What You Need to Know

• Policy Language Matters – Courts emphasize the need for precise analysis of Covered Risks, Exclusions, and Exceptions in Title Policies.
• Covered Risk Limitation – A claim is not covered if the disputed property is not specifically described in the Policy.
• Survey Exception & Loss Requirement – This decision reinforces the enforceability of the Survey Exception and the principle that coverage applies only if the Insured suffers a loss.
• Reservation of Rights – Insurers should include language in denial and reservation of rights letters that preserve their ability to assert additional defenses later whenever controlling law allows for same.

Introduction

In a January 6, 2025 Opinion, the United States District Court for the District of Vermont  addressed a title insurer’s duty to provide defense and/or coverage to an insured for a declaratory judgment action relating to a boundary line dispute where the insured was claiming title to a disputed parcel of property based on adverse possession.  Ultimately, the Court found none as (1) the dispute did not cover property described in the Policy; (2) even if it did, coverage would be excluded under the Survey Exception: and (3) Plaintiffs suffered no loss as they had title to land described in their deed.   Grabowski-Shaikh v. Conn. Atts. Title Ins. Co., 2025 WL 35522 (Vt. Dist. Ct. Jan. 6, 2025).

Background

Asim and Cara Grabowski-Shaikh  (“Plaintiffs”) purchased real property located at 4 Pleasant Street in Woodstock, Vermont (the “Property) in 2017. Before purchasing the Property, Plaintiffs ordered a title report, which was completed by attorney Steven Saunders, an agent of Connecticut Attorneys Title Insurance Company (“CATIC”). The title report did not identify any encumbrances on title or disputes over property boundaries.  Plaintiffs, however, did not commission a survey of the Property.

With respect to an abutting parcel of land on 2 Pleasant Street, Plaintiffs claimed ownership of said parcel through use, possession, and maintenance by themselves and their predecessors. When Plaintiffs moved into their 4 Pleasant Street home, they maintained the disputed area west of the driveway and parked their car in that space. The owners at 2 Pleasant Street did not object to their use.

In 2021, James Zilian purchased 2 Pleasant Street, disputed Plaintiffs’ claims to the abutting area, and no longer permitted them to park their cars in the disputed area. Plaintiffs’ and Zilian’s attorneys exchanged correspondence regarding the boundary dispute. The correspondence from Zilian’s attorney included a copy of Zilian’s Warranty Deed and a 1979 Survey, which showed that Zilian owned the disputed parcel of land. In May of 2023, Zilian’s attorney informed Plaintiffs that Zilian intended to improve his property up to the boundary line, including the disputed parcel of land. Plaintiffs’ attorney responded that the parcel belonged to Plaintiffs based on decades of use and maintenance, and Zilian’s attorney responded with a cease and desist letter.

In October of 2023, Plaintiffs sent a notice of claim letter to CATIC seeking defense and indemnification. CATIC ultimately denied coverage since nothing indicated that Plaintiffs had tried to quiet title or otherwise adjudicate their alleged claim to the property. CATIC cited to Paragraph 1 of the Covered Risks of the Policy which insures “against a situation where someone else owns an interest in the title to the land insured” and two exceptions to same: the parties in possession exception and the survey exception. The former removed from coverage claims of adverse possession of the insured land, and the latter removed from coverage any “facts which an accurate survey and inspection of the land would disclose and which are not shown by the Public Records.”

In June of 2024, Zilian filed a declaratory judgment action seeking to establish the boundary line. The action alleged that Plaintiffs claimed the boundary line was ten (10) feet west of the boundary line in Zilian’s Deed, and that Plaintiffs were parking their vehicles over the boundary line and essentially asserting an adverse possession claim.

That same month, Plaintiffs filed a complaint seeking a declaratory judgment requiring CATIC to provide coverage. CATIC filed a motion for a judgment on the pleadings and/or summary judgment.

The Decision

In deciding CATIC’s motion, the District Court agreed with CATIC that Zilian’s declaratory judgment action did not assert a claim against Plaintiffs’ title as reflected in the Public Records as  neither Plaintiffs nor their predecessors ever formally established title to the disputed area, nor was the disputed strip ever described as part of the Property insured under Schedule A of the Policy. Thus, CATIC had no duty to defend or indemnify Plaintiffs.

The District Court also rejected Plaintiffs’ argument that CATIC conceded in its denial letter that defense of the Zilian action was covered since the denial of claim letter identified two exceptions to coverage without stating that the action was not covered. As stated by the District Court, the denial letter expressly reserved the right to raise other grounds for denial; thus, CATIC was permitted to raise that it had no duty to defend or indemnify.

Finally, the District Court considered CATIC’s arguments regarding the aforementioned exceptions to coverage. The District Court held that the “parties in possession” exception would apply if Zilian were claiming title through adverse possession, not where Plaintiffs were alleged to be claiming title through adverse possession. On the other hand, the District Court found that the “survey” exception would apply since the 1979 Survey did not show a boundary dispute. Finally, the District Court also held that CATIC was not required to provide coverage since Plaintiff would suffer no loss with respect to their title, even if Zilian were to prevail with their action, since the Policy expressly excluded coverage from risks “that result in no loss to [Plaintiffs].”

Takeaways

This case highlights the importance of focusing on the language in the Policy as to Covered Risks, Exclusions and even Exceptions.  In that vein, the Court was methodical in its policy analysis in finding that the claim did not fall under Covered Risk One as the disputed property the Plaintiffs were claiming was not described in the Policy. Next, it was evenhanded in finding the parties in possession exception did not apply as the party adverse to the Insureds was claiming title based solely on its deed, not adverse possession.  The decision also reinforced the validity of the survey exception.  It also reinforced the well-established principle that a title policy only covers insureds if they suffer a loss.  Finally, it emphasizes the importance to insurers that in issuing denials of coverage or reservation of rights letters to include specific language that reserves the right to raise other grounds for denying coverage to avoid waiver arguments later on if additional grounds for denial exist.