DC Circuit Applies Discovery Rule To Erroneous Land Surveys Of Commercial Land

The case of Commonwealth Land Title Insurance Company v. KCI Technologies, Inc., concerns a title insurance company’s suit against two surveyors whose surveys failed to find a 12-inch encroachment on a parcel of commercial real property. Before purchasing the property, ICG 16th Street Associates commissioned a land survey that found no encroachment. The next year, it purchased the property along with title insurance that insured against any encroachment. When ICG started to develop the property, it commissioned more surveys. The first, in 2012, found that a party wall encroached on the property by two to three inches. A 2013 survey found the encroachment was four inches. On March 24, 2014, after demolition, the encroachment was discovered to be 12 inches. ICG filed a title insurance claim and was paid $1 million. On March 23, 2017, just under three years after the demolition, the title company sued the surveyors for the erroneous surveys. The surveyors moved to dismiss at the pleadings stage on statute of limitations grounds, and the district court granted the motion, finding that the claims were untimely since they were filed more than three years after the surveys were delivered, and that D.C.’s discovery rule did not apply because the title insurance company was a sophisticated entity. The D.C. Circuit, in a unanimous opinion by Judge Wilkins, reversed. First, the majority reasoned that D.C. Court of Appeals precedent allowed for the discovery rule to apply in commercial construction disputes. It then held that while the title insurance company was a sophisticated business entity, “it lacks sophistication in the area of land surveying.  Why else would it have commissioned four land surveys?” The Court also noted the latent and hidden nature of the encroachment, given that it was only fully discovered after demolition, and overlooked by several surveys. Therefore, the defects in the surveys were not known until the demolition in 2014, making the claims timely, and case was remanded for further proceedings and potentially trial. A link to the opinion is here.