What You Need to Know

• The complete defense rule does not apply to title insurance. The Colorado Court of Appeals joined a growing majority of courts nationwide in holding that the complete defense rule, which requires liability insurers to defend all claims if any claim is arguably covered, is not applicable to title insurance.
• Title insurance is fundamentally different from liability insurance. Unlike liability insurance, which provides prospective coverage to defend against "a suit" or "any suits," title insurance "narrowly covers defects in, or encumbrances on, titles that are in existence when the policy issues."
• Covered Risks 4 and 5 are not ambiguous. Covered Risk 4 insures only a right of access (not the ability to develop the property), and Covered Risk 5 requires that any violation of or notice to enforce laws or regulations be recorded in the Public Records for coverage to attach.
• Exclusions must be read in tandem with Covered Risks in determining if there is coverage under the Policy.

In Michel L. Schulp Revocable Trust v. Attys. Title Guar. Fund, Inc., 2026 Colo. App. LEXIS 340 (Colo. App., March 19, 2026), the Colorado Court of Appeals affirmed the district court’s grant of summary judgment to the title underwriter, Attorney Title Guaranty Fund, Inc. (“ATGF”), holding that it was not required to afford a defense to its insured on uncovered claims, even though some claims were covered and ATGF retained counsel to defend. In doing so, the Court joined a growing majority of courts nationwide in finding that the complete defense rule, which requires liability insurers to defend all claims if any claim is arguably covered, is not applicable to title insurance. In its opinion, the Court also analyzed the type of access to the property ATGF insured for under the Policy’s Covered Risks. It found that the insured had the access it bargained for under Covered Risk Four and that the Policy was not ambiguous.

The Trust Buys Undeveloped Land and Builds a Home

In 2018, the Michel L. Schulp Revocable Trust (the “Trust”) purchased undeveloped land in Estes Park, Colorado. An unimproved road (Homestead Lane) was the sole access to a public road, and it crossed multiple adjacent properties. The Trust began to construct a residence, which required improving the portion of Homestead Lane leading to the property. However, the local fire protection district found that if any portion of Homestead Lane was paved, the fire code required the entire road to be paved. In 2021, the Trust began paving the road.

A neighbor, Nicholas Stark (“Stark”) sued and claimed that the Trust had no right to legal access across his property. After a title claim was submitted, ATGF retained counsel for the Trust who successfully defended the right of access.

In 2022, however, another neighbor, Michael Nassimbene (“Nassimbene”) intervened in Stark’s action raising claims of trespass and unjust enrichment based solely on the paving of the road by the Trust without his consent. Specifically, Nassimbene did not contest the easement but rather claimed the paving increased his maintenance costs and violated a shared expense agreement the neighbors had on Homestead Lane.

The Trust submitted the claim to ATGF, who denied the claim as outside the scope of coverage because Nassimbene did not contest the easement and, in any event, the claim was subject to certain standard policy exclusions. The Trust retained its own counsel and settled with Nassimbene. It then sued ATGF to recoup its defense costs.

The Trial Court Grants Summary Judgment to ATGF

The Trust’s argument that its title policy required ATGF to cover claims made by Nassimbene focused on Covered Risks 4 and 5 of the standard ALTA Title Policy. Covered Risk 4 provides coverage to an Insured where there is “[n]o right of access to and from the [Property].” Covered Risk 5 provides coverage for violation of or intent to enforce “any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, or relating to – (a) the occupancy, use, or enjoyment of the [Property].” However, that coverage is limited to when a notice of the same describing the property is in the Public Records. “Public Records” is a defined term in the Title Policy that means records under state statute that impart constructive notice, namely the County Clerk where all deeds, mortgages, and other instruments impacting title to real property are recorded.

Against this framework, the district court held that first, Covered Risk 5 only obligated ATGF to defend if the violation of or intent to enforce any code or regulation was recorded. Since the fire protection district only raised the issue of paving all of Homestead Lane after the closing when the Trust went to build the home, it was not of record when the title policy was issued. Next, the district court found that Exclusions 3(a) and (d) precluded coverage. Exclusion 3(a) precludes coverage for defects “created, suffered, assumed, or agreed” to by the insured. Exclusion 3(d) bars coverage for title defects created post-policy. Finally, it then, relying on the United States District Court of Colorado’s decision in Cherry Hills Farm Court, LLC v. First American Title Ins. Co., 428 F. Supp. 3d 516 (D. Colo. 2019), rejected the Trust’s alternative argument that the complete defense rule should apply to title insurance and mandate a defense for Nassimbene’s claims. The Trust appealed.

Colorado Court of Appeals Affirms and Joins Other Jurisdictions in Holding the Complete Defense Rule Does Not Apply to Title Policies

In its opinion, the Court first addressed Covered Risk 4’s coverage for access and found it to be unambiguous and that it simply insured access. As Nassimbene was not contesting the easement, Covered Risk 4 was therefore not implicated. It rejected the Trust’s argument that access had to be sufficient to develop the property as well as its efforts to rely on an unpublished case from the District of Hawaii, First Am. Title Ins. Co. v. GS Indus., LLC, 2021 U.S. Dist. LEXIS 240601 (D. Haw. Dec. 16, 2021). Specifically, it noted that the GS Industries Court found that the lack of egress predated the government regulation as the easement ran to a one-way road. That was not the case here.

As to Covered Risk 5, it found, like the district court, that there was no notice of an intent to enforce the regulation at issue describing the property in the Public Records. It went further and also emphasized that Exclusion 1 excludes from coverage any impact of a government regulation not recorded in the Public Records as of the policy’s effective date. It also held that because the fire protection district did not require the road to be paved until the Trust decided to develop the property and upgrade the driveway after the title policy’s effective date, the Trust “created” the defect under Exclusion 3 and coverage was barred.

The Court then turned its sights on the complete defense rule. It found that title insurance was different from liability insurance which provides prospective coverage to defend against “a suit” or “any suits.” In contrast, title insurance “narrowly covers defects in, or encumbrances on, titles that are in existence when the policy issues.” It is also subject to conditions and exclusions. Also, unlike liability policies, a title policy is a single premium product paid for at closing, not annually. Finally, it found that title disputes can be bifurcated from other related claims much more easily than liability claims.

In doing this analysis, the Court first noted no Colorado state court had considered the application of the complete defense rule to title insurance. Then, citing the Cherry Hill decision and decisions from the Massachusetts Supreme Judicial Court, the United States Court of Appeals for the Third Circuit, the Illinois Court of Appeals, and the United States District Court for the Western District of Wisconsin, it rejects invoking the complete defense rule in the title insurance context. See GMAC Mortgage, LLC v. First American Title Ins. Co., 985 N.E.2d 823 (Mass. 2013); Lupu v. Loan City, LLC, 903 F.3d 382, 393-95 (3d Cir. 2018) (predicting Pennsylvania law would reject the complete defense rule in the title insurance context); Phila. Indem. Ins. Co. v. Chi. Title Ins. Co., 771 F.3d 391, 398-401 (7th Cir. 2014) (declining to apply the complete defense rule to a title insurance dispute under Illinois law); Findlay v. Chi. Title Ins. Co., 21 N.E.3d 1006 (2014) (endorsing Philadelphia Indemnity's interpretation of Illinois law); Badger Mining Corp. v. First Am. Title Ins. Co., 534 F. Supp. 3d 1011, 1021-22 (W.D. Wis. 2021) (holding that the complete defense rule doesn't apply to title insurance under Wisconsin law).

Takeaways

The obvious takeaway is that yet another court has joined the majority view that the complete defense rule does not apply in the title insurance context. However, lessons can also be learned from the Court’s careful analysis of what Covered Risks 4 and 5 cover and how the Exclusions play into their impact.

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