This case involves multiple litigations among three parties — First American Title Insurance Company (First American), the insurer; GMAC Mortgage, LLC (GMAC), the insured mortgagee; and Elizabeth Moore, the homeowner — arising out of a defect in the title to Moore’s home. First Ameri
GMAC filed a complaint and request for injunctive relief against First American in the United States District Court seeking, in relevant part, to recover from First American the costs
“1. Under Massachusetts law, when there is an overlap between one or more of the counts of the complaint and the terms of this standard title insurance policy, does the insurer have a duty to defend the insured against all claims in the action?”3
“2. Under Massachusetts law, when a title insurance contract gives the insurer the right to engage in litigation to cure a defect covered by the policy, does an insurer initiating litigation have a duty to defend the insured against all reasonably foreseeable counterclaims?” (Emphasis supplied.)
We answer “No” to both questions.
1. Facts. Because our task is limited to responding to the certified questions, we do not delve deeply into the factual complexities of this case. We merely recount several significant facts as the District Court judge found them.
Moore and her husband, Thomas, lived in a home in Bille-rica, the title to which was in Thomas’s name. In 2001, for the
Pursuant to the title insurance policy it issued to GMAC, First American could resolve this title defect
2. Preliminary issues. Before we reach the certified questions, we briefly dispose of two threshold issues: whether to answer the certified questions at all, and whether the title insurance contract covers the causes of action asserted in Moore’s action.
a. Whether to answer the certified questions. First American urges that we refrain from answering the certified questions on the ground that they are untimely and unnecessary, as the United States District Court judge already reached a decision based on the law as he reasonably predicted it. We decline to accept First American’s invitation to avoid this case in its entirety. Because the present matter remains pending (the case is administratively closed and the proceedings stayed), our response to the certified questions will determine the ultimate outcome. See SJ.C. Rule
b. Whether the title insurance contract covers Moore’s claims. GMAC asks that we conclude that the policy covers the three counts Moore asserted in her complaint on the ground that the allegations in her “complaint are ‘reasonably susceptible’ of an interpretation that they state ... a claim covered by the policy terms.”
“The interpretation of a contract is a question of law for the court.” Eigerman v. Putnam Invs., Inc., 450 Mass. 281, 287 (2007). Courts decide this type of question routinely, and such decisions are reviewable. See, e.g., C.A. Acquisition Newco, LLC v. DHL Express (USA), Inc., 696 F.3d 109, 112 (1st Cir. 2012), quoting Office Max, Inc. v. Levesque, 658 F.3d 94, 97 (1st Cir. 2011). However, we do not sit in review of the United States District Court judge’s decision in the present case. Therefore, we assume that Moore’s stated causes of action are not covered pursuant to the title insurance contract, and consider only
3. Certified questions. In Massachusetts, general liability insurers have a broad duty to defend their policy holders. See, e.g., Doe v. Liberty Mut. Ins. Co., 423 Mass. 366, 368 (1996); Boston Symphony Orch., Inc. v. Commercial Union Ins. Co., 406 Mass. 7, 10 (1989). Because “[i]t is not uncommon for a lawsuit against an insured to assert some claims that are covered by the insurance policy and others that are not,” the general rule in Massachusetts in the general liability insurance context is that “an insurer must defend the entire lawsuit if it has a duty to defend any of the underlying counts in the complaint.” Liberty Mut. Ins. Co. v. Metropolitan Life Ins. Co., 260 F.3d 54, 63 (1st Cir. 2001) (Liberty Mut. Ins. Co.), citing Mt. Airy Ins. Co. v. Greenbaum, 127 F.3d 15, 19 (1st Cir. 1997). Said differently, “if an insurer has a duty to defend one count of a complaint, it must defend them all.” Mt. Airy Ins. Co. v. Greenbaum, supra, citing Aetna Cas. & Sur. Co. v. Continental Cas. Co., 413 Mass. 730, 732 n.l (1992) (Aetna). See Simplex, supra; A.D. Windt, Insurance Claims and Disputes: Representation of Insureds & Insurers § 4.12, at 126-127 (1982) (Insurance Claims and Disputes). This is known as the “in for one, in for all” or the “complete defense” rule.
The “in for one, in for all” rule of general liability insurance defense typically is invoked where an insurance policy covers at least one cause of action or count in a complaint, but does not cover other claims asserted in the complaint in the same lawsuit. See Liberty Mut. Ins. Co., supra; Mt. Airy Ins. Co. v. Greenbaum, supra. Although the Federal court judge concluded that the three causes of action Moore asserted in her complaint were not covered under the title insurance policy, see Liberty Mut. Ins. Co., supra, we assume that First American was nevertheless “in for one,” in the sense that its prosecution of the title reformation and equitable subrogation counterclaims was inextricably intertwined with the defense of Moore’s action. Thus, we turn to the certified questions to address the issue whether First American was also “in for all.”
a. Question one. The first question asks whether the “in for one, in for all” rule of general liability insurance defense — that an insurer must defend an entire action against an insured where its policy potentially covers any one claim — applies in the unique title insurance context. We hold that it does not.* *****
“[A] title insurance policy is not an agreement to guarantee or a warranty of the state of the title . . . . It is, rather, an agreement to indemnify the policyholder . . . against loss through defects in title.” B. Burke, Law of Title Insurance § 2.01 [A], at 2-5 (3d ed. Supp. 2012), quoting Rood v. Commonwealth Land Title Ins. Co., 936 A.2d 488, 493 (Pa. Super.
The “in for one, in for all” rule is inapplicable in the title insurance context because title insurance is fundamentally different from general liability insurance. See B. Burke, Law of Title Insurance, supra at § 2.01 [B], at 2-16 (Supp. 2011); 1 J.D. Palomar, Title Insurance Law, supra at §§ 1:14-1:17, at 36-45. “Unlike other forms of insurance, title insurance is not directed at future risks. It is directed at risks that are already in existence on the date the policy is issued.” B. Burke, Law of Title Insurance, supra at § 2.01 [C], at 2-22 (Supp. 2008). Because title insurance narrowly covers defects in, or encumbrances on, titles that are in existence when a policy issues, title insurers attempt to eliminate or reduce risks prior to the issuance of a title insurance policy. See id. at § 2.01 [C], at 2-22 to 2-22.1 (Supp. 2008), quoting Fidelity Title Co. v. Washington Dep’t of Revenue, 745 P.2d 530, 531 (Wash. App. 1987). See also 1 J.D. Palomar, Title Insurance Law, supra at § 1:15, at 36-37 (title insurance as risk eliminating; general liability insurance as risk assuming). Such differences are reflected in the differing payment schemes and length of coverage as between title and general liability insurance: title insurance typically requires a single premium payment (often a percentage of the property value) for indefinite coverage, whereas general liability insurance requires continuation premiums (based on the likelihood a future event will occur) for coverage during a set term. See 1 J.D. Palomar, Title Insurance Law, supra at § 1:17, at 44. In light of the limited purpose and scope of title as compared to general liability insurance,
b. Question two. This question asks whether a tide insurer that elects to cure a title defect by initiating litigation
We return to our touchstone, that title insurance is unlike general liability insurance in that title insurance coverage is narrow. See B. Burke, Law of Title Insurance, supra at § 2.01 [B], at 2-16 (Supp. 2011); 1 J.D. Palomar, Title Insurance Law, supra at §§ 1:14-1:17, at 36-44. Because the issues covered by a title policy are relatively discrete, an attorney for a title insurance company (who typically specializes in real property issues) feasibly can defend only the title-related issues. Thus, we decline to impose a complete defense obligation on title insurers. Were we instead to impose on title insurers a duty to defend insureds against reasonably foreseeable counterclaims, this “reasonably foreseeable” rule of title insurance defense would quickly become a work-around to our conclusion that “in for one, in for all” does not apply in the title insurance context. See A.D. Windt, Insurance Claims and Disputes, supra at § 4.12, at 127 (no duty to
We might conclude differently if claims asserted in response to litigation initiated by a title insurer were compulsory counterclaims.
4. Conclusion. We answer the certified questions as follows:
Question one: A title insurer does not have a duty to defend the insured in the entire lawsuit where one claim is within the scope of the title insurance coverage and other claims are not. The title insurer is only obliged to defend the insured on the covered claims.
Question two: With the possible exception of compulsory counterclaims, a title insurer that initiates litigation similarly
The Reporter of Decisions is directed to furnish attested copies of this opinion to the clerk of this court. The clerk in turn will transmit one copy, under the seal of the court, to the clerk of the United States District Court for the District of Massachusetts, as the answers to the questions certified, and will also transmit a copy to the parties.
The affirmative defenses that the attorney for GMAC Mortgage, LLC (GMAC), asserted in Elizabeth Moore’s action were that she failed to state a claim; her claims were barred by the doctrine of unclean hands, laches, and estoppel, and the doctrine of mutual mistake; and her G. L. c. 93A claim failed to satisfy the filing prerequisites. The counterclaims that counsel for GMAC initially asserted (but First American agreed to prosecute) were for a judgment declaring that Moore’s interest in the property was subject to the mortgage, and for reformation of the mortgage and equitable subrogation.
GMAC’s request that First American actually defend it in Moore’s action became moot when the case settled. Therefore, the dispute became about recovering the costs of defending against Moore’s claims.
The judge’s use of the word “overlap” indicates that aspects of the three causes of action that Moore asserts in her complaint, which the judge determined fall outside the scope of the title insurance policy, implicate the underlying defect in the title to Moore’s home. It is because a component of Moore’s action implicated the title defect that First American prosecuted the counterclaims in Moore’s action. The question, recast slightly, is whether First American then had a duty to defend GMAC in the entire action. See Kartell v. Blue Shield of Mass., Inc., 384 Mass. 409, 425-426 (1981).
First American does not dispute that it is liable under the title insurance policy it issued to GMAC for title defects.
In relevant part, the title insurance policy states that First American:
“[A]t its own cost and without unreasonable delay, shall provide for the defense of an insured in litigation in which a third party asserts a claim adverse to the title or interest as insured, but only as to those stated causes of action alleging a defect, lien or encumbrance or other matter insured against by this policy. . . . [First American] will not pay any fees, costs or expenses incurred by the insured in the defense of those causes of action which allege matters not insured against by this policy.” (Emphasis added.)
Authority is split over whether parties to an insurance contract may contract around the default legal principle that, when a general liability insurer has any duty to defend, it must defend against all claims, both covered and noncovered. Compare Aetna Cas. & Sur. Co. v. Continental Cas. Co., 413 Mass. 730, 732 n.l (1992) (complete defense rule, “barring a contrary agreement with the
We acknowledge the paucity of cases involving the scope of title insurance defense. Indeed, we may revisit the question whether “in for one, in for all” should apply in the unique, title insurance context if lessons that emerge from practice so warrant.
The American Land Title Association’s (ALTA’s) standard title insurance policy form reflects the limited scope of title insurers’ defense obligation and the view that “in for one, in for all” is inapplicable in the title insurance
Although the United States District Court judge denied GMAC’s motion to bifurcate the trial of Moore’s claims from the title reformation and equitable subrogation counterclaims, a plaintiff’s noncovered claims could be stayed until the title issues were resolved in the appropriate circumstance. This natural bifurcation of claims lends further support to our conclusion that a title insurer is not required to defend against noncovered claims, even where there is an underlying title defect that the insurance company is obligated to defend.
This question highlights another fundamental difference between title and general liability insurers. Title insurers, under ALTA’s standard title insurance policy, may advance the interests of the insured by initiating suit to cure a title defect on the insured’s behalf. Thus, title insurers often assume an offensive and defensive posture, whereas general liability insurers typically assume a purely defensive posture.
First American asserts that this question is merely hypothetical because, technically, Moore did not assert “counterclaims.” Moore did not assert her three claims against GMAC as counterclaims in the initial Land Court action because she could not: her three claims for money damages were outside the jurisdiction of the Land Court. See G. L. c. 185, § 1. Thus, Moore asserted her claims as a plaintiff in the Superior Court. Notwithstanding this technicality, we (like the United States District Court judge) consider Moore’s three claims “effectively counterclaims,” because her claims came on the heels of the Land Court action and were only brought in the Superior Court because of the Land Court’s limited jurisdiction, and because the two actions were supposed to have been consolidated.
Because we do not impose on First American a broader duty than articulated in its title insurance contract (with the possible exception of the duty to defend against compulsory counterclaims where the insurance company initiates suit, see infra), there is no tension with freedom of contract principles. Beacon Hill Civic Ass’n v. Ristorante Toscano, Inc., 422 Mass. 318, 320 (1996), and cases and authorities cited.
Specifically, Moore challenges GMAC’s intentional acts of communicating with her regarding the note and mortgage after having been asked not to, sending correspondence addressed to her husband after receiving notification that he was deceased, taking photographs of the property, and otherwise pursuing or threatening to pursue foreclosure on the property before the title and mortgage issues were resolved.
A counterclaim is compulsory if “the court has power to give the relief sought. . . [and] the claim arises out of the transaction or occurrence that is the subject matter of the plaintiff’s claim.” J.W. Smith & H.B. Zobel, Rules Practice § 13.10 (2d ed. 2010). See Mass. R. Civ. P. 13(a), as amended, 423 Mass. 1405 (1996).
By way of example: where a plaintiff brings an action in the Probate and Family Court seeking equitable relief and the defendant has a counterclaim for money damages arising from the same transaction (which thus falls outside the subject matter jurisdiction of the Probate and Family Court), the counterclaim is not “compulsory.” See J.W. Smith & H.B. Zobel, Rules Practice, supra at § 13.11, at 233.