Brief Fact Summary. In this case, the Plaintiffs’, Brian and Helen White (Plaintiffs), predecessor in title had granted an easement deed for subsurface water rights. The Plaintiffs were unaware of the easement at the time of the sale. The Plaintiffs were issued title insurance by the Defendant, Western Title Insurance Co. (Defendant) and neither policy (there were two lots) mentioned the easement. The title insurance policy stated that it would protect the Plaintiffs against title being vested in a person other than the Plaintiffs and against any defect in or lien or encumbrance on title.
Synopsis of Rule of Law. The Court found that under negligence law, the Defendant had a duty to list all matters of public record regarding the subject property in its preliminary report. The title insurer is liable for his negligent failure to list recorded encumbrances in preliminary title reports.
In the case of the standardized contract prepared by the economically powerful entity and the comparatively weak consumer we look to the reasonable expectation of the public and the type of service which the entity holds itself out as ready to offer.View Full Point of Law
Issue. Under the facts presented, is the Defendant liable to the Plaintiffs?
Held. Yes. Judgment affirmed.
The Court found that the insurance policy did not exclude coverage for the easement in question, despite the exclusion in the policy. The provisions of the policy must be construed so as to give the insured the protection, which he reasonably had a right to expect. The policy was to protect against recorded interests and the easement at issue herein was recorded.
The Court found that under negligence law, the Defendant had a duty to list all matters of public record regarding the subject property in its preliminary report. The title insurer is liable for his negligent failure to list recorded encumbrances in preliminary title reports.
The covenant of good faith and fair dealing, in this jurisdiction, can be breached after litigation has begun. The Defendant here made several offers to compromise, found to have not been made in good faith and supported by evidence, such as a report of the appraiser.
The Court found that the provision in the insurance policy, which provided for payment of expenses and attorneys’ fees by the insurer for any such fees and costs incurred by the Plaintiffs, could apply in a suit against the insurer. Normally, such cases are against third parties, rather than against the title insurance company. These costs of litigation are recoverable because of the insurance company’s breach of the covenant of good faith and fair dealing.
Dissent. The dissent disagreed with the Court’s decision to allow the jury to consider evidence of prior settlement offers by the Defendant. The evidence of prior settlement offers would potentially confuse jurors who might feel that such offers are admissions of liability.
Discussion. The opinion sets out in great detail the various acts, which led to the jury’s finding that the Defendant had breached the covenant of good faith and fair dealing. Ordinarily, offers to compromise are excluded from introduction as evidence in a case in chief. The Court found a pattern of conduct on the part of the Defendant to evade responsibility for its omission of the easement in the preliminary title report.