First American Title Insurance v. Johnson Bank, 353 P.3d 370

First American issued lender’s title insurance on two parcels to Johnson Bank (Dec. 2, 2005 and Jun. 19, 2006) totaling $1,000,000 and $1,050,000 respectively.
The owners later sued First American over undisclosed CC&Rs that allegedly barred commercial development; Johnson Bank foreclosed on Sept. 22, 2010.
Johnson Bank obtained title to the Troon K and Troon H parcels via credit bids of $55,000 and $47,000.
In Oct. 2011 Johnson Bank notified First American of title defects not listed in the policies and sought damages under the lender’s policies.
The parties disputed whether the diminution in value should be measured from the loan date or from foreclosure; the superior court held for foreclosure date.
The court reversed and remanded, holding the loan date, not foreclosure date, should be used to measure diminution in value due to undisclosed defects.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Starting date to measure diminution in value under lender’s policy	Johnson Bank argues the loan date should be used	First American argues the foreclosure date should be used	Loan date is the correct measure; remand for judgment accordingly

Swanson v. Safeco Title Ins. Co., 186 Ariz. 637 (Ariz. App. 1995) (valuation date for owner’s title policy; supports measuring loss at defect discovery)
First Am. Title Ins. Co. v. Action Acquisitions, LLC, 218 Ariz. 394 (Ariz. 2008) (interprets ambiguous policy provisions in the insurer’s favor or against the insurer depending on context)
Citicorp Sav. of Illinois v. Stewart Title Guar. Co., 840 F.2d 526 (7th Cir. 1988) (addresses timing of loss calculation under title insurance)
First Am. Bank v. First Am. Transp. Title Ins. Co., 759 F.3d 427 (5th Cir. 2014) (loss calculation timing under lender’s title policy)
Karl v. Commonwealth Land Title Ins. Co., 20 Cal.App.4th 972 (Cal. Ct. App. 1993) (discusses valuation date concepts in title insurance)