Property Owners’ Entitlement To Recover Attorneys Fees In Litigation With A Title Insurance Company Over Title Policy Coverage And Claims Issues
Where a Title Insurer (or other Insurer) fails to pay a claim on its Title Insurance or other insurance policy, or litigation arises between them over the policy or a claim, the Insured may in some cases be able to recover attorneys fees from the Title Insurer in the litigation related to a policy claim, particularly where the insurer has acted in an egregious or bad faith manner.
“[A]lthough defendant failed to disclose an easement of record on its preliminary title reports and its title insurance policies, it denied any liability for loss of value . . attributable to the easement. When plaintiffs filed suit, defendant responded with a motion for summary judgment. After losing that motion, defendant was faced with both a ruling of the trial court rejecting its narrow reading of the policy and a unanimous body of case law establishing liability . . . Defendant nevertheless offered only nuisance-value settlements, and made no attempt to appraise plaintiffs' loss until the issue of liability had been tried and decided in plaintiffs' favor.”
“The entire pattern of conduct shows a clear attempt by defendant to avoid responsibility for its obvious failure to discover and report the recorded easement . . . We conclude that the evidence is sufficient to permit the jury to find a breach of the covenant of good faith and fair dealing.” (Emphasis added)
White v. W. Title Ins. Co . (1985) 40 Cal. 3d 870, 889, Citing, Brandt v. Superior Court (1985) 37 Cal.3d 813.
In Brandt v. Superior Court, the Supreme Court decided " that the trial court had not erred in admitting evidence of the insurer's litigation conduct to prove breach of the implied covenant. ( Id., at p. 885.)
The evidence of Bad Faith there included unfounded "nuisance-value" settlement offers
made by the insurer. ( Id., at p. 889.)
The court reasoned "the contractual relationship between insurer and the insured does not terminate with commencement of litigation" ( id., at p. 885); even where litigation arises between insurer and insured concerning coverage of one claim, the insurer is still obliged to perform its other contractual duties fairly and in good faith ( id., at pp. 885-886); to permit the insurer to act as an adversary once litigation is filed would frustrate the "policy of encouraging prompt investigation and payment of insurance claims." Id., at p. 886. (Emphasis added)
"It is well settled that if an insurer, in discharging its contractual responsibilities, 'fails to deal fairly and in good faith with its insured by refusing, without proper cause, to compensate its insured for a loss covered by the policy, such conduct may give rise to a cause of action in tort for breach of an implied covenant of good faith and fair dealing.' ( Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 574 [108 Cal.Rptr. 480, 510 P.2d 1032], original italics.) When such a breach occurs, the insurer is 'liable for any damages which are the proximate result of that breach.' ( Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 925 [148 Cal.Rptr. 389, 582 P.2d 980].) . . . . "“When an insurer's tortious conduct reasonably compels the insured to retain an attorney to obtain the benefits due under a policy, it follows that the insurer should be liable in a tort action for that expense. The attorney's fees are an economic loss -- damages -- proximately caused by the tort. ( Mustachio v. Ohio Farmers Ins. Co., supra, 44 Cal.App.3d at p. 363.) . . . . “ (Emphasis added)
Brandt v. Superior Court , supra, 37 Cal. 3d 813, 817; Cassim v. Allstate Ins. Co., (2004) 33 Cal. 4th 780, 806.
An award of such “Brandt fees [may be] in an amount greater than the benefits owing under the [Insurance] contract”. Cassim v. Allstate Ins. Co., supra, 33 Cal. 4th at 809(Emphasis added), citing Campbell v. Cal-Gard Sur. Servs. (1998) 62 Cal. App. 4th 563, 572.
“The same reasoning supports inclusion of witness fees and other litigation expenses as an element of damage.” White v. W. Title Ins. Co., supra, 40 Cal. 3d at 890. (Emphasis added) See also, California Title Insurance Practice §§ 11.34, 13.39, 14.15 (2d ed Cal CEB 2008); Track Mortgage Group, Inc. v Crusader Ins. Co. (2002) 98 CA4th 857, 867.
Thus, as an example, where an insurer “failed to disclose an easement of record on its preliminary title reports and its title insurance policies, it denied any liability for loss of value”, made “no attempt on its own to appraise plaintiffs' loss “, did not do a good faith and “prompt investigation and payment of insurance claims.", raised bogus defenses, did not do a survey ,and walked out of the mediation an hour into it, fees may be recovered from the Title Insurer.
Even where litigation arises between insurer and insured concerning coverage of one claim, “the insurer is still obliged to perform its other contractual duties fairly and in good faith.” Brandt, supra, 37 Cal.3d at 885-886. (Emphasis added)