Claims Under a Title Insurance Policy in California For Damages Caused by an Undisclosed or Unexcepted Covenant or Easement Which Clouds Title
Claims Under a Title Insurance Policy in California For Damages
Caused by an Undisclosed pr Unexcepted Covenant or Easement Which Clouds Title
“Title insurance is a contract to indemnify against loss through defects in the title or against liens or encumbrances that may affect the title at the time when the policy is issued”
King v. Stanley (1948) 32 Cal. 2d 584, 590. (All emphasis added); Radian Guaranty, Inc. v. Garamendi (2005) 127 Cal. App. 4th 1280, 1289
Stated slightly differently:
“Title insurance means insuring, guaranteeing or indemnifying owners of real or
personal property . . . against loss or damage suffered by reason of:(a) Liens or encumbrances on, or defects in the title to said property; . . . “
Ins Code § 104 & 12340.1.
The Title Policy thus may, for example, provide that:
“This Policy insures You against actual loss, including any costs, attorneys fees and
expenses provided under this Policy, resulting form the covered Covered Risks set forth below . . .
“The Covered Risks are:
1. Someone else owns an interest in Your Title
2. Someone else has rights affecting Your Title . . .
5. Someone else has a right to limit Your use of the Land
6. Your Title is defective . . .
9. Someone else has an encumbrance on Your Title . . . .”
“Title insurance policies should be interpreted in the same fashion as are other
insurance policies, that is, liberally in favor of the insured, and against the insurer. . .
When the very contingency happens that was insured against, only clear and compelling reasons should permit a court to deny to the insured full reimbursement for all losses, up to the face amount of the policy, . . . .”
Overholtzer v. Northern Counties Title Ins. (1953) 116 Cal. App. 2d 113, 122.(Emphasis added)
A title insurer is strictly liable in the case of any defects in title or differences between the policy and actual title to the property, including but not limited to any clouds on the title.
“[I]n the case of a title insurance policy, the insurer undertakes to indemnify the insured if the title turns out to be defective. That is the purpose of procuring the insurance and knowledge of defects in the title by the insured in no way lessens the liability of the insurer. The doctrine of skill or negligence has no application to a contract of title insurance."
J. H. Trisdale, Inc. v. Shasta County Title Co. (1956) 146 Cal. App. 2d 831, 837.
“The measure of damages here is the depreciation in market value caused by the existence of the [change in the location and size of the parking] easement . . . .”
Overholtzer v. Northern Counties Title Ins. Co. , supra, 116 Cal. App. 2d at 128.
A cloud on title, even if it does not cause any present problem, but which could lead to a future problem with use of the property, is a covered loss under a title policy. Overholtzer v. Northern Counties Title Ins. Co. , supra, 116 Cal. App. 2d at 124.
“The possible existence of an easement [not excepted in the title policy] constitutes a cloud on title which results in immediate damage, even absent formal enforcement of the claim to the easement. (See Herbert A. Crocker & Co. v. Transamerica Title Ins. Co. (1994) 27 Cal. App. 4th 1722, 1729.”
65 Butterfield v. Chi. Title Ins. Co. (1999) 70 Cal. App. 4th 1047, 1060. (Emphasis added) Marketable title: "'. . . must be free from reasonable doubt, and such that a reasonably prudent person, with full knowledge of the facts and their legal bearings, willing and anxious to perform his contract, would, in the exercise of that prudence which business men ordinarily bring to bear upon such transactions, be willing to accept and ought to accept. It must be so far free from defects as to enable the holder, not only to retain the land, but possess it in peace, and, if he wishes to sell it, to be reasonably sure that no flaw or doubt will arise to disturb its market value. . . .'"
Native Sun Inv. Group v. Ticor Title Ins. Co. , supra,189 Cal. App. 3d at 1275.
“So far as pleading and proof are concerned, an allegation and proof of the existence of the easement and of diminution in the market value are all that is required."
J. H. Trisdale, Inc. v. Shasta County Title Co. , supra, 146 Cal. App. 2d 831, 836 (emphasis added).
The insured property owner under a Title Policy is entitled to be paid the difference between what he or she paid for the property, and the true market value with the defect or cloud on title created by the undisclosed easement etc.
Claims should be made in writing on a title policy to the Title Insurer immediately upon discovering the defect in title.
“[The] cases allow an insured to recover damages caused by a defect in title covered by the policy. (Cf. Kish v. Bay Counties Title Guaranty Co. (1967) 254 Cal.App.2d 725, 732 [62 Cal.Rptr. 494].) By measuring the value of real estate without a given defect and subtracting the value of the land with the defect, a diminution in value measure of damages, such as the one used in Overholtzer, isolates the damages caused by the defect.
Native Sun Inv. Group v. Ticor Title Ins. Co ., supra, 189 Cal. App. 3d at 1274.(emphasis added)
“[T]he normal measure of damages under the owner's policy is the difference between the
value of the insured land or interest without the defect or lien versus its value with the defect or lien. Native Sun Inv. Group v Ticor Title Ins. Co. (1987) 189 CA3d 1265, 1274
California Title Insurance Practice § 11.7 (2d ed Cal CEB 2008)(emphasis added)
It is a matter of law that damages must be computed taking into consideration the easements and other defects or use restrictions of record, as they represent a cloud on title and a covered loss under a title policy, even if they are not currently being enforced. Overholtzer v. Northern Counties Title Ins. Co. , supra, 116 Cal. App. 2d at 124; 65 Butterfield v. Chi. Title Ins. Co. , supra, 70 Cal. App. 4th at 1060.