From the July, 2002 issue of of The Title Insurance Law Newsletter
A policy does not automatically insure an access easement, when Schedule A does not recite the easement but does reference a deed containing the easement, and Schedule B excepts any claim concerning title "beyond the lines of 'the premises,'" according to a New York court.
Aubuchon Realty Company bought then-vacant land in Canton, New York. Seaway Abstract searched title and discovered an existing easement benefitting the land on an adjacent parking lot. Aubuchon's lawyer sent Seaway a proposed deed. He said the deed would be modified to include the parking lot easement, and that "further information on this point would be forthcoming," but nothing further was delivered to Seaway. Seaway issued a policy as agent of American Title (Fidelity National's predecessor) that did not include the easement, but the deed contained a reference to it. The policy identified the insured estate as "fee simple vested in [plaintiff] by means of a deed by [Smith Barnett to plaintiff], dated June 11, 1987, recorded September 9, 1987, in the St. Lawrence County Clerk's office, in Liber 1012, Page 99."
Almost a decade later, the parking lot owner, Mr. Cohen, got in a disagreement with Aubuchon about its share of the maintenance expenses. He got leverage by discovering that Aubuchon's seller did not own the parking lot when it granted the easement to Aubuchon. When Cohen told Aubuchon to stop using the parking lot, it sued him for a prescriptive easement and, separately, Fidelity National on the policy.
In the case against Fidelity National, the trial court denied Aubuchon's summary judgment motion. It found that it could not rule as a matter of law that the policy insured the easement. The appeals court agreed.
Although the deed
referenced in the title insurance policy
plainly grants plaintiff "the right to use the parking area adjacent to and surrounding" the conveyed premises, the description of the "premises in which [plaintiff] has the estate or interest" covered by the title insurance policy and set forth in Schedule A makes no reference to the contested easement.
Schedule B to the title insurance policy [excepts] title to any property beyond the lines of "the premises", which, in turn, is defined as "the property insured
as described in Schedule A of the policy including such buildings and improvements thereon which by law constitute real property". Plaintiff, relying upon the reference in the title insurance policy to the recorded deed and noting that the parking lot easement was not expressly listed as an exception in Schedule B thereto, contends that the policy plainly and unambiguously provides coverage for any dispute surrounding plaintiff's right to use the parking lot. Defendant, on the other hand, argues that inasmuch as reference to the disputed easement is entirely absent from the description of the insured premises set forth in Schedule A, and given that Schedule B plainly excepts from coverage any property beyond the lines of "the premises",
any dispute regarding the easement and related parking rights is not covered by the policy.
The court found both interpretations "equally plausible and reasonable," and sent the case back for trial to include testimony to flesh out the terms of the insurance contract.
Aubuchon is the latest in a string of cases about incorporation by reference of rights outside the land described on Schedule A. See Kuper v. Stewart Title Guar. Co., ___ S.W.3d ___, 2002 WL 992566 (Tex.App. Hous. (1 Dist.)), reported last month, and Dishman v. Stewart Title Guar. Co., 2002 WL 491493 (Wash.App.Div. 1) (unpublished), in the May, 2002 issue, both of which concerned similar claims. Aubuchon raises the spectre that a reference in Schedule A to a recorded deed may be considered to insure all rights granted in that deed. Insurers are increasing the use of incorporation by reference in short form policies to save time and speed up policy delivery. This decision leaves open the possibility that incorporation by reference also increases risk.
Aubuchon Realty Co. Inc. v. Fidelity Nat'l Title Ins. Co. of New York, 743 N.Y.S.2d 626, 2002 N.Y. Slip Op. 04840 (N.Y.A.D. 3 Dept.).
