What You Need to Know

• In 1723 S. Mich. (Chi.) Landco. LLC v. Chi. Title Ins. Co., the Northern District of Illinois granted summary judgment to Chicago Title, holding that a Schedule B exception excluding the "rights" of the City and the public to a 16-foot alley unambiguously barred coverage for the City's claim to a portion of the insured property.
• The Court held that "rights" encompasses all property interests, fee or easement, recorded or unrecorded, and refused to read a "use-rights only" limitation into the policy or consider extrinsic evidence to manufacture ambiguity where none exists.
• A General Exceptions Endorsement cancelling the policy's broad catch-all exceptions did not nullify the specific, narrowly drawn alley exception; the two provisions address different interests and coexist.
• The practical takeaway: where a title policy contains a specific exception identifying a potential adverse interest, coverage for that interest requires negotiating the exception's removal by endorsement — a general exceptions endorsement will not suffice.

Introduction

In a recent case from the United States District Court of the Northern District of Illinois, the Court granted the Defendant Chicago Title Insurance Company’s (“Chicago Title”) motion for summary judgment finding their denial of coverage to the Plaintiff 1723 S. Michigan Landco, LLC (“Landco”). 1723 S. Mich. (Chi.) Landco. LLC v. Chi. Title Ins. Co., 2026 U.S. Dist. LEXIS 60403 (N.D. Ill. 2026) (hereinafter “Landco”) was appropriate. In doing so, the Court emphasized that it would interpret and enforce an exception in a title insurance policy according to its plain meaning and will not manufacture ambiguity if there is none. The Court’s holding also points to the importance of interpreting each provision considering the entire policy, not in isolation.

The Coverage Dispute Over an Alley

Landco purchased a commercial property in the City of Chicago (the “City”) known as 1723 South Michigan Avenue for $7,000,000 on May 17, 2022. Chicago Title issued a policy to Landco, insuring the title for the same amount.

Schedule B of the Policy contained several exceptions. One of them was Exception 8, which precluded coverage for rights of the City and the public “to the 16 Foot Alley Running North to South through the Center of the Block 3 aforesaid [].” Id. at 2. There were also five general exceptions, two of which included exceptions for “rights or claims of parties in possession” and “easements, or claims of easements” not demonstrated in public records. Id. Landco later purchased a “General Exceptions Endorsement” (“endorsement”), which cancelled all five general exceptions and stated that the endorsement prevails when it conflicts with a provision in the policy.

Landco received a January 2023 email from the City classifying the 16-foot alley as “an alley by prescriptive use” under Section 2-202 of the Ill. Highway Code, 605 ILCS 5/2-202.  In that vein, Landco consulted a senior title officer at Chicago Title who advised that Section 2-202 would divest Landco of title to the Disputed Land. In early 2023, the City denied Landco’s application for a building permit, asserting that it, not Landco, owned the eastern 8 feet of the Property (“Disputed Land”). This claim was not found in any public records. On April 17, 2023, Chicago Title, therefore, denied Landco coverage based on Exception 8.

The District Court Decides that Exception 8 Unambiguously Bars Coverage

Landco sued Chicago Title on August 1, 2025 and filed a two-count First Amended Complaint for (I) breach of contract and (II) bad faith. Chicago Title moved for summary judgment on Count I on two grounds: first, that its denial of coverage was proper under Exception 8 and second, that Landco cannot establish compensable damages.

The Court held that Exception 8 encompasses the City’s property interest. It also found that Exception 8 does not conflict with the General Exceptions Endorsement.

First, the Court began with it “will not strain to find ambiguity” in a contract or insurance policy where there is none. Id. at 6 (citing Firebirds Int’l, LLC v. Zurich Am. Ins., 2022 IL App (1st) 210558, ¶ 18). It then found that the term “rights” included in Exception 8 was not ambiguous. All property rights were encompassed by Exception 8 as to the alley. In that vein, while the Court found that the City likely had a prescriptive easement, not a fee interest, it stated that such a finding is immaterial here. Regardless of whether the City had a fee interest or an easement, the word “rights” should be interpreted to encompass both even if the property interest was unrecorded. Indeed, Exception 8 sets out coverage rights for the City or the public specifically for the eastern 8 feet of the property, which is the exact parcel that is disputed.

The Court also rejected Landco’s argument that Exception 8 conflicts with the General Exceptions Endorsement by distinguishing the language in the endorsement and Exception 8. Landco argued that the General Exceptions Endorsement is broad and applies to any one that may have a non-record interest in the Property. The Court, however, first found that Exception 8 is narrow and specifically names the rights of the public and the City to a specific portion of the Property (i.e., the alley). As such, the Court held that Exception 8 did not nullify the General Exceptions Endorsement, which covers any general exceptions such as the parties in possession exception.

Landco also argued that Exception 8 can be reasonably read to only apply to use rights, like easements, not ownership rights. Again, the Court viewed this as an impermissible interpretation that would require them to read language into the policy that is not there.

Finally, Landco attempted to introduce extrinsic evidence through a post-issuance revision to support their contention that Exception 8 is ambiguous. In the revision of the policy, Chicago Title agreed to remove a nonexistent 1963 common council order from Exception 8. According to Landco, this was evidence of Exception 8’s “use-rights only” scope. The Court disagreed once again because Exception 8 is unambiguous and extrinsic evidence should not be considered when there is no ambiguity. Landco, No. 1:2023cv0535 at 9 (citing Vivify Constr., LLC v. Nautilus Ins., 2017 IL App (1st) 170192, ¶ 20).

Takeaways

In this case, the District Court demonstrated that the words of a title insurance policy have meaning. If coverage is sought for an interest that is expressly barred by an exception specifically identifying the potential interest in the land and not just a general catch-all, then an endorsement is needed to remove the exception. It is that simple.

This blog was authored by Michael O’Donnell and Summer Associate Sharanya Thondapu. For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.