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Insurance – Title – Real Property – Easement Endorsement – Damages – Attorney’s Fees

First American Title Insurance Co. v. Columbia Harbison LLC (Lawyers Weekly No. 002-068-13, 21 pp.) (Joseph F. Anderson Jr., J.) 3:12-cv-00800; D.S.C.

Holding: In Endorsement 3 to the parties’ title insurance policy, the plaintiff-insurer agreed, with regard to a parking easement, to insure “against loss or damage resulting from an Order of a Court of competent jurisdiction requiring the removal of all or a portion of the structures” designated in the defendant-insured’s “Plans.” When a state court ordered the removal of structures the insured had constructed in the easement, the insurer was required to provide coverage.

The insurer’s motion for summary judgment is denied. The insured’s motion for summary judgment is granted in part.

Under the plain meaning of Endorsement 3, there is coverage for loss or damages resulting from the state court mandatory injunction. Contrary to the insurer’s argument, Endorsement 3 is not limited to “completed” structures, as the term “completed” is not found therein. Rather, Endorsement 3 refers to an order requiring removal of “all or a portion of” the structures. The injunction ordered removal of a retaining wall, and this is clearly “a portion of” the structures shown in the Plans.

The insurer breached its duty to indemnify the insured when it filed this action seeking a declaration of no coverage.

Endorsement 3 provides coverage for court-ordered removal of certain improvements to the insured property on the grounds that the improvements violate a specific risk that is excepted to in the base policy. The “loss or damage” insured against in Endorsement 3 is not insurance against a failure of title; rather, it is affirmative coverage of a different type. Thus, the case law pertaining to damages with respect to traditional title policies does not appear applicable to the insurance provided in Endorsement 3.

A covered loss occurred, and the insurer breached the title policy by failing to indemnify the insured according to policy terms. Thus, the issue is the appropriate measure of damages for breach of contract. The insured may attempt to prove consequential damages based on the insurer’s breach of its duty to indemnify.

In addition, because coverage existed under the title insurance policy, the insurer breached its contract with the insured by bringing this action to avoid coverage and defense. Therefore, the insurer is obligated to pay the attorneys’ fees that the insured incurred to defend this action.

Although it defended the insured in the underlying action, the insurer reserved the right to unilaterally quit funding the defense at any time. It filed a declaratory judgment complaint seeking a ruling that no coverage is provided to the insured and that the insurer is not required to defend the insured in the underlying action. As a result, the insured was forced to retain independent counsel to defend this lawsuit. Because coverage existed under the title insurance policy, the insurer breached its contract with the insured by filing this lawsuit. Therefore, under Hegler v. Gulf Insurance Co., 243 S.E.2d 443 (S.C. 1978), the insured is entitled to an award of attorneys’ fees.

Motions granted in part, denied in part.


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