October 13th, 2023

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Early Sullivan Prevails Before Nevada Supreme Court Likely Ending Massive HOA Litigation

An Early Sullivan appellate team of Scott E. Gizer and Sophia S. Lau secured a monumental victory on behalf of the title insurance industry when the Nevada Supreme Court agreed with them that title insurers did not agree to insure lenders against the enormous losses they suffered when numerous Homeowner’s Associations foreclosed on their assessment liens wiping out deeds of trust securing hundreds of millions of dollars.

In Nevada, HOAs are granted a super priority lien for delinquent assessments that takes priority over earlier recorded deeds of trust under NRS 116.3116. When the Nevada Supreme Court confirmed in the landmark 2014 SFR decision that these HOA foreclosures indeed wiped out a lender’s first position deed of trust, the lenders turned around and tendered thousands of claims to their title insurers claiming coverage under two particular endorsements attached to their title policies (the ALTA 5/CLTA 115 and the ALTA 9/CLTA 100). The title insurers largely denied these claims, explaining that these endorsements did not provide coverage for a variety of reasons, resulting in over 100 lawsuits being filed by the lenders in the State of Nevada.

Early Sullivan was retained by the Fidelity National Title Group brand of companies, Old Republic National Title Insurance Company, and North American Title Insurance Company to defend against these more than 100 lawsuits seeking total damages in excess of $100,000,000.00. In the case of Deutsche Bank v. Fidelity National Title Insurance Company, Early Sullivan successfully brought a motion to dismiss before Judge Adriana Escobar, who found that under the plain meaning of these endorsements, there was no coverage for Deutsche Bank’s claimed losses from the HOA’s foreclosure on its super priority lien. Deutsche Bank appealed to the Nevada Supreme Court, which decided to hear the matter En Banc in the first instance given the known gravity of the case and its effect on over 100 other cases.

In a 6-0 published decision, the Nevada Supreme Court, En Banc, agreed with Early Sullivan’s arguments and interpretations of the various statutes and endorsements at issue, and affirmed that the endorsements at issue did not provide coverage for Deutsche Bank’s losses. This decision should result in the dismissal of all other cases regarding this subject matter, and eliminates enormous potential losses to Early Sullivan’s clients. Needless to say, the title insurance industry is thrilled with the results obtained by Early Sullivan.