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New York Court Holds Bank Selling a Property Did Not Violate Insurance Law by Requiring Property Purchaser to Obtain Title Insurance from a Specific Title Insurer Banner Image

New York Court Holds Bank Selling a Property Did Not Violate Insurance Law by Requiring Property Purchaser to Obtain Title Insurance from a Specific Title Insurer

Month: June 2019

New York Court Holds Bank Selling a Property Did Not Violate Insurance Law by Requiring Property Purchaser to Obtain Title Insurance from a Specific Title Insurer

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New York’s Second Department Appellate Term recently held that a bank did not violate Insurance Law § 2502(a)(2) when it required a property purchaser to obtain title insurance from a particular insurer because the bank was acting as a seller, not a lender.  See Wenig Saltiel, LLP v. Specialized Loan Servicing, LLC, 63 Misc. 3d 152(A) (N.Y. App. Term. 2019). In the case, plaintiff purchased a property from defendant Specialized Loan Servicing, LLC, who was an agent for defendant Deutsche Bank National Trust Company as Trustee for GSAA Home Equity Trust 2005-4.  After the purchase, plaintiff filed a complaint making a number of allegations about the sale, including that the defendants violated New York Insurance Law § 2502(a)(2), which states that “[s]tate chartered banking institutions and federally chartered banking institutions shall not extend credit, lease or sell property of any kind, or furnish any services, or fix or vary the consideration for any of the foregoing, on the condition or requirement that the customer obtain insurance from such institution, its affiliate or subsidiary, or a particular insurer, agent or broker[.]”  The trial court dismissed this cause of action.

On appeal, the Court affirmed.  The Court found that Insurance Law § 2502(a)(2) “prohibits certain mortgage lenders from requiring borrowers to obtain title insurance from a specific title insurer, agent or broker as a condition precedent to receiving a loan.”  (emphasis added).  “As the transaction involved herein was between a seller and a purchaser of real property, that statute was not implicated.”

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

New Jersey Appellate Court Holds No Presumptive Rule that Materials Prepared for a Coverage Investigation Are Not in “Anticipation of Litigation”

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The New Jersey Appellate Division recently reversed a lower court and held that there is no presumptive rule that materials prepared or collected for an insurance coverage investigation are not privileged work-product prepared in “anticipation of litigation.”  See Paladino v. Auletto Enter., Inc., 2019 WL 2375475 (N.J. Super. Ct. App. Div. June 6, 2019).  This is a significant decision for insurance underwriters as well as claims handlers.

In Paladino, Plaintiff was a guest at Defendant’s catering facility, and fell while walking down a staircase.  Defendant prepared an accident report and gave notice to its insurer, which then retained an investigator.  The investigator photographed and made a diagram of the accident scene, and obtained recorded oral statements from three of Defendant’s employees.  Defendant’s claims examiner later certified that her purpose in retaining the investigator was to “prepare a defense for [Defendant] in the event that [Plaintiff] filed a lawsuit.”  Plaintiff’s counsel later visited Defendant’s facility to photograph the accident scene, and also received video surveillance and an incident report from the insurance carrier.

Plaintiff and her husband then filed suit, alleging her injuries from the fall were suffered due to Defendant’s negligence.  They also alleged a breach of express and implied warranties, and a failure to properly maintain the property.  In their answer, Defendant disclosed that its investigator had taken photographs of the staircase, prepared a diagram, and obtained statements from employees.  It did not produce this evidence, however, asserting that the documents were privileged work product.

Plaintiff filed a motion to compel the production of the photographs and recorded statements, which was granted by the trial court.  The trial court relied on Pfender v. Torres, 336 N.J. Super 379 (App. Div. 2001), as supporting a bright-line rule that materials prepared as part of a coverage investigation prior to the commencement of litigation are presumptively not protected by the work-product doctrine, because the insurer “may have” had interests apart from defending its insured in litigation. Pfender, in turn, relied on a lineage of case law such as State v. Pavin, 202 N.J. Super. 255, which held that investigatory materials prepared by an insurer before any legal claim was presented or not specifically directed by an attorney were not privileged.

On appeal, the Appellate Division reversed, holding that materials prepared in the scope of a coverage investigation may be protected work product if the materials pass “the appropriate fact-specific analysis” required by the work-product doctrine and Rule 4:10-2(c). In its opinion, the Court reconciled Pfender v. Torres, 336 N.J. Super 379 (App. Div. 2001) with the Appellate Division’s decision in Medford v. Duggan, 323 N.J. Super. 127 (App. Div. 1999).  The Court reasoned that these two cases, taken together, establish that materials prepared for a coverage investigation are protected work-product when a two part test is met. First, the materials must have been “prepared or collected in anticipation of litigation by another party or that party’s representative,” which includes an insurer or an agent of that party. If the materials were prepared or collected in anticipation of litigation, the party seeking the materials must satisfy a two part standard. The party “must (1) show a substantial need for the discovery; and (2) demonstrate that he or she is unable, without undue hardship, to obtain the substantial equivalent of the materials.” Even if these materials are compelled, the mental impressions, conclusions, opinions, or legal theories of an attorney contained therein are protected.  On the other hand, facts, statements made in the normal course of business, and statements that will be used to impeach a testifying witness are never protected.

This method of analysis, the Court held, is more consistent with the tenets of the work-product doctrine than a rule which presumptively excludes investigatory materials.  Under the work-product doctrine, certain “privileged” information, such as attorney work-product, is exempt from the general rule that all parties to litigation have the right to discovery of relevant information.  This doctrine is memorialized in Rule 4:10-2(c), which states that “(a) party may obtain discovery. . . prepared in anticipation of litigation or trial by or for another party or by or for that other party’s representative. . . only upon a showing that the party seeking discovery has substantial need of the materials. . . and is unable without undue hardship to obtain (their) substantial equivalent.”

This case is significant because materials prepared or collected for a coverage investigation will no longer be presumptively excluded from the work-product doctrine in the event of litigation. Rather, if it can be shown that the materials were “prepared or collected in anticipation of litigation,” and the opposing party cannot show substantial need and undue hardship, the materials may qualify as privileged work product.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com. The Firm gratefully acknowledges the assistance of summer associate Andrew Raimonde in the preparation of this Alert.

Expanded A-901 Requirements Coming Soon? Sales Persons, Consultants and Soil Recyclers Should Prepare

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There are extensive regulations in New Jersey governing businesses involved in the solid waste and recycling industries.  Many people do not realize that it is a long and complicated process to become a fully-licensed solid waste transporter, facility or broker.  And some do not realize that they cannot conduct a solid waste business in the State of New Jersey until the process is completed.

One of the most time-consuming aspects of solid waste licensing is obtaining A-901 approval, which is a requirement that currently does not apply to those involved in recycling.  The A-901 program was adopted many years ago in response to the infiltration of organized crime into the solid waste business to ensure those conducting the business of solid waste in New Jersey have the requisite integrity, reliability, expertise and competence.  There are some limited exceptions to A-901 licensing requirements for self-generators of solid waste and Licensed Site Remediation Professionals who manage solid and hazardous waste in connection with remediation projects (on the latter topic see our blog post NJDEP Issues Policy Statement on A-901 Licensing for Site Remediation Professionals, May 2016).     

The New Jersey Legislature is currently considering a bill (S1683/A4267), which would expand the scope of A-901 requirements to a broader range of persons involved in the solid waste industry, including sales persons and consultants.  The bill also would subject persons or companies engaged in soil and fill recycling services to the same regulation as those engaged in the business of solid waste.  This proposed legislation passed the Senate unanimously on June 20, 2019, and is now pending before the Assembly.

While the process to apply for an A-901 license is long (on average 12 months or longer), our experience has provided several practical considerations that can make the process smoother:

  • The applicant is not the only entity responsible for completing the corporate history disclosure forms; each parent company and potentially even remote investors must completely fill out these forms. 
  • While seemingly intrusive, every key employee, owner, officer, director, member and partner in the business must submit a personal history disclosure form, which includes information about family members, employment history and these individuals must also submit to fingerprint checks.  It is imperative that these persons be complete in their responses.
  • During the background check by the New Jersey State Police, be prepared to respond to questions and/or inquiries about situations that may have occurred years ago.  For example, an applicant recently was asked about a bench warrant for a long unpaid parking ticket; an affidavit from the applicant explaining that he lived in Europe at the time and that he did not own the car in question kept the background check on track.
  • Make sure the business is in good standing, including with the Division of Taxation. 

Finally, if the application passes muster, NJDEP will issue the A-901 license, but may as a condition require the recipient to attend an NJDEP seminar and/or obtain a letter from an attorney stating that the company has been advised of the applicable laws and regulations and is aware of its compliance obligations.  Having an attorney that has been involved in the A-901 application and that will be available to complete this step will also help to efficiently navigate the process.  

For more information, please contact the author Alexa Richman-La Londe at alalonde@riker.com or any attorney in our Environmental Practice Group.

California Federal Court Dismisses TILA Rescission Claim Arising Out of Loan Modification

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The United States District Court for the Southern District of California recently held that the Truth in Lending Act’s (“TILA”) disclosure and rescission provisions do not apply to a loan modification in which there is no extension of new credit.  See Lucore v. Wells Fargo Bank, N.A., 2019 WL 2373499 (S.D. Cal. June 5, 2019).  In the case, plaintiff received a loan in 2006 that was secured by a deed of trust against his home.  In 2010, he executed a modification of the loan and, four months later, sought to rescind the loan under TILA because he was not given the required TILA disclosures during the modification.  Defendant nonetheless proceeded to record notices of default and a notice of trustee’s sale against the property.  Plaintiff then brought this action seeking cancellation of the instruments and alleging a violation of the Fair Debt Collection Practices Act (“FDCPA”).  The FDCPA claim was based on plaintiff’s allegations that defendant was trying to foreclose on a note and deed of trust that had been rescinded.  Defendant moved to dismiss the action, arguing that plaintiff’s attempt to rescind was time-barred because it was more than four years after the initial loan.

The Court granted defendant’s motion to dismiss.  Under TILA, borrowers have the right to rescind a loan for three days.  However, if the lender fails to make the required TILA disclosures, this rescission right extends for three years.  Here, plaintiff claimed that defendant was required to provide TILA disclosures in connection with the 2010 refinance and, because defendant failed to do so, his rescission request was timely.  The Court disagreed, noting that “[c]ourts in the Ninth Circuit have found that TILA’s disclosure requirements and rescission provisions do not apply to loan modifications agreements when they do not constitute either the extension of new credit or a refinancing.”  Likewise, the relevant federal regulations state that a transaction is not a refinancing when it results in a “reduction in the annual percentage rate [from the original loan] with a corresponding change in the payment schedule [compared to the original loan].” 12 C.F.R. § 226.20(a)(2).  Here, the 2010 modification was not a refinancing because “Plaintiff’s existing obligation to repay the original loan was not satisfied and replaced by a new obligation. The modification simply altered Plaintiff’s existing loan repayment obligation by lowering his interest rate.”  Thus, defendant did not have a duty to provide new disclosures in 2010, and plaintiff’s rescission request was untimely.  Because plaintiff’s causes of action for FDCPA and cancellation were based on his claim that he timely rescinded the loan, the Court dismissed the action.

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

New York Court Dismisses Action Against Title Insurer Under Exclusion 3(a)

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The New York Supreme Court, Kings County recently found that a restrictive covenant could constitute an encumbrance under a title insurance policy but nonetheless dismissed an action brought by an insured because the insured was aware of the covenant before purchasing.  See 50 Clarkson Partners LLC v. Old Republic Nat’l Title Ins. Co., 516966-2018 (N.Y. Sup. Ct. May 30, 2019).  Plaintiff purchased the subject property in 2017, and defendant issued a title insurance policy in connection with the purchase.  In 2018, plaintiff allegedly realized that it could not redevelop the property as it had planned because there was a restrictive covenant from 1945 that prohibited the development of a structure more than two stories high.  Plaintiff filed a claim with defendant, and defendant denied the claim.  Plaintiff then brought this action, and defendant moved to dismiss.

The Court granted defendant’s motion to dismiss.  First, it denied defendant’s argument that the restrictive covenant is “an encumbrance regarding the use of the property and is not a defect affecting ownership of the property.”  Although the Court noted that “there are no New York cases discussing whether a restrictive covenant is a defect for which title insurance must provide coverage,” it likened restrictive covenants to other encumbrances and found that “restrictive covenants are surely encumbrances within the meaning of the title insurance policy as well as New York law.”  Nonetheless, the Court found that the covenant was excluded from coverage under Exclusion 3(a), which excludes any claims “created, suffered, assumed or agreed to” by the insured.  In this case, the Purchase and Sale Agreement stated that plaintiff would accept title subject to certain liens enumerated in an exhibit to the Agreement, which included the restrictive covenant.  The Agreement further stated plaintiff only accepted title subject to the covenant so long as the seller met certain conditions precedent, including “an agreement to modify the existing restrictive covenants, with the Owners of the properties adjacent to the Land necessary for the underpinning and shoring and which shall be reasonably required to perform the Construction pursuant to the Plans.”  Because the seller failed to satisfy these conditions, plaintiff argued that it had not accepted or agreed to the restrictive covenant and Exclusion 3(a) did not apply.  The Court rejected this argument, finding that “the failure on the part of the seller to comply with any conditions precedent does not undo or eliminate imputed knowledge of the covenants on the part of the plaintiff.”  Plaintiff had the right under the Agreement to terminate the Agreement and receive a return of its deposit if the conditions were not met, and it did not do so.  “[T]here can be no question the plaintiff was aware of the covenants and contracted remedies in the event the covenants were not modified in preparation of the anticipated work being performed.”  Thus, the closing “took place with full knowledge of the restrictive covenants” and Exclusion 3(a) applied.

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

Second Circuit Holds FDCPA Claim Accrued on Date Plaintiff’s Bank Account Was Improperly Frozen, Not on Date Plaintiff Had Notice of the Violation

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The United States Court of Appeals for the Second Circuit recently held that a claim brought under the Fair Debt Collection Practices Act (“FDCPA”) accrued on the date the debt collector froze the wrong person’s bank account, not the date the person had “notice” of the violation.  See Benzemann v. Houslanger & Assocs., PLLC, 2019 WL 2079006 (2d Cir. May 13, 2019).  In 2008, the defendant debt collector sent a restraining notice to a bank regarding a judgment against an individual named Andrew Benzemann (the “Debtor”).  However, defendant provided plaintiff Alexander Benzemann’s (“Plaintiff”) address and social security number.  The bank froze Plaintiff’s account.  Upon realizing what happened, Plaintiff’s attorney contacted defendant and notified him about the error, and defendant had the freeze lifted.  On December 6, 2011, defendant mailed another restraining notice making the exact same mistake to the same bank, and the bank again froze Plaintiff’s account.  Plaintiff realized his account was frozen on December 13, 2011, and contacted his attorney.  On December 14, Plaintiff learned that the account was frozen again due to defendant’s mistake.  On December 14, 2012, Plaintiff filed this action under the FDCPA.  The District Court initially found that Plaintiff filed the action outside the one-year statute of limitations because the claim accrued on December 6—the date defendant mailed the incorrect notice.  However, the Second Circuit reversed in 2015, holding that the FDCPA violation occurred whenever the bank froze the account “because it was only then that [Plaintiff] had a complete cause of action and notice of the FDCPA violation,” and remanded the action for discovery on when the bank froze the account.  After discovery, it was confirmed that the bank froze the account on December 13, 2011.  Thus, the District Court granted the defendant’s summary judgment motion because the claim was untimely.

On appeal, the Second Circuit affirmed.  Plaintiff argued that the Second Circuit’s language in the prior decision—that a violation does not occur until Plaintiff “had a complete cause of action and notice of the FDCPA violation”—meant that the limitations period did not begin running until Plaintiff discovered the improper restraining notice, i.e., December 14, 2011. (emphasis added).  The Court disagreed and stated that Plaintiff was taking that quotation out of context.  Instead, the Court stated that its prior decision held only that the FDCPA claim accrues when the injury occurs, and “Plaintiff’s knowledge—or lack thereof—is irrelevant in determining when an alleged FDCPA violation occurs.”  Further, the Court found that the FDCPA statute itself is clear that a plaintiff must bring claims “within one year from the date on which the violation occurs.”  See 15 U.S.C. § 1692k(d).  The Court also rejected Plaintiff’s claim that the action was timely under the “discovery rule.”  The Court left open the question of whether the discovery rule applies in FDCPA actions, finding instead that Plaintiff discovered his account was frozen on December 13, so it would be barred even if the discovery rule applied.  Finally, the Court found that equitable tolling also does not apply because there was no evidence Plaintiff acted diligently in bringing this action once he discovered the violation.

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

NJDEP’s Common Law Natural Resource Damage Claims Temporarily “Out of Business”

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When the New Jersey Department of Environmental Protection (“NJDEP”) filed six new lawsuits regarding hazardous substance discharges on the same day last August, NJDEP announced that environmental enforcement was “back in business” in New Jersey.  In three of these six cases, NJDEP brought its first claims for natural resource damages (“NRD”) in ten years.  NJDEP relied on both the Spill Compensation and Control Act (“Spill Act”) and common law theories of trespass, public nuisance, and, in one case, strict liability for abnormally dangerous activities, as the legal basis for its natural resource damages claims.  However, the trial judge in the case involving the former Hess Port Reading refinery and terminal in Woodbridge (the “Port Reading Case”) quickly dismissed all of NJDEP’s common law claims for NRD.  Although the Appellate Division currently is reviewing the dismissal, if upheld, this ruling could limit the types of damages recoverable by NJDEP and prevent the agency from putting its NRD cases before juries that presumably would be unsympathetic to the defendants NJDEP has targeted.

As noted above, in December 2018, Superior Court Judge Thomas McCloskey dismissed the common law counts of the Port Reading Case.  (As of this writing, the defendants’ motions to dismiss the common law claims in NJDEP’s other two cases in this first wave of new NRD suits—the Pohatcong Valley Superfund Site in Warren County and the Duell Fuel site in Atlantic City—remain pending.)  Judge McCloskey reasoned that NJDEP’s trespass claim failed because the State does not have exclusive possession of the allegedly injured groundwater, wetlands, and other natural resources.  Exclusive possession of property is a fundamental prerequisite for a trespass claim at common law, but Judge McCloskey found that the State possesses only a public trust interest in its natural resources that is shared with its citizens.  The court also dismissed NJDEP’s claim for monetary damages resulting from public nuisance based on a New Jersey Supreme Court ruling that a public entity only can seek an order forcing a party to stop a public nuisance, not money damages for the cost of abating the nuisance.  Finally, not only did the court hold that storing and refining petroleum products is not an abnormally dangerous activity, but it also held that the Spill Act’s regime of strict, joint, and several liability for hazardous substance discharges “subsumes” NJDEP’s common law claim for strict liability for abnormally dangerous activities.

NJDEP’s interlocutory appeal of the dismissal of its common law claims is pending before the Appellate Division.  In its brief filed on May 1st, NJDEP relies on a December 2018 decision permitting Rhode Island to bring trespass claims against oil companies for contamination of groundwater by the gasoline additive MTBE, despite that court’s acknowledgement that Rhode Island lacked the exclusive possessory property interest typically required for trespass claims.  Rhode Island v. Atl. Richfield Co., 357 F. Supp. 3d 129 (D.R.I. 2018).  But, as a defendant in the Duell Fuel NRD case pointed out to the trial court in that matter, Atlantic Richfield arguably is distinguishable because the Rhode Island court justified its departure from a traditional trespass analysis because of the “widespread” incidence of MTBE contamination throughout that state; in the Port Reading Case, by contrast, NJDEP seeks compensation for damages to natural resources at just one site.  As an alternative to a trespass claim, NJDEP contends it should be permitted to amend its complaint to assert an apparently novel claim for a so-called “tortious interference with the public trust.”  With respect to the public nuisance claim, NJDEP argues that public entities have been awarded costs of abatement incidental to injunctive relief in two prior cases and that the trial court prematurely dismissed the claim before a plan for abatement of the alleged injuries to natural resources could be developed in the litigation.  NJDEP also argues that the Spill Act does not “subsume” the common law cause of action of strict liability for abnormally dangerous activities because the statute’s savings clause preserves existing common law remedies.  N.J.S.A. 58:10-23.11v.  Implicitly acknowledging binding precedent cited by the trial court holding that operating a petroleum facility (i.e., a gas station) is not abnormally dangerous, NJDEP characterized its complaint as claiming that the discharge of the hazardous substances is the abnormally dangerous activity.  The defendants’ brief in response to these NJDEP arguments will be filed in June.

Given the sweeping authority possessed by NJDEP under the Spill Act to collect NRD, why should the fate of these ancillary common law claims matter?  As evidenced by its taking an interlocutory appeal to preserve the common law claims, NJDEP believes they are significant, and its appellate brief signals its reasons.  First, although it is well established that there is no right to a jury trial for Spill Act NRD claims, a jury typically would hear the common law tort claims that were dismissed in the Port Reading Case.  (That being said, defendants in the Pohatcong Valley case have argued that NJDEP’s jury demand should be stricken regardless of the legal soundness of the common law claims because the equitable, non-jury Spill Act counts form the “core” of the controversy; their motion to strike is pending before the trial court in Warren County.)  NJDEP surely would prefer to adjudicate its NRD cases before juries, which presumably would be more receptive than a judge to the state’s efforts to caricature defendants as remorseless corporate polluters.  Second, no reported cases have decided whether Spill Act liability for NRD applies retroactively to discharges of hazardous substances that occurred before 1977, and, even if a court found that the Legislature intended it to be retroactive, that result could be subject to constitutional challenge.  See NJDEP v. ExxonMobil Corp., 453 N.J. Super. 588, 645-48 (Law Div. 2015).  There are no such retroactivity concerns for the venerable common law torts of trespass and nuisance, so, for example, NJDEP could assert common law claims against Hess for discharges at its Port Reading facility dating back to its opening in 1958, whereas NJDEP’s Spill Act claims for pre-1977 discharges rest on a shakier legal foundation.  Finally, common law torts such as trespass permit NJDEP to assert a claim for punitive damages, which would increase NJDEP’s potential NRD claim substantially.

NJDEP’s aggressive litigation posture in the three NRD cases discussed in this article, and in yet other new NRD cases filed subsequently, means that this dispute over the soundness of common law NRD claims may be the first of several to reach the appellate level.  If the dismissal of common law claims in the Port Reading Case is upheld, the parties in NJDEP’s crosshairs will have a somewhat stronger position when attempting to resolve New Jersey NRD claims.

For more information, please contact the author Michael Kettler at mkettler@riker.com or any attorney in our Environmental Practice Group.

Louisiana Federal Court Finds Lack of Access Did Not Render Property Unmarketable, But That Insured Still May Be Entitled to Actual Loss from Lack of Access

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The United States District Court for the Western District of Louisiana recently held that the lack of access of an insured property did not render title to the property unmarketable, but found that the title insurance company must either cure the access issue or pay the diminution of value caused by the lack of access.  See BJD Properties, LLC v. Stewart Title Guar. Co., 2019 WL 2061972 (W.D. La. Mar. 29, 2019).  In 2006, the plaintiff-insured purchased a 27-acre property.  Although the property did not abut any public roadways, the insured had an oral agreement with a related entity that owned the neighboring property (the “Related Entity”) under which the insured could access its property via a road through the Related Entity’s property (“Lot 16”).  In January 2016, the homeowners’ association (the “HOA”) on Lot 16 demanded that the insured stop using Lot 16 to access its property, claiming that the oral agreement violated the HOA’s subdivision restrictions.  The insured did not notify the insurer of this issue at the time.  The HOA then brought an action against the Related Entity and, in June 2016, the Court enjoined the construction of the road through Lot 16.  In July 2016, the purchasers of one of the insured’s lots demanded a refund of their purchase price, which the insured provided. The insured filed a claim with the title insurance company and, after the title insurance company tried unsuccessfully to cure the lack of access, brought this action seeking damages.

The Court first found that the insured did not have a claim that title to the property was “unmarketable.”  It found that the policy explicitly covers losses for “lack of right of access,” and the insured’s argument that a lack of access would render title unmarketable would make the access coverage provision superfluous.  The Court also cited Fid. Natl. Title Ins. Co. v. Woody Creek Ventures, LLC, 830 F.3d 1209 (10th Cir. 2016), finding that unmarketability refers to defects affecting rights of ownership, not defects affecting physical condition.  Second, the Court found that the insured cannot recover damages based on the claim that it does not have a “preferred” right of access.  The insured retained two experts who opined that an access route through the neighboring property to the north caused a diminution of value of $243,500 when compared with access through Lot 16.  However, the Court found that the insured was not entitled to these damages—and that as long as the insurer could provide some access, that was sufficient under the policy.  Third, the Court found that the insurer was not liable for the refund the insured provided to the purchasers because the policy expressly excepts losses “voluntarily assumed by the insured in settling any claim or suit without the prior written consent of” the insurer.  Fourth, the Court found that the insurer could not be liable for monies the insured expended in developing the property because the insured could not point to any policy provision under which these losses would be covered.  Fifth, the Court found that the insured was not entitled to its costs incurred in this litigation because there was no evidence the insurer acted in bad faith.

Finally, although the Court found that “none of the categories of damages enumerated by the insured are recoverable under the Policy,” it held that the insured was still entitled to its damages from any actual loss caused by the lack of access.  The Court rejected the insurer’s claim that a loss did not occur until the insured purchased a right of access or sold the property at a loss, and instead found that it “has suffered an ‘actual loss’ if it can prove that the lack of access has caused a diminution in the value of the Property.”  In this case, the Court recognized that there was some dispute under Louisiana law as to how the lack of access could be cured, but left that question unresolved on this summary judgment motion:  “The determination of this cost to cure and the correlative diminution in value of the property is left to the trier of fact—that is, unless the insurer satisfies its obligations under the Policy by curing the access problem.”

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

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