Western Capital Partners, LLC v. Chicago Title Ins. Co., No. 12-2691 (7th Cir. 2014)
Annotate this CaseIn 2006 Western Capital made a $2.77 million loan to finance a Chicago development, which failed. Western initiated foreclosure, resulting in allegations that Western had breached its contract, committed fraud, and violated consumer protection statutes. Western requested that its insurers cover costs associated with its defense. Philadelphia Indemnity is Western’s general liability insurer. The mortgages were insured by CT on the standard ALTA form, which covers losses sustained because of defects in title and lien priority, and requires CT to pay costs, attorneys’ fees and expenses incurred in defense of the title or the lien, but excludes “fees, costs or expenses incurred by the insured in the defense of those causes of action which allege matters not insured against by this policy.” The district court declined to enforce the limitation, applied the “complete defense” rule, and held that CT had a duty to defend the entire lawsuit. The Seventh Circuit reversed. An insurer’s duty to defend is contractual. Title insurance, unlike general liability insurance, only indemnifies against losses incurred by reason of defects in title and specifically limits the duty to defend to claims within that coverage. The Illinois Supreme Court has never applied the complete-defense rule to title insurance.
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