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DeCandido v. First American Title Insurance Company

A-6127-96T5 (N.J. Super. App. Div. 1998) (Unpublished)

TITLE INSURANCE; SURVEYS—Where a title company recommends that a survey be obtained, orders the survey, and references that survey in its title policy, it is reasonable for a layperson policyholder to expect that the title insurance protects against survey errors.

A dispute arose from an inaccurate survey reference in a title insurance policy. The survey mislocated the placement of certain structures on the landowner’s property, including the driveway. The landowner relied upon the location of the driveway, as depicted in the survey, to make improvements to its property. As a consequence, they mistakenly damaged their neighbor’s property. The landowner compensated its neighbor for the damage, but the title company refused to cover the losses.

The title company itself ordered the survey even though the title commitment specifically provided that the title company would not provide coverage for “[a]ny facts about the land which a correct survey would disclose, and which are not shown by the public record.” After reviewing the survey, the title company issued its title policy. The recited survey exception was deleted and replaced by a survey endorsement which insured the landowner against any loss or damage which it might suffer by reason of any encroachments, overlaps, boundary line disputes or easements, except for mislocation of fences, or mislocation of a particular wall. The survey showed the landowner’s driveway as well within the boundaries of its property; it did not, however, show the exact distance between the edge of the driveway and the property line. The survey also noted various stone walls, fences and hedges along the property lines. After the landowner’s neighbor complained about the damage, the surveyor produced a revised survey on which the boundary lines remained the same, but now showing the driveway’s actual location.

In response to the landowner’s claim, the title insurance company issued a letter disclaiming coverage, asserting that it did not insure the accuracy of the survey. It explained that its policy only offered coverage against loss resulting from encroachments, overlaps, and boundary line disputes. Based on that explanation, it stated that the claim was not covered because it arose from the surveyor’s mislocation of improvements, a loss which was not covered by the policy. It also claimed that even if there was an encroachment, it arose “post-policy” and therefore was not covered.

In ruling against the title company, the Court found it liable for the expenses incurred by the policyholder under the doctrine of “reasonable expectations.” It reasoned that because the title company had suggested that the landowner obtain a survey, selected the surveyor who furnished the survey, and issued the title insurance policy referencing the survey, the policyholder could reasonably expect that the title policy insured that the survey accurately depicted the location of the driveway and other structures. To support its conclusion, the Court impliedly found that an ambiguity existed in the policy entitling the landowner to relief under the “reasonable expectations doctrine” because the landowner was an average “lay purchaser of insurance.” As such, the policyholder could reasonably expect that deletion of the exception for “losses arising from encroachments, overlaps, boundary line disputes and any other matters which would be disclosed by an accurate survey and inspection of the premises,” meant that it had insurance to cover losses arises out of an inaccurate survey.


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