarding the import of “Parcel Number 4-18-28” did not, as the trial court conceded, completely resolve the question of coverage under the policy because “descriptions of property in an insurance policy must be construed with reference to the insured’s reasonable expectations regarding the coverage being purchased.”  The appellate court further noted that the title insurance company’s argument did not refute or otherwise address the insured’s argument that the title insurance company is estopped from denying coverage based on the metes and bounds because the erroneous description in the policy resulted from the title insurance company’s failure to discover that the two lots had merged into one tax parcel.  The appellate court held that the trial court erred in entering summary judgment on Count I in favor of the title insurance company, noting that there remained material issues of fact relating to the insured’s estoppel argument.

With respect to Count II, the trial court found that the title insurance company had a reasonable basis for denying the insured benefits because it had no duty to defend the insured for title discrepancies related to Lot B.  However, the appellate court found that the trial court misperceived the scope of the insured’s bad faith claim, because the insured’s claim was not limited to the title insurance company’s denial of coverage and refusal to provide policy benefits, but also complained regarding the alleged delay in the claims process before the title insurance company denied coverage.  Finally, the appellate court held that, because it vacated the trial court’s entry of summary judgment on the policy issue (Count I), the trial court must also further examine the insured’s claim that the title insurance company breached its duty to defend the insured in the lawsuit filed by the buyer.  This case serves as a warning to all underwriters just how far courts will go to find coverage, as well as a reminder of the need to be precise in property descriptions.

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