Desjardins v . Fidelity Title Ins. 12-CV-272-SM 6/14/13 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Douglas Desjardins and Stephanie Desjardins, Plaintiffs

v. Case N o . 12-cv-272-SM Opinion N o .

Fidelity National Title Insurance Company, Defendant

O R D E R

Douglas and Stephanie Desjardins bring this action seeking a

judicial declaration that they are entitled to coverage under

their homeowners’ title insurance policy. The policy was issued

by the predecessor in interest to the defendant, Fidelity

National Title Insurance Company (“Fidelity”). The Desjardins

also seek damages for Fidelity’s alleged breach of contract.

Fidelity denies that the Desjardins’ policy provides coverage

under the circumstances presented in this case.

Pending before the court are the parties’ cross-motions for

summary judgment. For the reasons stated, plaintiffs’ motion is

granted, and defendant’s motion is denied. Standard of Review

A. Summary Judgment Standard.

When ruling on a motion for summary judgment, the court must

“view the entire record in the light most hospitable to the party

opposing summary judgment, indulging all reasonable inferences in

that party’s favor.” Griggs-Ryan v . Smith,

1 2 , 115

(1st Cir. 1990). Summary judgment is appropriate when the record

reveals “no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law.” Fed. R. Civ.

P. 56(a). In this context, “a fact is ‘material’ if it

potentially affects the outcome of the suit and a dispute over it

is ‘genuine’ if the parties’ positions on the issue are supported

by conflicting evidence.” Int’l Ass’n of Machinists & Aerospace

Workers v . Winship Green Nursing Ctr.,

(1st

Cir. 1996) (citations omitted).

B. Interpretation of Insurance Policies.

Construing the meaning and scope of language used in an

insurance policy presents questions of law for the court to

resolve. Under New Hampshire’s rules of construction:

Where disputed terms are not defined in a policy or by State judicial precedent, we apply an objective standard, construing the terms in context and as would a reasonable person in the position of the insured, based upon more than a casual reading of the policy as a whole. If the policy language may reasonably be interpreted in more than one way and one interpretation

2 supports coverage, any ambiguity is construed in favor of the insured and against the insurer. Absent ambiguity, however, our search for the parties’ intent is limited to the words of the policy.

Panciocco v . Lawyers Title Ins. Corp.,

1 0 , 613 (2002)

(citations omitted).

It bears noting that, at least with respect to the first

count in the Desjardins’ complaint (seeking a declaratory

judgment that they are entitled to coverage), Fidelity bears the

burden of proof under applicable New Hampshire law. See N.H.

Rev. Stat. Ann. (“RSA”) 491:22-a (“In any petition under RSA

491:22 to determine the coverage of a liability insurance policy,

the burden of proof concerning the coverage shall be upon the

insurer whether he institutes the petition or whether the

claimant asserting the coverage institutes the petition.”).

Moreover, should the Desjardins prevail on that claim, they will

be entitled to an award of “court costs and reasonable attorneys’

fees from the insurer.” RSA 491:22-b.

Background

In May of 2008, the Desjardins purchased a home at 15

Grappone Road, in Moultonborough, New Hampshire, also known as

Lot 3 (the “Property”). The Property is part of a subdivision

near Lake Winnipesaukee and includes an appurtenant easement to

3 use a waterfront lot known as Lot 12 for, among other things,

swimming and boating.1

At the closing, the Desjardins purchased a title insurance

policy from Fidelity’s predecessor in interest. Subject to

various conditions, exceptions, and exclusions, the “Policy

insures [the Desjardins’] title to the land described in Schedule

A.” Exhibit 1 to Plaintiffs’ Reply Memorandum (document n o . 18-

2 ) (the “Policy”), “Owner’s Coverage Statement.” The Policy

defines the insured “land” to include both the lot on which the

Desjardins’ home is located (Lot 3 ) , as well as their easement

over Lot 1 2 , which is described as follows:

[T]he right to use, in common with Grappone, Inc., its successors and assigns, Lot #12 as shown on [Plan #27059, recorded in the Carroll County Registry of Deeds at Book 2 7 , Page 59] for purposes of bathing,

1 “An easement is a nonpossessory interest in real property that can be created by written conveyance, prescription or implication. An appurtenant easement is an incorporeal right generally created for the purpose of benefitting the owner of the dominant estate and that runs with the land, is incapable of existence separate and apart from the dominant tenement, and is inheritable.” Cricklewood on the Bellamy Condo. Ass’n v . Cricklewood on the Bellamy Trust,

(2002) (citations and internal punctuation omitted).

Moreover, an appurtenant easement is such an integral part of an interest in real property, that it automatically passes with that property, even if it is not specifically referenced in the deed by which title is transferred. See RSA 477:26. See also Mansur v . Muskopf,

(2009) (“[E]asements automatically pass with the transfer of property to which they are appurtenant, even when absent from the face of the deed.”).

4 boating and all such other purposes as may be permitted by the said Grappone, Inc.

The Policy, Schedule A , Exhibit A . According to plaintiffs, the

plan referenced in both their deed and the Policy shows Lot 12

with 200 feet of shore frontage on Lake Winnipesaukee.

Plaintiffs’ memorandum (document n o . 14-1) at 2 .

In April of 2010, the owner of property adjacent to Lot 12

brought a quiet title action in the New Hampshire Superior Court,

claiming title to approximately 35 feet of Lot 12’s shoreline

frontage (the “Cooper Litigation”). In that state proceeding,

M s . Cooper asserts that she holds title to the disputed shoreline

property by virtue o f : (a) adverse possession; and (b) the

placement of an iron pin survey marker. If she were to prevail,

Lot 12 would obviously have less shoreline and beachfront than is

shown on the plan referenced in both the Desjardins’ deed and

their title insurance policy. S o , rather than enjoying an

easement affording them access to some 200 feet of waterfront and

beach area, the Desjardins would have a right to use only 165

feet of waterfront and beach area on Lot 1 2 .

Upon learning of the Cooper Litigation, the Desjardins made

demand upon Fidelity, asserting that they were entitled to

coverage under the Policy. While the Desjardins do not assert

5 that the Policy provides coverage for M s . Cooper’s adverse

possession claim, they do say it provides coverage for her claim

to a portion of Lot 12 by virtue of the placement of a boundary

monument. See Plaintiffs’ Reply Memorandum (document n o . 18) at

3. Fidelity denied the Desjardins’ claim, concluding that the

Policy provides coverage for neither M s . Cooper’s adverse

possession claim, nor her survey claim. This litigation ensued.

Invoking the provisions of Chapter 4 9 1 , New Hampshire

Revised Statutes Annotated, the Desjardins seek a declaration

that Fidelity owes them coverage under the Policy, in particular,

an obligation to intervene in the Cooper Litigation and defend

their title interests (count o n e ) . They also assert that

Fidelity is liable to them for breach of contract (count t w o ) .

As noted above, the parties have filed cross-motions for summary

judgment, in which each side claims entitlement to judgment as a

matter of law.

Discussion

I. The Insurance Policy.

A. General Provisions.

The relevant language provides that, “This Policy insures

your title to the land described in Schedule A.” The Policy,

6 “Owner’s Coverage Statement” (emphasis supplied). The Policy

defines the terms “land” and “title” as follows:

Land - the land or condominium unit described in Schedule A and any improvements on the land which are real property.

* * *

Title - the ownership of your interest in the land, as shown in Schedule A .

“Definitions.” As noted above, the Policy’s detailed (i.e.,

metes and bounds) description of the insured “land” includes both

the lot on which the Desjardins’ home is located (Lot 3 ) , as well

as their easement over Lot 1 2 .

Two of the Policy’s “Covered Title Risks” are directly

implicated in this proceeding and the relevant Policy provisions

are as follows:

This Policy covers the following title risks, if they affect your title on the Policy Date.

1. Someone else owns an interest in your title.

* * *

14. Other defects, liens, or encumbrances.

“Covered Title Risks.” The coverage provided by the Policy

i s , however, subject to certain standard exceptions. Those

7 exceptions state, in relevant part, that the Policy does not

provide coverage:

against loss or damage (and the Company will not pay costs, attorneys’ fees or expenses) which arise by reason of the following:

1. Rights or claims of persons and/or parties in possession [e.g., those claiming title by adverse possession].

2. Easements or claims of easements not shown by the public records, boundary line disputes, overlaps, encroachments, title to filled lands (if a n y ) , and any matters not of record which would be disclosed by an accurate survey and inspection of the premises.

Schedule B (emphasis supplied). If that were the extent of

the relevant Policy language, plaintiffs’ claims related to the

Cooper Litigation would not be covered. The exceptions set forth

above plainly disclaim coverage for the types of claims M s .

Cooper is advancing in the state court quiet title action:

adverse possession and a boundary dispute based upon the

placement of a surveyor’s monument.

Critically, however, Schedule B of the Policy concludes with

the following language:

Exception numbered 3 [dealing with mechanic’s liens and not relevant to this proceeding] is hereby deleted from the Owner’s Policy. Exceptions Numbered 1 and 2 of the Owner’s Policy [dealing with adverse possession and

8 boundary disputes] do not limit the coverages described by the Covered Title Risks set forth in the Cover of the Owner’s Policy.

That language apparently negates the exception carving out

boundary disputes and, at best, is confusing. Plainly, its

author knew how to simply “delete” an exception to the Policy, as

was done with respect to Exception 3 . Construing the precise

meaning of the qualifying language used to modify Exceptions 1

and 2 , and discerning its effect on the scope of coverage

provided by the Policy is central to resolving the parties’

dispute.

B. Standard Title Policy Exceptions.

The noted exceptions for “parties in possession” and

“boundary disputes” are fairly typical of title insurance

policies. See, e.g., Panciocco, 147 N.H. at 615. See generally

C . Szypszak, 17 New Hampshire Practice, § 7.04[A] (1st ed. 2003)

(“Standard Exceptions”). The purpose of such exceptions is to

protect the insurance company from potential liability that could

not be foreseen by simply reviewing public records, like those

maintained at the registry of deeds. S o , for example, with

regard to the exception for “parties in possession,” the New

Hampshire Supreme Court has observed:

When a person, who does not appear in the chain of title, is found in possession of property it may

9 indicate, for example, that he is making claim to the property by adverse possession, or that he is claiming under an unrecorded deed. A title examiner, however, seldom visits the land the title to which he is concerned with. Thus, both to protect themselves and to put their client on notice of this state of affairs, title examiners and title insurance companies generally exclude from their title opinions and policies claims of parties in actual possession of the land insured.

Id. (quoting Cheverly Terrace P’ship v . Ticor Title Ins. Co.,

(Md. App. 1994)). See generally B . Burke, Law of

Title Insurance, § 9.03 (“Exception for Acreage, Boundaries, and

‘What an Accurate Survey Would Disclose’”) (3d. ed. 2000).

The same is true with regard to the standard exception for

boundary disputes (typically known as “the survey exception”).

Because the precise location of boundary-defining monuments can

only be determined by an examination of the property and an

accurate survey, title insurance policies frequently except

coverage for boundary disputes. As the New Jersey Supreme Court

has noted:

The purpose of the survey exception is to exclude coverage when the insured fails to provide the insurer with a survey. From a search of relevant public records, a title company cannot ascertain the risks that an accurate survey would disclose. It is for this reason that the title company puts that risk on the insured, who can control it either by obtaining a survey or arranging for the elimination of the survey exception. Thus, the very purpose of a survey exception is to exclude from coverage errors that would be revealed not by a search of public records, but by an accurate survey.

10 Walker Rogge, Inc. v . Chelsea Title & Guar. Co.,

1 7 ,

533-34,

0 8 , 217 (N.J. 1989) (citations omitted). See

also Stull v . First Am. Title Ins. Co.,

, 978 n.5

(Me. 2000) (“Experts at trial testified that the survey exception

is designed to prevent a title insurer from becoming involved in

disputes over where the land described in the policy is actually

located on the face of the earth. It is normally waived when the

insured conducts a survey, but no survey had been performed in

the present case.”).

The existence of those exceptions to coverage gives rise to

the following logical implication: absent such exceptions, the

typical title insurance policy does provide coverage when an

abutter claims title to a portion of the insured’s property,

whether by adverse possession o r , as in this case, by virtue of

the placement of a disputed boundary marker. In other words, the

exceptions exist to disavow coverage that the typical title

insurance policy would otherwise provide. Consequently, insureds

can often obtain coverage under a title insurance policy for

boundary disputes simply by having the relevant exceptions

deleted. See, e.g., Walker Rogge,

,

(noting that an insured can obtain coverage for risks

excepted from the policy by “arranging for the elimination of the

11 survey exception.”). See also C . Szypszak, 17 New Hampshire

Practice, § 7.04[A] (“Coverage for the parties in possession,

mechanics’ lien, and survey exceptions are typically available on

loan policies, and sometimes on owner’s policies, based on

certain additional assurances . . . . The term of art is

‘deleting’ the exception, which by operation of the double

negative means the matter is covered.”).

C. The Qualifying Language.

As noted above, Exceptions 1 and 2 were not “deleted” from

the Policy. Rather, their application was qualified: “Exceptions

Number 1 and 2 of the Owner’s Policy do not limit the coverages

described by the Covered Title Risks set forth in the Cover of

the Owner’s Policy.” The Policy, Schedule B (emphasis supplied).

Although it is unclear from the record, it is not unreasonable to

presume that the qualifying language was employed to make clear

that, by negating application of the standard exceptions, the

insurance company was not in any way augmenting coverage

otherwise provided by the Policy. See, e.g., B . Burke, Law of

Title Insurance, § 9.03 (noting that an “exception is not the

opposite of coverage and so eliminating it does not automatically

provide coverage”). To obtain coverage under the Policy, the

insureds would still have to point to a covered risk specifically

identified in the Policy. And, says Fidelity, because none of

12 the Policy’s “Covered Title Risks” is implicated by the claims

advanced in the Cooper Litigation, the Policy does not provide

coverage. The court disagrees.

I. Count One - Declaratory Judgment.

The Policy describes the insured “land” to which the

Desjardins hold “title” as including both the lot on which their

home stands and the appurtenant easement over Lot 12 for bathing

and boating. Plainly, then, the Policy insures the Desjardins’

interest in the easement. And, even if one could plausibly argue

that the Policy’s language is ambiguous on that score, under

applicable New Hampshire law, that ambiguity must be construed in

favor of the insureds and against the insurer. See Panciocco,

147 N.H. at 613. I f , as Fidelity suggests, the Policy was not

intended to provide title insurance coverage for the easement, it

should not have included the easement in Exhibit A’s description

of the “land” covered by the Policy. See, e.g., Havstad v .

Fidelity Nat’l Title Ins. Co.,

5 4 , 660 (1997)

(involving a title insurance policy issued by Fidelity, expressly

providing that “the term ‘land’ does not include any property

beyond the lines of the area described or referred to in Schedule

13 A , nor any right, title, interest, estate or easement in abutting

streets, roads, avenues, alleys, lanes, ways or waterways.”).2

Alternatively, if Fidelity wished to clearly express its

intention to disavow coverage for the easement over Lot 1 2 , it

could have listed that recorded easement along with all the other

easements affecting the Property that are expressly disclaimed

from coverage under the Policy. See The Policy, Schedule B

(“This Policy does not insure against loss or damage (and the

Company will not pay costs, attorney’s fees or expenses) which

arise by reasons of the following: [listing a number of easements

and encumbrances affecting the Property, such as an easement for

“flowage and drainage,” various utility easements, and an

easement “to obtain water from a certain well located on Lot

3.”]). 3

2 Of course, to be fair, Liberty did not draft the policy language at issue in this case; that was done by its predecessor in interest. Still, the concept of specifically excluding appurtenant easements on or over the property of others (i.e., servient estates) from insurance coverage provided to the dominant estate is not one that is foreign to Liberty. 3 The court recognizes that the easements excepted from coverage burden the Desjardins’ estate, whereas the easement at issue in this case benefits their estate. Still, the point remains the same: if Fidelity did not wish to extend coverage to the easement affording use of Lot 1 2 , it could have unambiguously excepted such coverage in the Policy’s language. It did not. Instead, it did just the opposite: it defined the insured land to include the easement over Lot 1 2 , and then negated application of exceptions that would have otherwise disclaimed coverage.

14 S o , having determined that the Policy insures the

Desjardins’ interest in the easement over Lot 1 2 , the next

question is whether M s . Cooper’s claim in the state court

litigation implicates one (or more) of the Policy’s Covered

Risks. It does. M s . Cooper asserts that she owns a portion of

Lot 12 - a claim which, if successful, would substantially

diminish the Desjardins’ existing easement rights. It follows

that “someone else [is claiming she] owns an interest in [the

Desjardins’] title.” The Policy, “Covered Title Risks.”

Additionally, M s . Cooper’s asserted title to a portion of Lot 12

also falls into the category of “other defects, liens, or

encumbrances” upon the Desjardins’ title to “the land,” as

defined - that i s , Lot 3 and the inseparable easement to use Lot

12 for swimming and boating.

Because M s . Cooper’s boundary monument claim is a “Covered

Title Risk” with respect to plaintiffs’ title to their land (as

defined), and because the survey exception does not limit the

Policy’s coverage for that risk, the Desjardins are entitled to

coverage.

II. Count 2 - Breach of Contract.

In count two of their complaint, the Desjardins assert that

Fidelity breached the terms of the parties’ contract “[b]y their

15 failure to provide coverage, and denying the Desjardins’ claim.”

Complaint (document n o . 1 ) at para. 2 2 . Having determined that

the Desjardins’ are entitled to coverage under the Policy, the

court must next address Fidelity’s obligations when coverage is

implicated. Not surprisingly, the Policy is quite clear on that

point:

We will defend your title in any court case as to that part of the case that is based on a Covered Title Risk insured against by this Policy. We will pay the costs, attorneys’ fees, and expenses we incur in that defense. We can end this duty to defend your title by exercising any of our options list in Item 4 of the Conditions.

The Policy, “Company’s Duty to Defend Against Court Cases.” Item

4 of the Conditions states that:

After we receive your claim notice or in any other way learn of a matter for which we are liable, we can do one or more of the following:

a. Pay the claim against your title.

b. Negotiate a settlement.

c. Prosecute or defend a court case related to the claim.

d. Pay you the amount required by this Policy.

e. Take other action which will protect you.

f. Cancel this Policy by paying the Policy Amount, then in force, and only those costs, attorneys’ fees, and expenses incurred up to that time which we are obligated to pay.

g. Cancel the coverage described in Items 15 or 19 of the Covered Title Risks by paying our maximum

16 dollar limit of liability referred to in those items and only those costs, attorneys’ fees and expenses incurred up to that time which we are obligated to pay.

“Our Choices When You Notify Us of a Claim.”

Here, in response to the Desjardins’ notice of claim,

Fidelity denied coverage. Not only did it refuse to represent

the Desjardins’ interests in the Cooper Litigation, but it also

refused (or neglected) to invoke any of its other options set

forth under item 4 of the Policy’s “Conditions.” That was

plainly in breach of its obligations under the Policy. As a

consequence, the Desjardins were forced to provide their own

legal representation, presumably incurring costs and, perhaps,

legal fees for which Fidelity should have been responsible.

Going forward, Fidelity can obviously decide which of the options

set forth above it wishes to pursue (e.g., attempt to negotiate a

settlement with M s . Cooper, step in and represent the Desjardins’

interests in the litigation, e t c . ) . But, that does not render

moot the Desjardins’ claim that they have already suffered

consequential damages - in the form of costs and perhaps

attorney’s fees - as a result of Fidelity’s breach.

17 As to count two of their complaint alleging that Fidelity

breached the terms of the Policy, the Desjardins are entitled to

judgment as a matter of law.

Conclusion

The Policy, properly construed, provides the Desjardins with

coverage for M s . Cooper’s claim that she holds title to the

disputed 35 feet of shore frontage on Lot 12 by virtue of the

placement of a boundary marker. But, even if one could plausibly

argue that the relevant language is ambiguous on that point, it

must be construed in favor of coverage, since the Policy may be

reasonably interpreted to provide coverage by a reasonable person

in the position of the insureds, based upon more than a casual

reading of the Policy as a whole. It necessarily follows that

Fidelity improperly denied the Desjardins’ request for coverage.

Accordingly, the Desjardins’ motion for summary judgment as to

both counts in their complaint (document n o . 14) is granted and

Fidelity’s motion (document n o . 12) is denied.

The Desjardins are entitled to an award of damages

consisting of the costs and attorney’s fees reasonably incurred

in representing their interests in the Cooper Litigation. They

are also entitled to an award of costs and attorney’s fees

reasonably incurred in successfully prosecuting this declaratory

18 judgment suit. See RSA 491:22-b. Those sums should be easily

calculated and the court will assume that the parties are capable

of coming to an agreement on that issue. I f , however, they are

not able to agree on the sums to which the Desjardins are

entitled, the parties shall notify the court, which will either

schedule a damages hearing o r , if plaintiffs believe they are

entitled to a jury trial on their contract damages, it will issue

an appropriate briefing order.4

SO ORDERED.

m c^ Steven J . McAuliffe Jnited States District Judge

June 1 4 , 2013

cc: Christopher T . Meier, Esq. Lisa S . Wade, Esq.

4 Although plaintiffs have requested a jury trial, neither party has addressed whether they are actually entitled to one on the issue of damages for their breach of contract claim, when those consequential damages appear to consist entirely of court costs and attorney’s fees. The court will require additional legal briefing on the issue.

19