Virginia Supreme Court Rejects Role of Juries in Title Insurance Bad Faith Claims

Virginia-Supreme-CourtIn a new opinion that merits review by anyone who underwrites title or defends title insurers in Virginia, a 6-1 majority of the Virginia Supreme Court held that Virginia Code sec. 38.2-209 requires that judges, not juries, make the determination of whether an insurer has acted in bad faith under a policy. In REVI, LLC v. Chicago Title Insurance Company, REVI purchased certain residential land with the intent to develop it, and purchased title insurance against any “loss or damage” caused by “[a]ny defect in or lien or encumbrance on the title.” Four years later, REVI discovered the parcel had a number of development restrictions on it as imposed by the United States back in 1963. REVI made a title insurance claim, and Chicago Title worked to remove some, but not all, of the restrictions. Chicago Title decided that the reduced restrictions did not diminish the value of the parcel, but REVI claimed $1.6 million in lost value. When Chicago Title refused to pay, REVI sued and alleged bad faith, asking for a jury trial over Chicago Title’s objection. The jury awarded REVI $1.2 million in damages for breach of contract and another $442,000 for bad faith. The trial court vacated the bad faith award, holding that Va. Code sec. 38.2-209 required any bad faith finding to be made by the judge, and ruled that there was not enough evidence to prove Chicago Title acted in bad faith. REVI appealed, and in a decision authored by Justice Mims, the Court affirmed, holding that 209(A)’s requirement that a “court” make the determination means the trial judge, not a jury. In particular, the Court noted that when Title 38.2 was created in 1986 as part of the Recodification Act, another statute separately addressed “the court or jury,” thus indicating that the General Assembly saw the two as distinct. Justice McClanahan, concurring, noted that the General Assembly’s habit was to use the term “court” to refer to the trial judge, not a jury. Justice Kelsey, in dissent, argued that the term “court” was ambiguous, and should be read in favor of allowing jury review. A link to this opinion, issued on September 17, 2015, is here.