The United States Court of Appeals for the Third Circuit recently affirmed a lower court and held that an insured was not entitled to coverage for a litigation involving a portion of the insured’s property that encroached onto a neighbor’s property. See 631 N. Broad St., LP v. Commonwealth Land Title Ins. Co., 2019 WL 3383878 (3rd Cir. July 26, 2019). The case concerned an insured property owner who discovered that a wall on the southern border of its property encroached onto a neighbor’s property by about five inches. The insured was conducting renovations, and brought an action against its neighbor in which it sought a declaratory judgment that it had the right to demolish the wall. The insured also filed a claim with the title insurance company who had issued a policy on the property, but the title insurance company denied the claim. When the court in the underlying action held that the insured could not demolish the wall, the insured brought this action against the title insurance company for breach of contract. The District Court granted the title insurance company’s motion for summary judgment.
On appeal, the Court affirmed. First, the Court found that there was no coverage under the policy because the dispute concerned the neighbor’s property, not the insured’s property. “The Policy’s coverage extended only to the borders of the . . . Property, as described in Schedule A of the Policy, and ‘does not include any property beyond the lines of the area described in Schedule A.’” Second, the Court found that the policy had a survey exception that excepted “easements, encroachments, overlaps, shortages of area, boundary line disputes and other matters affecting title that an accurate and complete survey would disclose” from coverage. Because “the underlying litigation involved an encroachment or boundary dispute that a complete and accurate survey would have disclosed,” coverage was barred under this exception. Finally, the Court found that there was no issue with the fact that the title insurance company defended the neighbor in the underlying action, and that the coverage of the neighbor was not an “inconsistent provision” that would give rise to a quasi-estoppel claim.