Judge: Donald F. Gaffney, Case: The Estate of Frances Marsh v. Chicago Title Insurance Company, Date: 2022-10-26 Tentative Ruling

TENTATIVE RULING:

Motion for Summary Judgment.

Defendant Chicago Title Insurance Company moves for summary judgment or, in the alternative, summary adjudication against Plaintiff the Estate of Frances Marsh.  For the following reasons, the motion is DENIED.

A “party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact . . . .”  (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.)  A defendant moving for summary judgment satisfies his or her initial burden by showing that one or more elements of the cause of action cannot be established or that there is a complete defense to the cause of action.  (Code Civ. Proc. (“CCP”), § 437c(p)(2).)  Once the moving party meets that burden, the burden shifts to the party opposing MSJ to show, by reference to specific facts, the existence of a triable issue as to that affirmative defense or cause of action.  (Villacres v. ABM Industries, Inc. (2010) 189 Cal.App 4th 562, 575.) 

As an initial matter, though Defendant styles its motion as a motion for summary judgment or, in the alternative, summary adjudication, because Defendant’s motion papers do not comply with California Rule of Court 3.1350(b), the court treats the motion solely as a motion for summary judgment. Rule 3.1350(b) states:

If made in the alternative, a motion for summary adjudication may make reference to and depend on the same evidence submitted in support of the summary judgment motion. If summary adjudication is sought, whether separately or as an alternative to the motion for summary judgment, the specific cause of action, affirmative defense, claims for damages, or issues of duty must be stated specifically in the notice of motion and be repeated, verbatim, in the separate statement of undisputed material facts.

(Id.)

Defendant’s Notice of Motion identifies 5 issues on which Defendant seeks summary adjudication.  Defendant’s Separate Statement, however, does not identify any of the 5 issues identified in the Notice of Motion or what facts are material to those issues.   Thus, the court must deny Defendant’s summary adjudication motion.  (See Schmidlin v. City of Palo Alto (2007) 157 Cal.App.4th 728, 743-44 (“A motion for summary adjudication tenders only those issues or causes of action specified in the notice of motion, and may only be granted as to the matters thus specified. The movant must ‘state[ ] specifically in the notice of motion and ... repeat[ ], verbatim, in the separate statement of undisputed material facts,’ ‘the specific cause of action, affirmative defense, claims for damages, or issues of duty’ as to which summary adjudication is sought. (Former Cal. Rules of Court, rule 342(b); see now Cal. Rules of Court, rule 3.1350(b).) The motion must be denied if the movant fails to establish an entitlement to summary adjudication of the matters thus specified; the court cannot summarily adjudicate other issues or claims, even if a basis to do so appears from the papers.”).) 

On a summary judgment motion where, as here, an insurer seeks to prevail on the ground that it did not have a duty to defend its insured against a third party lawsuit, the insurer must present undisputed facts establishing the absence of any potential for coverage. The insured defeats such a motion by showing a potential for coverage exists—i.e., that the underlying claim may fall within policy coverage. (Albert v. Mid-Century Ins. Co. (2015) 236 Cal.App.4th 1281, 1290; Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 300.)

A title insurance policy is interpreted under the well-established rules for interpretation of insurance agreements. (Hovannisian v. First American Title Ins. Co. (2017) 14 Cal.App.5th 420, 430.) An insurer owes a duty to defend its insured against claims creating a potential for indemnity under the insurance policy. (Albert v. Mid-Century Ins. Co., supra, 236 Cal.App.4th 1281, 1289.) That is, “ ‘ “the carrier must defend a suit which potentially seeks damages within the coverage of the policy.” ’ ” (Montrose Chemical Corp. v. Superior Court, supra, 6 Cal.4th 287, 295.) The duty to defend is broader than the duty to indemnify, and thus the duty to defend may exist even where coverage is in doubt and ultimately does not develop. (State Farm General Ins. Co. v. Frake (2011) 197 Cal.App.4th 568, 577.)

A duty to defend a claim due to a potential for coverage under the policy may arise (a) from the nature of the allegations in the third party complaint, and also (b) from “facts known to the insurer and extrinsic to the third party complaint.” (Montrose Chemical Corp. v. Superior Court, supra, 6 Cal.4th 287, 296.) Consequently, “an insurer has a duty to defend an insured if it becomes aware of, or if the third party lawsuit pleads, facts giving rise to the potential for coverage under the insuring agreement.” (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 19.)

The Third Amended Complaint (“TAC”) asserts causes of action for (1) Breach of Contract, (2) Tortious Breach of Duty of Good Faith and Fair Dealing, (3) Unfair Business Practices, and (4) Declaratory Relief, naming Defendant in all causes of action.

The first cause of action for breach of contract alleges Defendant breached the insurance policy it issued to Plaintiff.  (Complaint., ¶¶ 75-84.) 

An insurance company's obligation to indemnify an insured depends upon the nature of the risks covered by the terms of the insurance policy. (Hovannisian v. First American Title Ins. Co., supra, 14 Cal.App.5th at p. 429.) “In insurance coverage cases, ‘the proper initial focus must be the language of the policy itself....’ ” (Golden Security Thrift & Loan Assn. v. First American Title Ins. Co. (1997) 53 Cal.App.4th 250, 255.) Generally, before a court considers whether any exclusions to coverage apply, it first examines the coverage provisions to determine whether coverage potentially exists at all. (Rosen v. Nations Title Ins. Co., supra, 56 Cal.App.4th 1489, 1497.)

The title insurance policy at issue covered loss from “Covered Risks,” which includes: “1. Someone else owns an interest in Your Title. 2. Someone else has rights affecting Your Title arising out of leases, contracts, or options. 3. Someone else claims to have rights affecting Your Title arising out of forgery or impersonation. 4. Someone else has an easement on the Land. 5. Someone else has a right to limit Your use of the Land. 6. Your Title is defective. 7. Any of Covered Risks 1 through 6 occurring after the Policy Date ..... 10. Someone else claims to have rights affecting Your Title arising out of fraud, duress, incompetency or incapacity. …”  (Defendant’s UMF 3 and Plaintiff’s Response; Plaintiff’s UMF 56.)

After stating the covered risks, the policy provides that Fidelity “will defend Your Title in any legal action only as to that part of the action which is based on a Covered Risk and which is not excepted or excluded from coverage in this Policy.... [¶] We will not pay for any part of the legal action which is not based on a Covered Risk or which is excepted or excluded from coverage in this Policy.”

The relevant exclusion from coverage is set forth in paragraph 4 of the section of the policy under a heading entitled “EXCLUSIONS,” which excludes the following matter from coverage: “4. Risks: [¶] a. that are created, allowed, or agreed to by You, whether or not they are recorded in the Public Records. [¶] b. that are Known to You at the Policy Date, but not to Us, unless they are recorded in the Public Records at the Policy Date.”  (Defendant’s UMF 5.)

Defendant contends it had no obligation to Plaintiff because Plaintiff did not have a covered claim or a potentially covered claim.  Plaintiff alleges Frances Marsh purchased the subject property based on misrepresentations made by her son, Mark Wynne.  (Plaintiff’s UMF 29-39.)  Wynne induced Marsh to sign a quitclaim deed transferring 50% ownership of the property to Wynne’s wife and placed certain restrictions on the quitclaim deed’s validity.  (Plaintiff’s UMF 36, 39.)   Marsh later attempted to sell the property, but Wynne recorded the quitclaim deed and recorded a deed of trust encumbering the property.  (Plaintiff’s UMF 39-44.)  After Marsh passed away, Wynne pursued a lawsuit in Washington Superior Court and Riverside Superior Court, seeking full possession of the property.  (Plaintiff’s UMF 45-46.)  Defendant initially agreed to defend Plaintiff in the Riverside case but ultimately denied the tender in both cases because of exclusions 4(a) and 4(b), cited above.  (Defendant’s UMF 5, 27-42.) 

Plaintiff has submitted evidence to establish a triable issue of material fact as to whether there was a potential for coverage under the insurance policy and thus whether Defendant had a duty to defend Plaintiff or prosecute a claim on Plaintiff’s behalf.  (Plaintiff’s UMF 27-48; Plaintiff’s response to Defendant’ UMF 10; 16, 23.)

Defendant contends that exclusion 4(a) (a risk “created, allowed, or agreed to by” Plaintiff) applies because Marsh signed the 2013 quitclaim deed giving rise to the Wynne’s claims regarding the property.  Defendant also contends that exclusion 4(b) applies because Marsh was aware of the 2013 quitclaim deed and Defendant was not. 

It has been held that the term “ ‘created,’ ” as used in this type of exclusion, means “ ‘conscious, deliberate causation’ ” in contrast to a result that was merely inadvertent or negligent. (Safeco Title Ins. Co. v. Moskopoulos (1981) 116 Cal.App.3d 658, 667; accord, RNT Holdings, LLC v. United General Title Ins. Co. (2014) 230 Cal.App.4th 1289, 1301.) As is clear from the plain wording of paragraph 4.a. of the subject policy, risks that are of the insured's own making, because the situation or condition affecting title was deliberately created, allowed or agreed to by the insured, are excluded from coverage.

Plaintiff has provided evidence to create a triable issue of fact as to whether she consciously and deliberately caused the risk of “someone else claim[ing] to have rights affecting [its] Title arising out of fraud, duress, incompetency or incapacity.”  (Plaintiff’s UMF 33-36; Plaintiff’s response to Defendant’s UMF 3-4.)  Plaintiff has produced evidence that Marsh was fraudulently induced to sign the quitclaim deed and thus there is a triable issue of fact as to whether Defendant had a duty to defend.  (Id.)  Accordingly, the motion is denied.

Plaintiff’s evidentiary objections are overruled. 

Plaintiff to give notice.