The United States District Court for the District of Maryland recently dismissed a title policy holder’s claim regarding an allegedly unmarketable title and provided especially useful language to the industry. In Kiritsis v. Stewart Title Guaranty Co., the court confirmed that “unmarketable” as used in the policy was not ambiguous and that the term related solely to title and not the property itself.

Plaintiffs owned one dwelling across three adjoining parcels in Ocean City, Maryland. Plaintiffs entered into a sales contract with a developer who announced a plan to replace the existing residence and erect separate dwellings on each of the three lots. Shortly thereafter, Plaintiffs’ neighbor filed suit to bar the development claiming that Ocean City’s Zoning Code prohibited the announced plan. The developer’s intended title insurer would not issue a policy absent an exception for the neighbor’s claim, which caused closing to be disrupted. The Plaintiffs made a claim on their title policy asserting that title to their property was unmarketable.

The Kiritsis Court analyzed whether the title was unmarketable and held that the term referred solely to legal title of the property and neither to its usage nor value. The Court noted that “[i]f a storm destroyed part of a building on a piece of property, it would certainly make the property less desirable or ‘marketable,’ but it would have no impact on whether the title to the property was valid.” Concluding that the policy would not afford the relief demanded by Plaintiffs, the Court held that it “is not the purpose of title insurance to insure against any possible claim brought against owners of a property; rather, as its name suggests, its purpose is to insure against claims to the title of the property at issue.” The Court also noted the policy’s exception for losses related to police powers, zoning, and land use. While a potentially predictable win for the title industry, the decision is useful for practitioners given the strong favorable language throughout the opinion.

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.