217 Cal. App. 4th 62
Cal. Ct. App.2013Background
- Liberty owns the Broadway Trade Center property in Los Angeles and holds a Chicago Title ALTA owner’s policy issued January 21, 1998.
- Partielly sued Liberty and related entities in 2001–2002, alleging, among other things, fraud and quiet-title claims to recover a 9.5% interest in the BTC property arising from a loan participation with AFS and the Afshani brothers.
- Liberty tendered defense of the Partielly Action to Chicago Title in 2002; Chicago Title refused, asserting no covered loss under the policy.
- The trial court held Chicago Title had a duty to defend the Partielly Action; damages were awarded in Phase II, and a tort claim for breach of the implied covenant was resolved in Phase III in Liberty’s favor, with a total judgment around $1.08 million.
- On appeal, the court held there was no duty to defend because the Partielly Action did not allege a defect in Liberty’s title but instead alleged tortious conduct in Liberty’s acquisition of title, precluding coverage under the insuring clause.
- Liberty’s appeal was deemed moot because no duty to defend exists, and the court reversed the judgment against Chicago Title and directed entry of judgment for Chicago Title.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Partielly Action falls within the insuring clause | Partielly alleges a 9.5% title interest; action seeks title relief and quiet title against Liberty. | Action concerns tortious conduct in Liberty's acquisition of title, not defects in title itself. | No coverage under insuring clause; no duty to defend. |
| Whether exclusions apply to defeat coverage | Exclusions do not apply; facts show potential coverage. | Exclusions would bar coverage even if the insuring clause applied. | Court did not reach exclusions; absence of insuring-clause coverage controls. |
| Whether Liberty's appeal is moot due to no duty to defend | Errors in Phase III may be reviewable despite denial of defense. | Without a duty to defend, no breach of the implied covenant claim lies. | Liberty's appeal is moot; dismissible. |
Key Cases Cited
- Moskopoulos v. Safeco Title Ins. Co., 116 Cal.App.3d 658 (Cal. Ct. App. 1981) (title insurance does not cover tortious conduct in acquiring title)
- Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th 1 (Cal. 1995) (duty to defend; evaluate complaints against policy terms; extrinsic facts may establish coverage)
- Rosen v. Nations Title Ins. Co., 56 Cal.App.4th 1489 (Cal. App. 1997) (duty to defend; coverage determined by insuring clause and exclusions)
- Montrose Chem. Corp. v. Superior Court, 6 Cal.4th 287 (Cal. 1993) (establishes general rule for insurer’s duty to defend and resolving policy ambiguity)
- Quelimane Co. v. Stewart Title Guaranty Co., 19 Cal.4th 26 (Cal. 1998) (title-search defects and insurer reliance on records; ALTA/CLTA distinction context)
- Elysian Investment Group v. Stewart Title Guaranty Co., 105 Cal.App.4th 315 (Cal. App. 2002) (distinguishes on-record vs off-record risks and coverage scope)
- Barczewski v. Commonwealth Land Title Ins. Co., 210 Cal.App.3d 406 (Cal. App. 1989) (insurer duty to defend tied to whether claims affect title or are within policy scope)