Frequently, policyholders sue their title insurance companies in order to determine whether a claim is covered and to force the company to pay any loss. Obtaining a court order confirming that a claimed loss is covered may not mean that it is over. The title insurance company may still be able to submit information to prove that the policyholder had no loss.
In a Federal case decided in Idaho, Guenther v. Old Republic National Title Insurance Company, Old Republic denied coverage when policyholders claimed they had no access to the property. In denying coverage, Old Republic did not argue that the policyholders might in fact have access. The court told Old Republic that its policy required it to indemnify its policyholders for lack of legal access. This allowed the policyholders to proceed to their proof of lack of legal access.
At trial, Old Republic, despite having no ownership interest in the property or any nearby property, sought to submit evidence showing that the policyholder did have legal access. Over the strenuous objection of the policyholder, Old Republic was allowed to submit that evidence, but only for a limited purpose. The court said that if Old Republic was attempting to obtain an order that access did exist in a certain place, Old Republic would not be allowed to submit the evidence. Old Republic’s purpose was only to defend against the policyholder’s claim for money under the policy, and if access did exist, no money would be owed.
At first blush this case seems to give the title insurance company two chances to say that there is no coverage under the policy. Even the federal judge deciding the case referred to his own analysis as “somewhat nuanced” and “a messy way to sort out property rights, perhaps,” but it is hard to argue with the concept that policyholders claiming lack of access, who actually have access, should not be allowed to obtain an insurance payment by excluding evidence of their actual access rights.
When embroiled in title insurance coverage issues, whether as a title insurance company or a policyholder, be certain to engage experienced title insurance counsel.