After the purchaser of property in Monroe, La., discovered a defect in title, the company sued several parties to the transaction, including the title insurer who issued the title policy. The title insurer argued that the defect was not covered because it attached to the property after the policy was issued. The U.S. District Court for the Western District of Louisiana agreed with the insurer.
The case is Cavender Enterprise Leasing Family LLC v. First States Investors 4200 LLC, et al. (U.S. District Court for the Western District of Louisiana, No. 3:11-1577).
Cavender Enterprise Leasing Family LLC was conveyed title to property in Monroe, La., by act of sale with limited warranty from First States Investors 4200 LLC by deed dated Feb. 15, 2008. Chicago Title Insurance Co. issued title insurance to Cavender with an effective date of Feb. 25, 2008. The act of sale was recorded in the conveyance records of Ouachita Parish on Feb. 25, 2008.
On May 7, 2010, Regions Bank filed an act of deposit via a post-closing letter agreement dated June 15, 2005, between Regions Bank and First States in the conveyance records of Ouachita Parish. The act of deposit gave a right of first refusal to Regions Bank from First States on June 15, 2005.
Chicago Title contended that the title insurance policy excludes from coverage any defects, liens, encumbrances, adverse claims or other matters that attach or are created subsequent to the date of the policy. It argued that because the post-closing agreement was recorded on May 7, 2010, subsequent to the policy being issued, the title insurance policy provides no coverage.
The court agreed and granted a motion for summary judgment filed by Chicago Title dismissing Cavender’s claims against it.
“Chicago Title maintains that the policy clearly excludes coverage for any losses, damages, costs, attorney’s fees or expenses that may arise as a result of title defects, liens, encumbrances, adverse claims or other matters arising or created subsequent to the date of the policy, nor does it provide coverage for damages arising as a result of rights or claims of parties in possession not shown by the public records,” the court stated.
“The plaintiff has failed to oppose this motion and thus has failed to create a genuine issue of material fact for trial,” the court stated. “The post-closing letter agreement was not filed in the public records until May 7, 2010; the date of the issuance of the Chicago policy is Feb. 25, 2008. The policy clearly excludes from coverage the title defect or cloud created by the right of first refusal. The policy clearly does not provide coverage for damages arising as a result of rights or claims of parties in possession not shown by public records.”