Client Alert: Important Decisions Limiting a Carrier’s Duty to Defend

In difficult times, it is good to see courts continuing with their dockets and issuing favorable decisions for the industry.  On March 23, the United States District Court for the District of Columbia issued a very important decision limiting a carrier’s duty to defend.

In Security Title Guarantee Corp. of Baltimore v. 915 Decatur St NW, LLC, Decatur 915 alleged that it received a deed on December 7, 2016 executed by Bridget Fordham and, on December 8, 2016, transferred the property to Claremont Management.  The two deeds were recorded on December 15, 2016, two minutes apart.  In October 2017, Ms. Fordham filed suit against Decatur 915, Claremont Management, and others, alleging that her signature had been forged and that the December 7 deed was void.  Ms. Fordham’s lawsuit alleged trespass to title, trespass for mesne profits, unconscionability, negligence and conversion of personal property.

Decatur 915 made a claim on its title insurance policy.  The title insurer filed a declaratory judgment action seeking a determination that it had neither a duty to defend, nor a duty to indemnify.  The insurer essentially alleged that the claims made by Ms. Fordham did not qualify as covered risks, as Decatur 915 had transferred its interest before the claims were made, and that the risks were otherwise excluded.

The Court recognized that Decatur 915’s transfer of the property meant that coverage ended once title passed, but, nevertheless that coverage would continue for covered claims if the claims were premised on loss or damage incurred during the coverage period.  Ms. Fordham’s claims of trespass for mesne profits and conversion of personal could, arguably, result in damages which would have been suffered during Decatur 915’s possession of the property and, thus, were within the time period of coverage.  However, neither of these two claims related to defects in or encumbrances on the title, and—even if they did—each fell under the “created, suffered, assumed, or agreed to” exclusion.  The Court held that the insurer had no duty to defend.

This decision is a significant one, as it resolved continuation of coverage issues not previously addressed in the District of Columbia.  Importantly, however, while there was no duty to defend, this coverage case continues in order to resolve the question of indemnification.  The Court held that such a decision would only be reached once the underlying litigation had resolved.

Jackson & Campbell, P.C. represents title insurers and insureds in Maryland, Virginia, and Washington, D.C. and we strive to keep our clients and other title professionals up to date on various developments in the law. Additionally, we present no cost in-house updates of the nation’s most noteworthy cases and national trends following the spring and fall American Land Title Association’s Title Counsel meetings.

If you have any questions about this case or laws impacting real estate in and around the Washington, D.C. region, feel free to contact us. Our Real Estate Litigation and Transactions Practice Group is ready to assist.