Washington Supreme Court Finds No Duty to Defend under Title Insurance Policy

Campbell v. Ticor Title Insurance Co. (Wash. S. Ct. 2009).

In a unanimous decision, the Washington Supreme Court upheld the denial of a defense under a title insurance policy.

The underlying lawsuit arose from a dispute over a pedestrian easement recorded as part of a three-parcel subdivision. Lots A and B were lakefront lots with existing houses, while Lot C was an upland lot. The purpose of the easement was to provide access from Lot C to the lake. It was to burden Lot B and run adjacent to the boundary between lots A and B. The Campbells purchased Lot A. A subsequent purchaser of Lot C discovered that the house on Lot B was built up to the property line, such that the pedestrian easement ran through the house. He sued the Campbells and others seeking reformation of the parties’ deeds so that the easement would cross Lot A.

The Campbells tendered defense of the suit to their title insurer, Ticor Title Insurance Company. Ticor denied coverage and refused to defend, asserting exclusions for title encumbrances (1) not contained in public records or (2) created after issuance of the policy. The Campbells brought a declaratory judgment action against Ticor. The trial court ruled in Ticor’s favor on cross motions for summary judgment, and the supreme court affirmed.

Citing Woo v. Fireman’s Fund Insurance Co., 161 Wn.2d 43 (2007), the supreme court noted that, in Washington, the duty to defend is triggered if the insurance policy “conceivably covers” the allegations in the complaint. If there is uncertainty, the insurer may defend under a reservation of rights while bringing a declaratory judgment action to determine coverage. But in this case, Ticor denied a defense outright.

The court held that the allegations against the Campbells were not conceivably covered under the Ticor policy due to the exclusions relied on by Ticor. As to the first exclusion, the Campbells pointed out that the easement was disclosed by public records. But the court held that the exclusion nonetheless applied because the easement “never affected lot A, nor was it intended to do so.” The court reasoned that it would be “unreasonable to interpret the policy’s language as covering any easement disclosed by public record, even those that do not affect the title at issue.” The court noted that, if the reformation suit were successful, it would be because a court determined that the original intent in granting the easement was best effectuated by burdening the Campbell’s land, not because the original grant of easement disclosed a burden on the Campbells’ land. The court held that the second exclusion applied as well because the easement dispute arose after issuance of the policy.