Aрpellant, Cheverly Terrace Partnership (“Cheverly”), appeals from an order entered in the Circuit Court for Prince George’s County (Ahalt, J.), granting summary judgment in favor of appellee, Ticor Title Insurance Company (“Ticor”). Cheverly asks:
Whether the Circuit Court erred in concluding, as a mattеr of law, that under the terms of the April 1985 title insurance policy between the parties Ticor was not obligated to defend Cheverly in the underlying action brought by Cheverly Terrace II Limited Partnership (“Cheverly II”).
We answer this question in the negative and, therefore, affirm. 1
Facts and Proceedings
In April 1985, Cheverly purchased prоperty consisting of a shopping center surrounded by a parking lot in Prince George’s County, Maryland. At the time of settlement, Cheverly purchased title insurance for this property from Ticor. In July 1988, Cheverly II, the owner of an apartment complex adjacent to Cheverly’s shopping cеnter, filed suit against Cheverly in the Circuit Court for Prince George’s County. Cheverly II contended that its tenants used Cheverly’s parking lot and, thus, it sought to establish title to a portion of the *609 lot through adverse possession or, in the alternative, by an implied easement. Ticor refused to defend Cheverly in this suit, contending that the claims alleged by Cheverly II were excluded under the terms of the title insurance policy between the parties.
The circuit court granted Cheverly’s motion for summary judgment in the underlying suit. In
Cheverly Terrace II v. Cheverly Terrace Partnership,
Discussion
Cheverly contends that, under its title insurance policy, Ticor was required “to defend all claims made against [Cheverly] based upon an alleged defect, lien or encumbrance, unless specifically excluded by the [p]olicy.” Thus, Cheverly argues that because the facts alleged in the underlying action constituted a claim within the coverage of the рolicy, the circuit court erred in concluding that Ticor was not required to defend the action. We disagree.
The duty of an insurer to defend an insured under a policy provision has been principally discussed in the context of tort actions. In
Brohawn v. Transamerica Ins. Co.,
The obligation of an insurer to defend its insured under a contract provision such as here involved is determined by the allegations in the tort actions. If the plaintiffs in the tort suits allege a claim covered by the policy, the insurer has a duty to defend. Even if a tort plaintiff does not allege facts which clearly bring the claim within or without the *610 рolicy coverage, the insurer still must defend if there is a potentiality that the claim could be covered by the policy,
(citations omitted). Additionally, under the exclusive pleading rule, “an insurer’s duty to defend is determined by reference to the policy language and the allegations made in the complaint.”
Eastern Shore Financial v. Donegal Mut. Ins. Co.,
In
St. Paul Fire & Marine Ins. Co. v. Pryseski,
(1) what is the coverage and what are the defenses under the terms and requirements of the insurance policy?
(2) do the allegations in the tort action potentially bring the tort claim within the policy’s coverage?
We conclude that the reasoning behind this two-part test is equally applicable to the question of whether a title insurance company is required to defend a claim of adverse possession or implied easement. Thus, we shall consider (1) the scope of the policy’s coverage and (2) whether the allegations in the underlying suit bring the claim within this coverage.
Policy coverage
Under the title insurance policy at issue in this case, Ticor insured Cheverly against:
loss or damage ... and costs, attorneys’ fees and expenses which the Company may become obligated to pay hereunder, sustained or incurred by the insured by reason of:
1. Title to the estate or interest ... being vested otherwise than as stated [in the policy];
2. Any defect in or lien or encumbrance on such title;
3. Lack of a right of access to and from the land; or
*611 4. Unmarketability of such title.
Under the terms of the policy, Ticor agreed to defend Cheverly in all litigation “to the extent that such litigation is founded upon an allеged defect, lien, encumbrance, or other matter insured against by this policy.” The policy’s exclusionary clause provided:
This policy does not insure against loss or damage by reason of the following:
General Exceptions:
(1) Rights or claims of parties in possession not shown by the public records.
(2) Encrоachments, overlaps, boundary line disputes, and any other matters which would be disclosed by an accurate survey and inspection of the premises.
(3) Easements or claims of easements not shown by the public records.
(4) Any lien, or right to a lien, for services, labor, or material herеtofore or hereafter furnished, imposed by law, and not shown by the public records.
(emphasis added). Thus, the title insurance policy clearly and unambiguously excluded from coverage “rights or claims of parties in possession” and “easements or claims of easements” when these claims were not recorded.
The Allegations in the Underlying Suit
In the underlying suit, Cheverly II contended, in part:
14. [Cheverly II], through its predecessors constructed a parking lot ... and is currently using the lot for parking and access for the Cheverly Terrace Apartments....
15. [Cheverly II] and its predecessors’ use has been adverse, open, exclusive, and continuous fоr over twenty years.
16. [Cheverly II] is currently in physical possession of the western and northern part of the [parking lot].
Thus, Cheverly II alleged two legal theories supporting its claim to title, “adverse possession” or, in the alternative, “a perpetual easement by implication.”
*612 During the hеaring on the motion for summary judgment in the case now before us, the circuit court asked Cheverly’s counsel to address the potentiality of coverage in the underlying suit.
THE COURT: What I’m having trouble following in your analysis is, if Ticor had no obligation, had the plaintiff in the underlying action been successful to pay the result of that litigation, where does the potentiality of coverage exist that would bring it within Eastern Shore [84 Md.App. at 609 ]?
MR. BARON [Cheverly’s counsel]: If the underlying claim was successful on their theory, there might not have been a duty to indemnify for the losses. But there still was a duty to defend the action, because there [аre] two issues under the insurance policy. It’s not just a duty to indemnify. It’s also a duty to defend. There [are] two separate provisions.
THE COURT: But the duty—according to Eastern Shore, the duty to defend is dependent upon potentiality in terms of indemnification.
MR. BARON: Correct. But they would have had it—
THE COURT: Where is the potentiality?
MR. BARON: The potentiality is because the claim is bеing brought ... by a party not in possession, as being claimed usage of the property. By—
THE COURT: But if they were successful on that, the potentiality would be empty.
MR. BARON: But if they weren’t successful, then you have the potentiality.
(emphasis added).
In other words, Cheverly’s counsel contended that because Cheverly II was unable to establish the allegations of adverse possessiоn in its complaint, it was not a “party in possession” and its claim was, therefore, covered by Cheverly’s title insurance policy. We disagree with this result-oriented approach. The duty to defend under an insurance policy is not determined by the facts ultimately proven in the underlying suit. Rather, аn insurer’s duty to defend is based on whether the allegations in the complaint potentially bring
*613
the claim within the policy’s coverage.
Pryseski,
Ticor clearly excluded from coverage under the title insurance policy, “[r]ights or claims of parties in possession not shown by the public records” and “[e]asements or clаims of easements not shown by the public records.” We note that “[generally, ‘possession’ within the context of title insurance policies refers to an open, visible and exclusive use.”
Happy Canyon Inv. Co. v. Title Ins. Co. of Minnesota,
When a person, who does not appear in the chain of title, is found in possession of property it may indicate, for example, that he is making claim to the property by adverse possession, or that he is claiming under an unrecordеd deed. A title examiner, however, seldom visits the land the title to which he is concerned with. Thus, both to protect themselves and to put their client on notice of this state of affairs, title examiners and title insurance companies generally exclude from their title opinions and policies claims of parties in actual possession of the land insured.
(citation omitted).
In the underlying suit, Cheverly II claimed title to the disputed property by adverse possession or, in the alternative, by an implied easement for parking and access. “To establish adverse possession, a claimаnt must show that the possession was actual, open, notorious, exclusive and continuous or uninterrupted for the statutory period of twenty years.”
Goen v. Sansbury,
Cheverly argues that because the use of the parking lot by Cheverly II tenants was not, in fact, established as open, visible and exclusive possession of the property, the policy provision excluding “parties in possession” did not apply and, thus, Ticor was required to defend the underlying suit. In support of this argument, Cheverly refers us to the holding in
Guarantee Abstract,
In
Cooper v. Commonwealth Land Title Ins. Co.,
Additionally, we note that Cheverly’s argument assumes that unless the “parties in possession” exclusion applies, Cheverly II’s claim would be automatically covered under the insurance policy as some form of defect in title. Cheverly does not address, however, whether there are any facts alleged in the underlying complaint that would, if proven, state a claim for which Ticor would be liable. As we have held, the allegations raised in Cheverly II’s suit were excluded from coverage under the title insurance policy.
In reviewing a disposition by summary judgment, we must determine whether a material factual issue exists, and in doing so, all factual inferences must be resolved against the moving party.
Rosenberg v. Helinski, 328
Md. 664, 674,
JUDGMENT AFFIRMED; APPELLANT TO PAY THE COSTS.
Notes
. Cheverly has filed a motion to strike Ticor’s appendix to its brief. The appendix consists of three pages from a transcript of a hearing in the underlying suit between Cheverly and Cheverly II. Because this material was not made part of the record in the lower court, Cheverly’s motion is granted and the appendix shall not be considered.