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California Court of Appeal Affirms Summary Judgment Victory Obtained by Eric Early, William Wright and Kevin Sinclair on Behalf of First American Title Insurance Company

In 1500 Viewsite Terrace, LLC v. Pickford Escrow, Inc., et al., the California Court of Appeal has affirmed the summary judgment victory obtained by Early Sullivan for its client First American Title Insurance Company.

In the Viewsite action, the plaintiff/appellant had sued First American for breach of title policy and bad faith relating to multimillion-dollar residential property in the Hollywood Hills. The Court of Appeal’s decision in Viewsite involves issues that are important to the title insurance industry, including regarding the interpretation of certain key title insurance policy forms, provisions and exceptions.  

The decision is the first in California interpreting a binder of title insurance. And, the decision confirms that a policy of title insurance issued pursuant to such a binder does not provide more coverage than that offered in the binder. The decision is also important insofar as there is relatively little California case law interpreting exceptions to coverage in title insurance policies, particularly since the California Legislature made certain amendments to the Insurance Code in 1981 which eliminated any duty of disclosure on the part of title insurers and confirmed that preliminary reports are not representations of the condition of title.

In the decision, the Court found that an exception for a recorded lis pendens, and a separate exception for a recorded judgment, were neither vague nor ambiguous. The decision is the first in California to interpret the legal effect of an exception for a lis pendens and an exception for a recorded judgment in a title insurance policy. The decision also interprets Condition 3 of the CLTA standard coverage policy of title insurance. The CLTA standard coverage policy of title insurance is one of the commonly used form policies of title insurance in California, and identical or nearly identical provisions to Condition 3 are found in many other form policies of title insurance policies issued in this state and around the country. Despite the ubiquitous nature of this policy provision, there is a dearth of case law interpreting Condition 3 (which obligates the insured to provide prompt notice of any potential claim and that, if prompt notice is not given and such lack of prompt notice prejudices the insurer, that all liability of the insurer shall terminate).

The decision confirms that this form policy language means what it says. The decision also found that the title policy in question was not illusory. This is the first California opinion addressing the doctrine of illusory contracts in the specific context of a title insurance policy.

Click on Download PDF to see the judgment.