The Court of Appeals of Kentucky recently held that claims against a closing attorney who performed a title search were untimely, and that insureds did not have a claim against their title insurance company when the company initially found that the claim was “potentially covered” before later denying the claim based on one policy provision, and then later prevailing on summary judgment on another provision. See Pasha v. Eisele, 2020 WL 4555812 (Ky. Ct. App. Aug. 7, 2020). Plaintiffs entered into a contract to purchase the property at issue in 2008, and retained the defendant attorney, Eisele, to handle the title search and the closing. After conducting the title examination, Eisele advised plaintiffs that the property was zoned to allow a multi-level building. Plaintiffs then purchased the property and obtained a title insurance policy in 2009. That same year, plaintiffs learned that there was a restriction on the property that prohibited multi-level buildings. Plaintiffs filed a claim with their title insurer. Although the title insurer initially found that the claim was “potentially covered,” it reserved its rights and later denied based on the insurer’s conclusion was that plaintiffs did not suffer a loss. In 2011, plaintiffs retained the Bornstein firm and sued the title insurance company. At that point, plaintiffs also informed the Bornstein firm that they were considering bringing an action against Eisele, but understood that “the one (1) year statute of limitations on error and omission has passed” and did not bring a claim against him. The trial court dismissed the action against the title insurer in 2013, finding that the restriction was discoverable in the public record and that the claim was barred by a policy exclusion for “[a]ny easements or servitudes appearing in the public records.”
In 2016, plaintiffs brought this action against Eisele and the Bornstein firm, claiming Eisele was negligent for failing to discover the restriction and Bornstein was negligent for failing to bring a claim against Eisele in 2011. Plaintiffs also claimed that the Bornstein firm should have raised an equitable estoppel claim against the title insurer based on the fact that the insurer initially accepted the claim, and then denied the claim because plaintiffs did not suffer a loss, but prevailed on summary judgment on other grounds. The trial court granted defendants’ motion for summary judgment dismissing the claims.
On appeal, the Court affirmed. The Court found that plaintiffs were required to bring their claim against Eisele within one year of the “occurrence,” or one year “from the date of the actual or constructive discovery of the cause of action.” In this case, the alleged negligence occurred in 2009 and plaintiffs were aware of it then, as shown when they acknowledged in 2011 that the one-year period had passed. Further, because any claim against Eisele would have been untimely, plaintiffs’ claim against the Bornstein firm for failing to name Eisele as a party had no merit. Finally, the Court found that the Bornstein firm was not negligent for failing to raise the equitable estoppel argument against the title insurance company earlier in the case, finding that “even if appellants could establish all other elements of equitable estoppel, it is undisputed that not only were appellants aware of [the title company’s] reservation of any and all defenses, appellants had the means to discover what those defenses might be.”
For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Anthony Lombardo at alombardo@riker.com.
