Rainy Weather Triggers Defense Coverage
Perry owned a parcel benefitted by a granted easement over their Neighbors’ property. Perry’s owner’s policy included the easement in Schedule A, but excluded coverage for the "terms and provisions of the easement" in Schedule B. When Perry tried to pave the easement, the Neighbors sued to enjoin paving or any other improvement of the easement, but conceded Perry’s right to use the easement for access. The Neighbors alleged “when the easement was created, the parties had an unwritten understanding that the area would not be improved.”
Perry tendered a defense claim under the policy. Fidelity denied coverage, pointing out that the Neighbors were not contesting the existence of the easement, only the manner of its use. Perry sued, seeking a declaration that Fidelity was obligated to defend the Neighbors’ action. Perry claimed the unpaved easement area became muddy and impassable during wet weather, and that the inability to improve the easement would render title to the main property unmarketable!
The Court found the Neighbors’ complaint raised the possibility that Perry “would be effectively denied the easement granted in the deed.” Thus, the suit placed at issue “whether the easement could actually be conveyed. That is, it placed at issue the marketability of Perry’s title.” Ultimately, Fidelity had an obligation to defend the Neighbors’ action. Perry v. Fidelity National Title Insurance Company, 2015 IL App (2d) 150168 (2015).
The rationale for this opinion is hard to discern. Without actually saying so, the Court seems to rely on the fact the easement was affirmatively insured in Schedule A. Thus, the insured interest might have been seen as greater than a “right of access to and from the land.” Although the Neighbors’ suit didn’t arise until after Perry’s policy date, the fact that it alleged a pre-policy “unwritten understanding” restricting use of the easement was apparently enough to trigger the defense obligation. A petition for leave to appeal to the Illinois Supreme Court is pending.