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Ditommaso v. Lawyers Title Insurance Corporation

A-197-98T2 (N.J. Super. App. Div. 1999) (Unpublished)

TITLE INSURANCE—Where an insured is aware of an unrecorded encroachment and its title insurer is not, the insurer is not liable for the cost to remove the encroachment.

A buyer purchased a lot for the purpose of constructing a house on it. It noticed a shed on the property that had been placed there by a neighboring owner. Its seller told the buyer that the shed would be removed. A land surveyor omitted the shed from the survey when the surveyor was told by the seller that it was a “temporary” structure and would be moved prior to closing. The buyer’s attorney asked the title insurance company’s agent if it had any information about the shed’s presence on the property. The agent told the attorney that the shed was not located on the survey. The attorney then spoke with the surveyor, who then said the shed was not located on the property, but on the adjacent lot. This information was furnished to the title insurance company through its agent. When closing took place, the shed was still on the property. When the seller still did not remove the shed and the buyer complained, the seller responded that the neighbor claimed title to the land on which the shed was located by adverse possession. In a suit by the buyer against all of the involved parties, the Chancery judge directed removal of the shed. The damage claims against all of the parties, including the title insurance company, were transferred to the Law Division. Here, the buyer sought reimbursement from the title insurance company for the legal fees it expended in removing the shed. The title company declined coverage by citing the following exclusion: “[Y]ou are not insured against loss, costs, attorneys’ fees, expenses resulting from ... title risks ... that are known to you, but not to us on the policy date – unless they appeared in the public record.” Both the lower court and the Appellate Division held that the title insurance company must prevail as a matter of law. “The evidence is clear that plaintiffs knew about the shed at the time of closing, and that [the title company] did not. Given these facts, the exclusion in the title policy applies.”


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