What You Need to Know

• Adverse possession claims fall squarely within parties-in-possession exclusions - The court reinforced established law that title insurance policies' standard "parties-in-possession" exceptions clearly exclude coverage for adverse possession claims, as these represent rights of persons in possession not discoverable through public record searches.
• No duty to defend when the only theory falls within an exclusion - Even if an adverse possession claim appears to lack merit, title insurers have no duty to defend or indemnify when the sole theory of liability is encompassed by a policy exclusion. The court rejected Cropsey's argument that coverage should apply because Waterview allegedly never occupied the disputed property.
• "Public Records" in exclusions means chain-of-title records, not all public documents - The court clarified that references to "Public Records" in parties-in-possession exceptions should be interpreted according to industry custom as records that impart constructive notice in the chain of title (deeds, liens, etc.), not broader public documents like court filings. This protects insurers from having to search all possible public sources.
• Policy language distinctions matter significantly - Though both policies contained similar parties-in-possession exclusions, the different wording between the Modified Ridge Policy and Sienna Policy created distinct arguments and interpretations, demonstrating how even minor language variations can substantially impact coverage disputes.
• Late notice does not help insureds - Cropsey's failure to provide formal written notice until 2018—over a decade after the 2007 quiet title action began—undermined its position, though the court's decision ultimately rested on the exclusion itself rather than notice issues.

Introduction

In Commonwealth Ins. Co. v. 2610 Cropsey Dev. Corp., 22-CV-2512, 2025 U.S. Dist. LEXIS 211281 (E.D.N.Y. Oct. 24, 2025), the Eastern District of New York recently granted summary judgment to a title insurer on their claim that it owed no coverage to its insured concerning a quiet title action over ownership of a private road. The basis for the court’s decision, and the insurer’s supporting argument, was that the parties-in-possession exception precluded coverage.

Background

In 2005, 2610 Cropsey Development Corp. (“Cropsey”) purchased two real property lots in Brooklyn, New York. In connection with the purchase, Cropsey obtained a title policy from Ridge Abstract Corp. (“Ridge”), underwritten by Commonwealth Insurance Company (“Commonwealth”). The policy did not insure any portion of Centre Place.

Cropsey’s lots were adjacent to property owned by Waterview Towers, Inc. (“Waterview”). Between the respective properties was a narrow private road known as Centre Place. Waterview and its predecessor had long used half of the Centre Place road as parking for a nearby co-op building also owned by Waterview. However, ownership of Centre Place would allow Cropsey to develop a larger project than it had first expected.

In February 2005, Ridge’s employee orally agreed to modify the aforementioned policy to include the half of Centre Place that abutted Cropsey’s property. The modification to the policy (the “Modified Ridge Policy”) was eventually memorialized in writing and backdated to April 2005. Then, in March 2006, Cropsey sent a letter to Waterview that claimed that Cropsey owned the entirety of Centre Place and demanded that Waterview cease using Centre Place to park vehicles.

On April 6, 2007, Waterview filed a quiet title action in New York state court, seeking a determination on ownership of Centre Place. Waterview asserted title to the entirety of Centre Place and claimed that it held a deeded interest in half. On May 31, 2007, Cropsey executed two deeds purporting to convey title to the half of Centre Place abutting its property to itself. On January 31, 2008, the court held that Waterview did not have a deeded interest in Centre Place but found that there were disputes of fact concerning Waterview’s adverse possession claim.

In August 2008, Cropsey recorded a deed that purported to convey the Waterview-claimed half of Centre Place to itself. At this time, Cropsey purchased a second title policy from Sienna Abstract, LLC (“Sienna”), underwritten by Commonwealth, (“Sienna Policy”) that insured the Waterview-claimed half of Centre Place. Interestingly, Sienna’s owner was also Cropsey’s counsel in the quiet title action. Cropsey counterclaimed in the state court case that it held title to the entirety of Centre Place and Waterview’s counsel narrowed his client’s claims to title by adverse possession only, not any deeded interest.

Following an eleven-day bench trial in 2014, the New York state court found that Waterview had obtained ownership over half of Centre Place via adverse possession, and that Cropsey’s deed to lot 48 of the property conveyed right to ownership of the other half of Centre Place. Finally, the court expunged Cropsey’s various deeds to itself.

Concurrent with the quiet title action was a dispute between Cropsey and Commonwealth over when Commonwealth was notified of the quiet title action. It was undisputed that Cropsey only sent a formal written claim to Commonwealth on December 18, 2018 — far after the state court action and the judgment entered therein. However, Cropsey contended, and Commonwealth disputed, that constructive notice was previously provided including through Commonwealth’s policy issuing agents.

Cropsey and Commonwealth both filed suit in the Eastern District of New York and those cases were consolidated. Commonwealth sought a declaration that it had no obligation to indemnify or reimburse Cropsey, and Cropsey asserted counterclaims for breach of contract of both title policies. Both parties moved for summary judgment.

Decision

In considering the dual motions, the District Court focused on the “parties-in-possession” exception to coverage that was contained in both title policies. In short, the exceptions precluded coverage for loss or damage arising by reason of rights of persons in possession.

The Sienna Policy’s exception stated: “This policy does not insure against loss or damage (and the Company will not pay costs, attorneys' fees or expenses) which may arise by reason of . . . Rights or cla[i]ms of parties in possession not shown by public records.” A later portion of the Sienna Policy then defined “Public Records” as “Records established under state statutes at Date of Policy for the purpose of imparting constructive notice of matters relating to real property to purchasers for value and without Knowledge.”

Under established New York law, claims of adverse possessions, such as those raised by Waterview, fall “squarely” within the scope of the parties-in-possession exception. Thus, the Court found that Commonwealth had no obligation as to the Modified Ridge Policy. Specifically, the Modified Ridge Policy’s exception stated: “The following are expressly excluded from coverage of Policy, and the Company will not pay loss or damage costs, attorneys' fees, or expenses which arise by reason of . . . Rights of tenants or persons in possession.”

Cropsey alleged that coverage should have been afforded as it alleged Waterview never occupied the Cropsey portion of Centre Place. The Court rejected that argument as it found where “the only theory of liability requires proof of conduct [i.e., adverse possession] encompassed by the exclusion, . . . the insurance carrier has no duty to indemnify and is therefore relieved of the duty to defend.”

As to the Sienna Policy, the Court rejected Cropsey’s argument that the parties-in-possession exception's use of "public records," uncapitalized, in its policy refers to a broader set of records than the defined “Public Records” term identified in the same policy. The basis for Cropsey’s argument was that the state court action was a “public record” that identified Waterview’s adverse possession claim and that, therefore, the exception did not apply. However, applying the contractual maxim of interpreting an agreement with cognizance of the customs, practices and usages of its particular trade or business, the Court found that the purpose of the parties-in-possession exception was to protect the insurer from title defects that could not be discovered through searching the chain of title. Instead, the risk for such possible defects is passed onto the insured who can presumably more easily observe whether there is a claimant in possession of the subject property. With that context, it made little sense for Commonwealth to commit to have to search all court filings or similar “public records” documents. Therefore, the District Court granted Commonwealth’s motion for summary judgment and found it had no obligation under either policy to indemnify or reimburse Cropsey for the fees and costs it incurred in the state court action.

Takeaway

This case functions as a helpful restatement of two typical parties-in-possession exceptions to coverage for title insurers that exclude adverse possession claims unambiguously. Further, the case is a helpful restatement that when the conduct pled in the Complaint fails squarely in an exclusion, there is no duty to defend regardless of the lack of perceived merit in the pled claim. Finally, the minimal distinctions between the two policies at issue also highlight the effect that minor differences in language can have on the arguments that can be raised by title insurer and insured, alike.