DENNIS L. MUNDEN; SHERRILYN L. MUNDEN, Plаintiffs-Appellants, v. STEWART TITLE GUARANTY COMPANY, a Texas surety; CHICAGO TITLE INSURANCE COMPANY, an Illinois surety, Defendants-Appellees.
No. 20-35336
United States Court of Appeals for the Ninth Circuit
August 13, 2021
D.C. No. 4:19-cv-00112-DCN
OPINION
Appeal from the United States District Court for the District of Idaho
David C. Nye, Chief District Judge, Presiding
Argued and Submitted May 3, 2021
Seattle, Washington
Filed August 13, 2021
Before: Danny J. Boggs,* A. Wallace Tashima, and Marsha S. Berzon, Circuit Judges.
Opinion by Judge Boggs
Title Insurance / Idaho Law
The panel affirmed the district court’s grant of summary judgment to Stewart Title Guaranty Company, reversed the district court’s grant of summary judgment to Chicago Title Insurance Company, and vacated the district court’s judgment as to Chicago Title only in a diversity action brought by plaintiff title insurance holders against insurance companies for indemnification and breach of contract.
The plaintiffs initially sued Bannock County, Idaho in state court to prevent enforcement of an ordinance restricting their usе of a road passing through their land. Stewart Title and Chicago Title refused to defend and indemnify plaintiffs in the state action. The plaintiffs sued the insurers in federal court, and the district court granted the insurance companies’ motions for summary judgment. The district court found that the plaintiffs had failed to show the existence of a “public record,” as defined by the policies, showing any facts, rights, claims, interests, easements, liens, or encumbrances by reason of which the plaintiffs’ state-court dispute arose. Because each policy excluded coverage for loss, damages, and expenses arising by reason of such items nоt shown in the public records, the district court found that the companies had no obligation to cover the plaintiffs’ claims.
Concerning the disputed meaning of the term “public records” in the title policies, the panel followed the process in McFarland v. Liberty Ins. Corp., 434 P.3d 215 (Idaho 2019), to determine a reasonable meaning for the definition of the term. “Public records” are official documents that were brought into existence in accordance with Idaho public statutes, brought into existence on or before the date of the policy, and intended, at least in part, to provide constructive notice of some fact or circumstance relevant to the insured property to purchasers for value who did not have actual knowledge of that fact or circumstance. Applying the definition, the panel held that the Bannock County road map was a “public record” within the meaning of the policy. Because the maps were published before the effective date of each policy and because the plaintiffs’ dispute with the County arose by reason of the County’s claim to title of the road, none of Gеneral Exceptions 2–4 in the Stewart policy nor either of Exceptions 1 or 3 in the Chicago policy excluded coverage for the plaintiffs’ claims.
The panel next considered the Stewart Title policy’s separate exclusion at issue: Special Exception 4, disclaiming coverage for premises falling within the bounds of roads or highways. Although the district court did not reach the issue, the panel considered it because Stewart Title argued in its motion for summary judgment that Special Exception 4 applied to the plaintiffs’ dispute. The panel held that the only reasonable meaning of Special Exceрtion 4 in the Stewart Title policy favored the insurer, not the insured. Specifically, the panel held that so long as there was some causal link between a public interest in roads on the plaintiffs’ property and some kind of loss, damage, costs,
COUNSEL
Nathan M. Olsen (argued), Petersen Moss Hall & Olsen, Idaho Falls, Idaho, for Plaintiffs-Appellants.
Matthew Cleverly (argued), Fidelity National Law Group, Seattle, Washington; Tyler H. Neill (argued), Casey Legal Group PLLC, Eagle, Idaho; for Defendants-Appellees.
OPINION
BOGGS, Circuit Judge:
This is a contract-interpretation case arising under Idaho law. The Mundens, a married couple, own land in Bannock County, Idaho. They purchased title insurance for that property from the defendant insurance companies. Several years later, the Mundens sued Bannock County in Idaho state court to prevent enforcement of an ordinance restricting their use of a road passing through their lаnd. The Mundens then sued the insurance companies in federal court for indemnification and breach of contract, alleging that the companies failed to honor their promise to defend the Mundens’ title. The insurance companies assert that the
We affirm in part and reverse in part. The district court erred in its interpretation of the insurance policies under Idaho law. One of the companies, Chicago Title, has not shown that it is entitlеd to judgment. The other company, Stewart Title, is still entitled to judgment, but for a different reason than the district court gave.
I. Background
A. Factual Circumstances
1. The Title Policies
Dennis and Sherrilyn Munden are a married couple living in Bountiful, Utah. They own over 1400 acres of real property in two sets of parcels in Bannock County, Idaho, which they use for ranching. They purchased the first set of parcels, about 768 acres total, in January 2012 and the second set, totaling about 660 acres, in August 2014. The Mundens purchased title insurance for the first purchase through Stewart Title Guaranty Co. and for the second purchase through Chicago Title Insurance Co. The policies obligate the companies to indеmnify and defend the Mundens against any covered claims to their title.
At issue are the following exclusions in the policies. First, the Stewart Title policy:
does not insure against loss or damage (and the Company will not pay costs, attorneys’ fees or expenses) which arise by reason of:
. . .
General Exceptions:
. . .
2) Any facts, rights, interests, or claims which are not shown by the public records, but which could be ascertained by an inspection of the land or by making inquiry of persons in possession thereof.
3) Easements, liens, or encumbrances, or claims thereof, which are not shown by the public records.
4) Discrepancies, conflicts in boundary lines, shortages in area, encroachments, or any other facts which a correct survey would disclose, and which are not shown by the public records.
. . .
Special Exceptions: . . .
. . .
4. Right, title and interest of the public in and to those portions of the above described premises falling within the bounds of roads or highways.
does not insure against loss or damages, and the Company will not pay costs, attorney’s fees, or expenses that arise by reason of:
1. Rights or claims of parties in possession not shown by the public records.
. . .
3. Easements, or claims of easements, not shown by the public records.
And under both policies, the definition of “public records” is:
Records established under state statutes at Date of Policy for the purpose of imparting constructive notice of matters relating to real property to purchasers for value and without Knowledge.
2. The Underlying State-Court Dispute
The Mundens’ property contains a gravel road, Garden Creek Road, that is the subject of a dispute between the Mundens and Bannock County. This dispute began after the County enacted Ordinance No. 2019-01 (the “2019 ordinance”) in January 2019, which amended Ordinance No. 2006-1 (the “2006 ordinance”). The 2006 ordinance closed specified snowmobile trails in the County, including Garden Creek Road, to all motor vehicles except snowmobile traffic and snow-trail-grooming equipmеnt between December 15 of each year and April 15 of the next year. Using other motor vehicles on those trails during that closure was punishable
Shortly after the County enacted the 2019 ordinance, the Mundens filed an action in Idaho state court seeking an “injunction and other relief аgainst Bannock County for its actions affecting the use of their property.” During a hearing on February 4, 2019, the County asserted that Garden Creek Road had been listed as a public road on county maps since 1963.1 In March 2019, the County filed a countercomplaint in Idaho state court seeking a declaration that Garden Creek Road is a public road. The County alleged (among other things) that Garden Creek Road had been listed as a county road on the Idaho Department of Transportation Maps showing public roads since at least 1958, that under
B. Proceedings Below
On February 7, 2019, the Mundens sent a notice of claim to Stewart Title and to Chicago Title, asking the companies
In April 2019, the Mundens filed a complaint in federal district court against the insurance companies, seeking declaratory and injunctive relief, indemnification, and damages for breach of contract. Stеwart Title answered the complaint in May, and Chicago Title filed a Rule 12(b)(6) motion. The Mundens filed a motion for partial summary judgment (on the question of liability, not damages) in July, and Stewart Title filed its own summary-judgment motion in August. The district court, without objection, treated Chicago Title’s motion to dismiss as a summary-judgment motion because it raised matters outside of the pleadings.
After hearing argument, the district court denied the Mundens’ motion and granted the insurance companies’ motions for summary judgment. The court concluded that there was at least a dispute of material fact as to whether the marketability of the Mundens’ title was affected by the County’s claim tо Garden Creek Road, triggering potential claims under the two policies. But it found that the Mundens had failed to show the existence of a “public record,” as defined by the policies, showing any facts, rights, claims, interests, easements, liens, or encumbrances by reason of which the Mundens’ state-court dispute arose. Because each policy excludes coverage for loss, damages, and expenses arising by reason of such items not shown in the public records, the district court found that the companies had no obligation to cover the Mundens’ claims. The district court did not address Stewart Title’s additional argument that “Special Exception 4” in its policy, which excludes coverage for loss, damages, and expenses arising by reason of the
The Mundens’ timely appeal followed.
C. Applicable Legal Framework
1. Standard of Review
We review de novo a grant of summary judgment. Pac. Gulf Shipping Co. v. Vigorous Shipping & Trading S.A., 992 F.3d 893, 897 (9th Cir. 2021). Summary judgment is granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
2. Interpretation of Insurance Contracts Under Idaho Law
The insurance policies provide that “the court . . . shall apply the law of the jurisdiction where the Land is located . . . to interpret and enforce the terms of this policy” and that in no case “shall the court . . . apply its conflicts of law principles to determine the applicable law.” No party disputes the validity of the choice-of-law clauses. Thus, because the “Land” specified in each policy is in Idaho, Idaho law governs the policies.
Perhaps because there is no Idaho case on-point for this question, the parties and the district court have relied heavily on out-of-state authorities in their legal analyses. But a
In Idaho, whether an insurance policy is ambiguous “is a question of law.” McFarland v. Liberty Ins. Corp., 434 P.3d 215, 219 (Idaho 2019) (quoting Farmers Ins. Co. of Idaho v. Talbot, 987 P.2d 1043, 1047 (Idaho 1999)). A court begins with the policy’s “plain language” and “determine[s] whether or not there is an ambiguity.” Ibid. (quoting Clark v. Prudential Prop. & Cas. Ins. Co., 66 P.3d 242, 244–45 (Idaho 2003)). A provision is ambiguous if it “is reasonably subject to differing interpretations.” Ibid. (quoting Markel Int’l Ins. Co. v. Erekson, 279 P.3d 93, 95 (Idaho 2012)).
Idaho prescribes several rules for interpreting insurance policies. First, clear language in the policy is “given its plain and ordinary meaning.” Ibid. (quoting Farm Bureau Mut. Ins. Co. of Idaho v. Schrock, 252 P.3d 98, 102 (Idaho 2011)).
There is a presumption that “common, non-technical words are given the meaning applied by laymen in daily usage—as opposed to the meaning derived from legal usage,” but that presumption is rebutted if “a contrary intent [of the parties] is shown.” Ibid. (quoting Fisher v. Garrison Prop. & Cas. Ins. Co., 395 P.3d 368, 372 (Idaho 2017)). Examining reference materials helps in determining that usage. Id. at 220–21 (referring to “[a] survey of multiple dictionaries” such as Webster’s Third New International Dictionary and the Oxford English Dictionary). Lay usage can accommodate more than one reasonable meаning for a
For uncommon, technical terms, a policy’s failure to define that term even though it defines other terms “weighs in favor of ambiguity.” Id. at 219 (citing Arreguin v. Farmers Ins. Co. of Idaho, 180 P.3d 498, 501 (Idaho 2008)). But the “mere fact that a term is undefined in a policy does not make that term ambiguous if it has a settled legal meaning” in Idaho. Ibid. (quoting Melichar v. State Farm Fire & Cas. Co., 152 P.3d 587, 592 (Idaho 2007)).
The court “must construe the policy as a whole, not by an isolated phrase.” Id. at 222 (quoting Cascade Auto Glass, Inc. v. Idaho Farm Bureau Ins. Co., 115 P.3d 751, 754 (Idaho 2005)). In particular, if an isolated term or provision appears initially ambiguous, “reading the policy as a whole can remove the ambiguity by rendering onе of the possible interpretations unreasonable.” Ibid.
And “[b]ecause insurance policies are adhesion contracts not typically subject to negotiation between the parties, ‘all ambiguities in an insurance policy are to be resolved against the insurer . . . .’” Id. at 219 (quoting Howard v. Or. Mut. Ins. Co., 46 P.3d 510, 513 (Idaho 2002)). The insurer has the burden “to use clear and precise language if it wishes to restrict the scope of coverage,” and “exclusions not stated with specificity will not be presumed or inferred.” Ibid. (quoting Clark, 66 P.3d at 245). Thus, if there is an ambiguity, there is no factfinding of the parties’ actual intent in drafting the language. Id. at 223 (construing the ambiguous term “dwelling” by choosing the reasonable interpretatiоn most favorable to the insureds).
II. Analysis
A. “Public Records”
1. Interpreting the Definition
The parties primarily dispute the meaning of the term “public records” in the title policies—namely, whether the “public records” contain facts, rights, claims, etc. by reason of which the Mundens’ current dispute with Bannock County arose. Following the McFarland process described above, “public records” can be interpreted, reasonably in
First, we follow the McFarland process to determine a reasonable meaning for the definition of “public records.” The parties have clearly expressed an intent to give a specific meaning in the policies to the term “public records.” Each policy expressly defines that term as “[r]ecords established under state statutes at Date of Policy for the purpose of imparting constructive notice of matters relating to real property to purchasers for value and without Knowledge.” “Date of Policy”3 and “Knowledge”4 are terms that the policies separately define. Uncommon, technical terms in the definition are “constructive notice”5 and “purchasers for
The rest of the definition consists of common, nontechnical terms. Assigning those terms reasonable lay meanings, a reasonable interpretation of “records established under state statutes at Date of Policy” is: “Official documents that had been brought into existence in accordance with Idaho state statutes, on or before the Date of Policy.” And “for the purpose of imparting constructive notice of matters relating to real property to purchasers for value and without Knowledge” can reasonably mean “intended, at least in part,7 to provide constructive notice of some fact or circumstance relevant to the insured property to
One last wrinkle: it is perhaps not entirely clear whether the phrase “for the purpose of imparting” should modify “records established” or “statutes,” although most readers would view the phrase as specifying the purpose for which the “records” were “established.” We have found no authority supporting that Idaho, in interpreting contracts, follows the nearest-reasonable-referent canon (often mistakenly called the “last-antecedent canon”), as described in Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 152–53 (2012) (“When the syntax involves something other than a parallel series of nouns or verbs, a prepositive or postpositive modifier normally applies only to the nearest reasonable referent.”). Nor is that canon universally accepted in the contractual or even statutory setting. See, e.g., Phoenix Control Sys., Inc. v. Ins. Co. of N. Am., 796 P.2d 463, 470 (Ariz. 1990) (in banc) (Feldman, V.C.J., specially concurring) (“[I]t would be a fiction to pretend [the parties] drafted the language mindful that its meaning would be ascertained through use of the doctrine of the last antecedent.”); Kennett v. Bayada Home Health Care, Inc., 845 F. App’x 754, 768 (10th Cir. 2021) (Bacharach, J., concurring) (noting that “[t]he Colorado legislature has expressly repudiated the last-antecedent rule” in statutory interpretation and that only one Colorado court of appeals case had applied the rule in contractual interpretatiоn).
Thus, we do not apply the canon here, instead choosing “[r]ecords established” as a reasonable referent. With that syntactic choice, the resulting interpretation of the definition of “public records” is: “Official documents that were:
brought into existence in accordance with Idaho state statutes, and - brought into existence on or before the Date of Policy, and
- intended, at least in part, to provide constructive notice of some fact or circumstance relevant to the insured property to purchasers for value who did not have actual knowledge of that fact or circumstance.”
Notably, “state statutes” is unqualified in this interpretation. Contrary to thе district court’s conclusion, the policy, so interpreted, contemplates no restriction of the statutes to
2. Applying the Definition
An Idaho county that takes a real-property interest in a highway must update its official map to include the highway and regularly publish maps showing its highways.
The Bannock County road map was established in accordance with state statutes—particularly,
This is a reasonable interpretation in light of the contract as a whole. The Mundens could have reasonably expected the title companies, in doing their due diligence, to check county maps to ensure that roadways traversing the property are not public highways or rights-of-way. Indeed, Stewart Title’s Special Exception 4, which excludes coverage arising from claims of public interest to roads and highways, seems to anticipate that instruments indicating public interest in highways might not be recorded. Adding that exception shifts to the insureds the burden of checking whether the County has acquired an interest in a road on the land. It is less likely that Stewart Title would have shifted that burden if it had been clear that the Mundens already bore it.
B. Stewart Title’s “Special Exception 4”
As mentioned above, the Stewart Title policy has a separate exclusion at issue in this case: Special Exception 4, disclaiming coverаge for damages, costs, expenses, etc. “aris[ing] by reason of . . . [r]ight, title and interest of the public in and to those portions of the above described premises falling within the bounds of roads or highways.” The Mundens argue that this exception does not encompass their dispute with Bannock County over Gravel Creek Road.
The district court did not address this issue because it granted summary judgment to both insurance companies on the “public records” issue. Although we generally do not resolve issues that the district court did not first reach, Hormel v. Helvering, 312 U.S. 552, 556 (1941), that rule is not absolute, Singleton v. Wulff, 428 U.S. 106, 120–21 (1976) (“The matter of what questions may be taken up and resolved for the first time on appeal is one left primarily to the discretion of the courts of appeals, to be exercised on the facts of individual cases.”). In particular, we may address an issue “even though the district court refused to resolve it” so long as it was “raised sufficiently for the trial court to rule on it.” CFPB v. Gordon, 819 F.3d 1179, 1191 n.5 (9th Cir. 2016) (quoting O’Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957 (9th Cir. 1989)). Because Stewart Title argued in its motion for summary judgment that Special Exception 4 applied to the Mundens’ dispute, we may take up the issue now.
Their interpretation is unreasonable for two reasons. First, the main clause before the list of general and special exceptions reads: “This policy does not insure against loss or damage (and the Company will not pay costs, attorneys’ fees, or expenses) which arise by reason of,” and then lists specific exceptions. “By reason of” is broad language that does not inherently limit the kinds of reasons that may trigger an exclusion. So it need not be the Mundens who assert a public interest—any party’s claim of a public interest (such as Bannock County’s claim) triggers the exception.
Second, the Mundens’ interpretation would not make sense in light of the policy as a whole. The policy is for title insurance for two private persons. It is implausible that the Mundens, as private persons, would assert a public right, title, or interest in the portions of their own land falling within the bounds of roads or highways. Under their interpretation, the exclusion would be practically a nullity, a consequence we must avoid. Steel Farms, Inc. v. Croft & Reed, Inc., 297 P.3d 222, 229 (Idaho 2012) (“A court must look to the contract as a whole and givе effect to every part thereof.”).
So long as there is some causal link between a public interest in roads on the Mundens’ property and some kind of loss, damage, costs, attorneys’ fees, or expenses, the policy
III. Conclusion
We affirm the grant of summary judgment to Stewart Title and reverse the grant of summary judgment to Chicago Title. We vacate the judgment of the district court as to Chicago Title only, and we remand for further proceedings consistent with this opinion.
If we affirm in part, reverse in part, modify, or vacate a judgment, we may exercise our discretion in taxing costs.
Recognizing this unique situation, we therefore award costs as follows. The Mundens’ costs are taxed against Chicago Title, and Stewart Title’s costs are taxed against the Mundens.
AFFIRMED IN PART, REVERSED IN PART, VACATED IN PART, and REMANDED.
Notes
By contrast, for the insurer to prevail, it must win under all interpretations that are reasonable in light of the contract as a whole. That includes the most insured-favorable reasonable interpretation possible.
We need not delve into the state-court record to see if that issue has been preclusively decided. It suffices to note that the Mundens have waived the argument on appeal for failure to brief it sufficiently. See United States v. Ghanem, 993 F.3d 1113, 1133 (9th Cir. 2021) (holding that defendant waived argument supporting due-process claim because he failed to cite relevant case law).