Fifth Third Mortgage Company v. Chicago Title Insurance Company
2010 U.S. Dist. LEXIS 133628
| S.D. Ohio | 2010Background
- CTIC issued a title insurance policy through Direct Title as issuing agent for the Buford loan on Plantation Drive, Mason, Ohio.
- Plaintiff Fifth Third Mortgage claims its mortgage was the first and best lien; CTIC allegedly missed title defects caused by Direct Title’s alleged fraud.
- Plaintiff submitted a title claim and demanded CTIC defend and indemnify in a Warren County foreclosure action (National City Bank’s case).
- CTIC refused to defend in January 2010, asserting Plaintiff’s loan did not meet underwriting standards.
- CTIC sought to rescind or limit its obligations arguing underwriting guidelines and agent authority issues; discovery was sought under Rule 56(f).
- Court resolves whether CTIC is bound by the policy, must defend in Warren County Action, and whether rescission or bad-faith claims entitle relief; summary judgment for Plaintiff is warranted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is CTIC bound by the policy via Direct Title as issuing agent | Direct Title had apparent/actual authority; policy lists Direct Title as issuing agent | Direct Title exceeded authority; CTIC not bound by misrepresentations | CTIC bound; policy issued through Direct Title; agency established |
| Is CTIC obligated to defend in the Warren County Action | CTIC breached by refusing defense and indemnification | Underwriting practices exclusions and causation defenses apply; no defense obligation | CTIC must defend and indemnify; Plaintiff entitled to summary judgment on defense/related declaratory claims |
| Are underwriting standards a basis to rescind the policy | Underwriting standards not contractually required or material | Misrepresentation of underwriting could allow rescission | Rescission not warranted; underwriting standards not a policy term; no basis to rescind |
| Is CTIC liable for bad-faith handling of the claim | CTIC acted arbitrarily and without reasonable justification | Discretion in handling claims due to underwriting concerns | CTIC acted in bad faith as a matter of law |
Key Cases Cited
- Am. Savs. & Loan Assn. v. Lawyers Title Ins. Corp., 793 F.2d 780 (6th Cir. 1986) (exclusions and coverage broadness protect insured)
- Fidelity Natl. Title Ins. Co. v. Matrix Fin. Servs. Corp., 255 Ga.App. 874 (Ga. Ct. App. 2002) (insurer must honor title policy despite lender underwriting concerns)
- Rhone v. First Am. Title Ins. Co., 401 Ill.App.3d 802 (Ill. App. 2010) (apparent authority of issuing agent sustains insurer liability)
- Mortg. Network, Inc. v. Ameribanc Mortg. Lending, 177 Ohio App.3d 733 (Ohio App. 2008) (apparent agency and reliance on issuing agent)
- Aetna Cas. & Sur. Co. v. Leahey Constr. Co., Inc., 219 F.3d 519 (6th Cir. 2000) (agency scope and insurer liability for agent actions)