The U.S. Court of Appeals for the Ninth Circuit recently affirmed in part and reversed in part a trial court’s judgment in an action brought by two landowners against their title insurance companies for indemnification and breach of contract.
In so ruling, the Ninth Circuit held that the definition of “public records” in the title insurance policies at issue (the same definition as in the standard 2006 ALTA owner’s and loan policies) included official county maps.
The title defects at issue here were apparent in the official county maps. Therefore, the Ninth Circuit held that the title insurer defendants could not rely on the policy exclusion for title defects that were not apparent in the public records.
Of note, the standard ALTA owner’s and loan policies effective July 1, 2021 now have a different definition of “public records.”
A copy of the opinion in Munden v. Stewart Title Guaranty Co. is available at: Link to Opinion.
The plaintiffs in this case were husband and wife owners of real estate in Idaho (“landowners”). The landowners initially sued the county in which their land was located to prevent enforcement of an ordinance restricting their use of a road passing through their land.
The county asserted that the road at issue had been listed as a county road on the Idaho Department of Transportation Maps showing public roads since at least 1958, that under Idaho Code § 40-202 the road has been a public highway since 1963, and that the landowners purchased the property expressly subject to the easements and rights of way apparent of record.
The landowners also submitted title claims to their title insurers, but both title insurers refused to defend and indemnify the landowners in the state court action.
The landowners then sued the title insurers under the title insurance policies at issue in federal court for indemnification and breach of contract, asserting that both insurers failed to honor their promise to defend the landowners’ title.
The federal trial court granted the insurance companies’ motions for summary judgment. In so ruling, the trial court found that the landowners failed to show the existence of a “public record,” as defined by the policies, showing any indication of the county ordinance restricting the landowners’ use of the road passing through their land. Because both policies excluded coverage for title defects not shown in the public records, the trial court held that the landowners’ claims were not covered.
This appeal followed.
The Ninth Circuit summarized Idaho’s procedure for interpreting insurance policies as follows:
- First, give any expressly defined terms their defined meaning.
- Give any clear provisions their plain, ordinary meaning.
- If an uncommon, technical term is undefined in the policy but has a settled legal meaning in Idaho, give the term that settled legal meaning.
- Give each undefined common, nontechnical term a meaning in daily usage by laymen.
- All remaining terms are ambiguous; choose a reasonable meaning for each such term.
For steps 4 and 5, the meanings selected should produce the interpretation most favorable to the insured but still reasonable in light of the policy as a whole — that is the interpretation to be adopted.
The parties primarily disputed the meaning of “public records” in the title insurance policies. Each policy expressly defined that term as “[r]ecords established under state statutes at Date of Policy for the purpose of imparting constructive notice of matters relating to real property to purchasers for value and without Knowledge.”
Using Idaho’s procedure for interpreting insurance policies, the Ninth Circuit held that a plain language meaning of the term “public records” is:
Official documents that were:
- brought into existence in accordance with Idaho state statutes, and
- brought into existence on or before the Date of Policy, and
- intended, at least in part, to provide constructive notice of some fact or circumstance relevant to the insured property to purchasers for value who did not have actual knowledge of that fact or circumstance.
The Ninth Circuit noted that “[a][n Idaho county that takes a real-property interest in a highway must update its official map to include the highway and regularly publish maps showing its highways.” Idaho Code § 40-202(2), (3), (6). The county also “must either record with the county recorder an instrument establishing that interest or else ‘[c]ause the official map of the county or highway-district system to be amended as affected by the acceptance of the highway or public right-of-way.'” Idaho Code § 40-202(2).
The Court noted that the relevant county map was established in accordance with Idaho law, and well before the title insurance policies here were issued. Therefore, the Ninth Circuit held that the county road map was a “public record” within the meaning of both title insurance policies.
One of the title insurer defendants relied on the exclusion of coverage for title defects not shown in the public records. Accordingly, the trial court’s judgment in favor of that title insurer was reversed.
The second title insurer defendant also asserted a specific policy exclusion not present in the other title insurer’s policy. This specific exclusion disclaimed coverage for damages, costs, expenses, and the like “aris[ing] by reason of . . . [r]ight, title and interest of the public in and to those portions of the above described premises falling within the bounds of roads or highways.”
The Ninth Circuit held that this specific policy exclusion in the second title insurer defendant’s title policy applied here. Therefore, the trial court’s judgment in favor of the second title insurer was affirmed.