75 A.3d 394
Md. Ct. Spec. App.2013Background
- Back Creek purchased Harbor View waterfront property in Annapolis in 1998 and developed the community.
- Back Creek bought a title insurance policy from First American Title Insurance Company covering its interest in the land.
- Policy insured against defects, lien or encumbrance, unmarketability, and lack of a right of access, plus defense costs as provided by the policy terms.
- In 1999, Back Creek recorded a subdivision plat showing an easement for access to slips and built a pier; a Declaration of Easements and related covenants created community rights and a waterfront access easement.
- Between 2000 and 2006, Back Creek conveyed lots to buyers and the pier to the HOA; a 2008 Smith declaratory judgment action questioned riparian and access rights, not title defects; Back Creek incurred over $200,000 in defense costs.
- The Smith Action did not allege defects, liens, or unmarketability in Back Creek’s title, and the insured’s coverage termination appeared after conveyances; First American denied coverage, leading to this lawsuit seeking defense costs; the circuit court granted summary judgment for First American, which this court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does First American have a duty to defend in the Smith Action? | Back Creek | First American | No duty to defend |
| Are the Smith Action claims within the policy’s scope of coverage? | Back Creek | First American | No coverage under policy terms |
| Did timing of the policy (termination) affect coverage for post-conveyance claims? | Back Creek | First American | Coverage terminated with insured’s loss of title |
| Did untimely notice prejudice defeat coverage? | Back Creek | First American | Not reached; analysis unnecessary given no potential coverage |
Key Cases Cited
- Stewart Title Guar. Co. v. West, 110 Md.App. 114 (Md. 1996) (title insurance protects against title defects; defense is broader than indemnity)
- Walk v. Hartford Cas. Ins. Co., 382 Md. 1 (Md. 2004) (duty to defend broader than duty to indemnify)
- Cheverly Terrace P’ship v. Ticor Title Ins. Co., 100 Md.App. 606 (Md. 1994) (duty to defend depends on policy scope and underlying allegations)
- Gebhardt Family Inv., LLC v. Nations Title Ins. of N.Y., Inc., 132 Md.App. 457 (Md. 2000) (transfer of title can terminate coverage for title defects after conveyance)
- Chi. Title Ins. Co. v. 100 Inv. Ltd. P’ship, 355 F.3d 759 (4th Cir. 2004) (Fourth Circuit on timing and scope of coverage under Maryland law)
- Knopf v. Lawyers Title Ins. Corp., 109 Md.App. 134 (Md. 1996) (interpreting policy terms and defense obligations)
- Utica Mut. Ins. Co. v. Miller, 130 Md.App. 373 (Md. 2000) (duty to defend when allegations potentially bring claims within coverage)
- 100 Investment, 355 F.3d 759 (4th Cir. 2004) (duty to defend limited to covered occurrences)