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Florio v. Lawyers Title Insurance Corporation

2006 WL 1520175 (N.J. Super. App. Div. 2006) (Unpublished)

TITLE INSURANCE — The compelled removal of an insured’s floating dock because the dock was attached to the property claimed by the neighboring property owner amounts to a dispute over the insured’s pierhead line and, if the disputed pierhead line is included within the insured description, it is the title insurance company’s duty to defend against the neighboring owner’s claim.

An owner purchased a property located on an inlet. The property included riparian rights, extending the owner’s legal title beyond the bulkhead line to a pierhead line in the inlet, with part of the property between the two lines under water and under the state’s jurisdiction. A fixed pier and ramp were located on the property within the riparian grant area in a marshy area with insufficient water to keep a boat. When the owner bought the property, a floating dock was present to provide access to the inlet.

The owner purchased a residential title insurance policy which listed certain categories of title risks it covered, including a catch-all provision for “other defects, liens, or encumbrances.” The list of the policy’s standard exclusions included “encroachments, overlaps, boundary line disputes or other matters affecting title which a survey would disclose, and which are not shown by the public record.” This exclusion was eliminated at closing.

Almost two years later, the owner’s neighbor informed him that according to a recent land survey, the owner’s floating dock was encroaching on the neighbor’s property. A survey performed for the owner determined that the riparian grants to the owner and the neighbor overlapped by about forty feet. The neighbor’s own title insurance policy acknowledged the conflict and stated that the owner’s rights to the area were superior to the neighbor’s rights. The owner informed his title insurance company of the neighbor’s encroachment claim, and the insurance company responded that the floating dock was outside the insured property, and denied coverage.

Meanwhile, the neighbor filed a complaint demanding that the owner remove the floating dock. As the litigation proceeded, the owner continued to request the insurance company’s involvement. The insurance company continued to deny the requests, asserting that the title insurance policy did not cover the issue at hand because the focus of the neighbor’s complaint was the floating dock itself, and not the integrity of the owner’s pierhead line and access to the inlet. The neighbor’s ejectment claim was eventually dismissed.

The owner then filed an action seeking reimbursement of counsel fees and costs associated with the previous litigation, on the basis that the insurance company should have defended and indemnified the owner pursuant to the title insurance policy. The insurance company maintained its position that the owner’s claims were not afforded coverage by the title insurance policy. The lower court found in favor of the owner, issuing an order requiring the insurance company to pay the owner’s legal fees and costs. It found that if the neighbor had prevailed in his action against the owner, the pierhead line on the owner’s property would have been redefined, preventing the owner from putting the floating dock off the pierhead line. The lower court explained that the neighbor’s claim attacked the owner’s legal right to seek access to the inlet where it adjoined his property. The claim affected the owner’s title, as his right was derived from that title, and the lower court concluded that it fell under the title insurance coverage. Therefore, the owner was entitled to fees associated with the neighbor’s claim against him, as well as fees associated with the present case seeking reimbursement under the title insurance policy.

On appeal, the Appellate Division affirmed the lower court’s decision. The Court agreed that the owner’s pierhead came into dispute in the previous litigation, and would have been redefined if the neighbor had prevailed. It found that the owner purchased his property intending to use the riparian grant to gain access to the inlet, and redefining the pierhead line would have left him virtually no access to the inlet. While the insurance company argued that it insured only the metes and bounds description in the deed, the Court found that the policy described the property up to and including the pierhead line. It further found that if the neighbor’s asserted pierhead line had prevailed, the owner would have had practically no pierhead line in front of his property. The insurance company had insured that the owner’s property had a 83 foot pierhead line as illustrated by the owner’s survey. If the neighbor prevailed, the owner’s pierhead line would have been virtually eliminated. As the pierhead line was the lot line, the Court stated, a change in that line would have been a change to the property owned and insured.

The Court explained that because of the unequal bargaining power between title insurance companies and insured persons, title insurance policies are considered adhesion contracts. Courts therefore strictly construe exceptions to coverage against the insurer. They enforce a policy’s restrictions only if the restrictions are consistent with the average insured person’s reasonable expectations. The Court stated that a title insurer’s prime duty is to vindicate the insured’s title, and if a question arises regarding the extent of the land title insured, the insurer must defend. It went on to explain that the guideline in determining if the insurer has a duty to defend is not whether the insured is actually liable to the plaintiff in an action, but whether the complaint will impose a liability which is covered by the insurance policy if the cause of action is sustained.

In conclusion, the Court found that the catch-all provision in the insurance policy covered the risk to the owner’s title that arose from the neighbor’s action. Additionally, the elimination of the policy’s survey exclusion resulted in the policy covering all boundary line disputes that affected title. As the neighbor’s claim against the owner was such a dispute, the title insurance company had a duty to defend on the owner’s behalf. The Court affirmed the lower court’s decision holding that the owner was entitled to a defense and indemnity under the title policy.

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