Miller v. Ticor Title Ins. Co., 194 Or.App. 17, ___ P.3d ___, 2004 WL 1463030 (2004).
From the August, 2004 issue of The Title Insurance Law Newsletter
An insured may not claim a loss for the inability to use a portion of the property while its title is in litigation defended by the insurer. Also, when the insureds settled the lawsuit by obtaining title to the land, but subject to a restrictive covenant as to its use, the measure of loss was solely the diminution in value due to the restrictions so imposed.
The Millers bought a home on the Willamette River in Oregon. Their neighbor, Mr. Cummings, claimed title to part of the land. Ticor Title, which had issued a policy to the Millers, determined that Cummings had record ownership of the disputed land, but that the Millers had a good case of adverse possession. Ticor paid for a quiet title action that resulted in a settlement by which the Millers obtained title to the land, but consented to a restrictive covenant limiting its use to a footpath.
The Millers then sued Ticor. They claimed $15,000 in damages due to the diminution in value caused by the restrictive covenant, and about $79,000 for loss of the use of the area while the litigation was pending. Ticor promptly paid the $15,000, but denied a duty to pay the rest. It filed and won a motion for summary judgment on the loss-of-use claim.
On appeal by the Millers, the court affirmed. It recited paragraph 7(a) of the Conditions & Stipulations, which limits loss to the policy amount or "the difference between the value of the insured estate or interest as insured and the value of the insured estate or interest subject to the defect, lien or encumbrance insured against by this policy." It said the effect of this provision was that, "no matter the extent of actual monetary damages the Millers might have incurred due to an insured loss, Ticor is not obligated to indemnify them beyond those monetary limits."
The court said the loss provision precluded the kind of consequential damages claimed by the Millers:
Under the straightforward terms of the policy, and on the record before us, Ticor's limit of liability is $15,000, as the trial court concluded.
[B]efore trial, the parties agreed that the property, as burdened by the restrictive covenant, was worth $15,000 less than it was worth without the restrictive covenant. Thus, to use the language of the policy itself, $15,000 represents "the difference between the value of the insured estate or interest as insured and the value of the insured estate or interest subject to the defect, lien or encumbrance insured against by [the] policy." That amount, in turn, is the extent of Ticor's liability against monetary loss. Necessarily, then, as the trial court concluded in granting summary judgment, the Millers have been paid the full amount owed under the policy.
[T]he Millers assert that Cummings's claim of ownership during the quiet title litigation limited their ability to use their property for more than a year, resulting in loss of use damages. According to the Millers, the policy covers all loss or damage sustained or incurred by the insured because of a defect in or lien or encumbrance on the property, and thus encompasses loss of use damages. We need not decide whether the Millers are correct that loss of use damages are recoverable in addition to or in lieu of loss of value damages. Under the express terms of the policy, the extent of Ticor's liability is the difference between the value of the property as insured and the value with the defect, lien, or encumbrance. Ticor has paid the Millers $15,000 for the reduced value of their property with the restrictive covenant. If the restrictive covenant is the "defect, lien or encumbrance," the Millers have been paid all that they are due under the policy, because $15,000 is the cap on Ticor's liability, even if the Millers suffered other covered losses.
The Millers belatedly recognized that their own complaint was their downfall, and asked the trial court to allow them to amend. The revised complaint would have alleged that the damages were really for Cummings' claim of ownership in the disputed land until that claim was disposed of. The trial court denied the request to amend, and the appeals court agreed, based on the final determination clause.
Regardless of whether, in other circumstances, a mere claim of ownership might suffice as a defect in title, section 9 of the policy makes clear that when the claim is resolved through litigation, Ticor is obligated to indemnify the Millers only for damages based on the reduced property value caused by the defect in title as established in the litigation. Specifically, section 9(b) provides: "In the event of any litigation, including litigation by [Ticor] or with [Ticor's] consent, [Ticor] shall have no liability for loss or damage until there has been a final determination by a court of competent jurisdiction, and disposition of all appeals therefrom, adverse to the title as insured." That provision expressly precludes Ticor from incurring any liability for a defect in title until after litigation involving the title has been finally resolved. By implication, if not expressly, it limits Ticor's liability to the amount of the loss in value caused by the defect in title established by the litigation. Section 9(a) reinforces that conclusion. It provides that, if litigation "removes the alleged defect, lien or encumbrance," Ticor will be deemed to "have fully performed its obligations with respect to that matter and shall not be liable for any loss or damage caused thereby." Necessarily, under that section, until litigation is pursued to resolution, it cannot be determined whether Ticor has "fully performed" and, thus, it cannot be determined whether Ticor is liable for any damages. In combination, sections 9 (a) and (b) of the policy establish that, when litigation is brought to resolve an asserted defect in title, Ticor's liability is limited to damages based on the reduced property value caused by the defect as established in the litigation.
Once Cummings' claim was resolved, all that remained of it was the restrictive covenant, the court said, for which payment had been made. The court felt obliged to go further, ruling that Cummings never was the owner: "the quiet title action established that the restrictive covenant is all the interest that Cummings ever had in the property and precluded Cummings from asserting any greater interest."
