North Fork Land & Cattle, Lllp v. First American Title Insurance Company
2015 WY 150
| Wyo. | 2015Background
- Ronald and Carol Hansen owned five contiguous parcels in Fremont County, Wyoming and obtained ALTA title insurance policies from First American naming the Hansens as insureds.
- The Hansens conveyed the parcels to Hansens’ North Fork Ranch, LLLP (HNF), a Colorado limited liability limited partnership they formed for estate planning; HNF later converted and renamed to North Fork Land & Cattle, LLLP (North Fork) under Wyoming law and recorded quitclaim deeds memorializing the conversion/name change.
- First American did not disclose that Bunker Road burdened three parcels; North Fork asserted claims under the original title policies for damages from that undisclosed encumbrance.
- First American moved for summary judgment arguing North Fork was not an “insured” under the policies because the Hansens’ transfers to HNF were not transfers "by operation of law," and the quorum court granted judgment for the insurer.
- The Wyoming Supreme Court reviewed policy language defining "insured" (including successors “by operation of law as distinguished from purchase” and examples like heirs, devisees, corporate or fiduciary successors) and reversed, holding North Fork qualifies as an insured successor under the policy language and Wyoming law.
Issues
| Issue | Plaintiff's Argument (North Fork) | Defendant's Argument (First American) | Held |
|---|---|---|---|
| Whether successors who receive title from the named insured via entity transfer (estate-planning partnership conversion/quitclaim) are "insureds" under policy language "succeed to the interest... by operation of law" | Transfers into HNF/North Fork were not purchases and fall within "operation of law" and the policy's listed examples (corporate or fiduciary successors) — so North Fork is an insured successor | "Operation of law" means only involuntary/automatic transfers; these were voluntary transfers and thus fall outside the policy's successor coverage | Reversed: "operation of law" must be read in context and by plain meaning a reasonable insured would understand; transfers to a partnership composed of the insureds for estate planning qualify as successors and are covered |
| Whether a transferee who acquired record title by quitclaim (to memorialize a statutory conversion/name change) loses coverage under the policy | The statutory conversion made the new Wyoming entity the same owner by operation of law; the quitclaim was only record notice and did not defeat coverage | The quitclaim constituted a conveyance and could cut off warranty/continuation of coverage | Rejected: Wyoming conversion statute caused continuity of ownership; quitclaim was ministerial and did not defeat successor coverage |
| Whether earlier ALTA policy language should be narrowly construed to exclude voluntary estate-planning transfers (e.g., into trusts/LLPs) | Policy examples (heirs, devisees, fiduciaries) and ordinary meaning show such transfers present no greater risk and are within coverage | Insurers and some courts narrow "operation of law" to involuntary transfers to limit exposure | Court adopts contextual/plain-meaning construction; recognizes ALTA 2006 revisions but holds the earlier language here covers estate-planning entity successors |
Key Cases Cited
- Haines v. Old Republic Nat’l Title Ins. Co., 178 P.3d 1086 (Wyo. 2008) (describing title insurance as an indemnity contract governed by policy terms)
- Doctors’ Co. v. Ins. Corp. of America, 864 P.2d 1018 (Wyo. 1993) (insurance policies interpreted by plain meaning a reasonable insured would give; ambiguities construed against insurer)
- Shotmeyer v. New Jersey Realty Title Ins. Co., 948 A.2d 600 (N.J. 2008) (adopts narrow/involuntary definition of "operation of law")
- Historic Smithville Dev. Co. v. Chelsea Title & Guar. Co., 445 A.2d 1174 (N.J. Super. Ct. Ch. Div. 1981) (rejects strict involuntary-only meaning of "operation of law" and reads policy broadly to include corporate/fiduciary successors)
- United States v. Seattle-First Nat’l Bank, 321 U.S. 583 (U.S. 1944) (discusses difficulty of defining "operation of law" and focuses on the immediate statutory mechanism effecting transfer)