Title Defect Might Benefit
Even if the insured had no title to half the premises described in the policy, the insurer may have no liability. That’s because the defect may confer a benefit on the remaining premises that ameliorates the putative loss. Nastasi v. County of Suffolk, et al., 2013 NY Slip Op 03824 (2nd Dept., May 29, 2013).
In 1984, approximately 200 Long Island beachfront landowners filed a class action in New York federal court. They claimed that their lands suffered dramatic erosion from actions taken decades earlier by the County of Suffolk, the State of New York, the United States of America, and other government agencies. The litigation was settled in 1994, with the government agreeing to “renourish” and maintain the beaches that had been lost. The settlement required the landowners and the State of New York to enter into a Boundary Line Agreement (BLA) prior to commencement of the project. Pursuant to the BLA, the landowners quitclaimed their respective interests in the land seaward of a particular line, while the State quitclaimed its interest landward of the line. The BLA was “dated” March 20, 1996 and signed by the plaintiffs in 1996, but not signed by the State or recorded until 2003.
Nastasi purchased one of the affected parcels in 2002. Of course, the BLA was not found of record and Chicago Title insured a description that included the seaward portion. Nastasi made a claim under his policy, which was denied. In the ensuing litigation, the trial court had dismissed the action against Chicago Title. The Second Department reversed, but recognized that Chicago might still be able to prevail.
Opposing Nastasi’s motion for summary judgment, Chicago Title had presented an affidavit from a certified real estate appraiser opining that the BLA resulted in a benefit to Nastasi because the government's maintenance and nourishment of the beach added significant value to their property. Since exclusion 3(c) of the policy excludes defects "resulting in no loss or damage to the insured claimant," the Court held that Chicago had presented a prima facie defense under the policy. Nastasi’s appraiser concluded that there was a significant loss, presenting a triable issue of fact and precluding summary judgment.
Full disclosure: Lance Pomerantz submitted an expert affidavit in support of Chicago Title’s summary judgment motion. The case also involves issues in addition to the loss-valuation issue discussed above. However, because the litigation is ongoing, no additional commentary will be offered at this time.