From the Desk of Kyle Riley: In this case, the Washington Court of Appeals examined the duties of an insurer when issuing title policies, in the context of the Consumer Protection Act (“CPA”).
Claims Pointer: Insurers writing title policies should be aware that the CPA imposes a duty on insurers to indemnify the insured against any limitation on a title that is not accepted in the policy. However, there is no duty to accept every limitation on title.
Janice Courchaine and Eva Voss v. Commonwealth Land Title Ins. Co. and National Title Ins. Group, in the Court of Appeals of the State of Washington, Division III, No. 30020-0-III (consolidated with No. 30021-8-III) (March 12, 2013).
In September 2008, Courchaine and Voss purchased a lot in Spokane Valley. One half of the lot contained a single-family home, and there was room to build an additional home on the other half. The purchasers planned to build duplex homes for their families. Before the purchase closed, Courchaine and Voss obtained a preliminary commitment for title insurance from Commonwealth Land Title Insurance Company (“Commonwealth”). Courchaine and Voss reviewed the commitment and its exceptions to coverage and, finding the commitment satisfactory, purchased the property and acquired title.
Shortly after purchasing the lot, Courchaine and Voss learned that the Bonneville Power Administration (“BPA”) had an easement on the property. The purchasers submitted a claim under their title policy with Commonwealth. The Commonwealth policy did not list the BPA easement as an exception to coverage. Initially, Commonwealth accepted the claim and acknowledged coverage. However, Commonwealth then passed the claim along to an adjuster for Fidelity National Title Insurance Group (“Fidelity”), Commonwealth’s parent company. Fidelity ultimately denied Courchaine’s and Voss’ claim. They sued Commonwealth and Fidelity in March 2010 for assorted violations of the CPA. The trial court ruled in favor of the purchasers, finding that the claim was covered and that both Commonwealth and Fidelity had violated the CPA.
On appeal, Commonwealth and Fidelity argued that the trial court made three errors. First, Commonwealth did not breach the title policy and Fidelity is not liable for coverage. Second, Commonwealth did not violate the CPA. Third, even if Commonwealth did violate the CPA, Fidelity cannot be charged with that violation.
The Washington Court of Appeals rejected the first argument, stating that Commonwealth had a duty to indemnify against any flaw on the title that it did not except. The BPA easement was not accepted in the policy. Therefore, Commonwealth breached the policy by failing to compensate the insureds for their loss. However, the Court agreed with Fidelity that Courchaine and Voss presented no evidence as to why Fidelity should be liable for Commonwealth’s breach. Accordingly, the trial court’s judgment against Fidelity, in that regard, was reversed.
The Court of Appeals then moved on to reject Courchaine’s and Voss’ argument that Commonwealth violated the CPA. The trial court had found that Commonwealth violated the CPA in three ways: (1) by failing to identify the BPA easement as an exception to coverage in its commitment; (2) by delaying in issuing the policy; and (3) by misleading Courchaine and Voss into believing that Fidelity and Commonwealth were separate legal entities. The Court of Appeals rejected all three of these arguments.
First, the Court noted that Commonwealth had no duty to identify the BPA easement in the commitment or policy. Washington statutes state that a preliminary commitment “is not a representation as to the condition of the title.” Therefore, Commonwealth’s failure to inform Courchaine and Voss about the BPA easement was not an unfair or deceptive act under the CPA. Second, the trial court gave no reason why Commonwealth’s delay in issuing the policy caused a problem. Accordingly, there were insufficient grounds on which to find a violation of the CPA due to that delay. Finally, the Court rejected the notion that any confusion about the corporate identities of Commonwealth and Fidelity could be grounds for violating the CPA. With these three arguments defeated, the Court held that Commonwealth was not liable for violating the CPA.
Finally, the Court addressed whether Fidelity could be liable under the CPA. The Court found that Fidelity was liable for violating the CPA because, once it assumed the claim adjustment responsibility, Fidelity was liable for any loss caused by denying the claim. The trial court found that Fidelity knew the plaintiffs had a valid claim, but denied it anyway. That action constituted a violation of the CPA.
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