FLORENCE FLORIO et al. v. LAWYERS TITLE INSURANCE CORPORATION

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0329-04T20329-04T2

FLORENCE FLORIO and

JOHN M. DALESSIO,

Plaintiffs-Respondents,

v.

LAWYERS TITLE

INSURANCE CORPORATION,

Defendant-Appellant.

__________________________________________________________

 

Argued March 27, 2006 - Decided June 5, 2006

Before Judges Cuff and Holston, Jr.

On appeal from Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-2114-03.

Dean A. Gaver argued the cause for appellant (Greenbaum, Rowe, Smith & Davis, attorneys; Mr. Gaver and Steven Firkser, on the brief).

Jay H. Greenblatt argued the cause for respondents (Greenblatt & Laube, attorneys; Mr. Greenblatt, on the brief).

PER CURIAM

Defendant, Lawyers Title Insurance Corporation (Lawyers), appeals the Law Division's August 5, 2004 order, which entered judgment in favor of plaintiffs, Florence Florio and John M. Dalessio, in the amount of $64,431.66, representing counsel fees and costs incurred in the defense of the Chancery Division action entitled Bayside Development Corporation v. Florence Florio and John M. Dalessio under Docket No. ATL-C-157-01, and for the costs and legal expenses plaintiffs incurred in the subsequent Law Division action. We affirm.

The issue presented in this case is whether defendant was obligated, pursuant to the Lawyers Title Insurance Corporation Owners Policy of Title Insurance No. 119-00-776017, to defend and indemnify plaintiffs in an action filed by Bayside Development Corporation (Bayside), an adjacent property owner. Bayside sought a declaratory judgment that plaintiffs had encroached upon Bayside's possession of its property and requested that the court enter an order of ejectment, compelling the removal of plaintiffs' floating dock.

Plaintiffs purchased 81 Lagoon Boulevard, Brigantine, also known on the tax map as Block 5201, Lots 20 and 20.01, on December 13, 1999. The property is located on Half Moon Inlet and includes riparian rights that arose from an August 2, 1965 grant to Sachar Brigantine Development Corporation, recorded in Atlantic County deed book 2290, page 100. By reason of the State's riparian grant, plaintiffs' legal title extends beyond the bulkhead line to a pierhead line in the inlet, with a portion of the property between the bulkhead and the pierhead line under water and subject to the jurisdiction of the State. It is undisputed that a fixed pier and ramp are located on plaintiffs' property within the riparian grant area. This area is marshy, covered in high grass and does not contain sufficient water to keep a boat in the water for access to the bay. A floating dock was present when plaintiffs purchased the property, providing access to the inlet. Lawyers claims that the floating dock had been constructed without obtaining a permit or license from the Bureau of Tidelands Management and was not part of plaintiffs' property covered by the title insurance policy.

In connection with plaintiffs' purchase of the property, plaintiffs obtained a residential title insurance policy from Lawyers, which enumerates fourteen categories of title risks that it covers, including a "catch-all" provision for "[o]ther defects, liens, or encumbrances." A list of exclusions in the insurance policy includes in Schedule B:(1) "[e]asements, encroachments, overlaps, boundary line disputes or other matters affecting title which a survey would disclose, and which are not shown by the public record;" and (2) preclusion of attorney's fees and expenses resulting from "terms, conditions and provisions as contained in Riparian Grant from the State of New Jersey . . . ."

On September 14, 2000, Bayside sent a letter to plaintiffs notifying them that pursuant to an August 4, 2000 land survey performed by Vargo Associates, plaintiffs' floating dock was encroaching onto Bayside's property. A survey performed by Doran Engineering for plaintiffs showed the riparian grants to plaintiffs and Bayside overlapping by an area of thirty-five by forty-five feet. Bayside's own title insurance policy noted this conflict and determined that plaintiffs' rights to this area were superior to Bayside's.

Plaintiffs advised Lawyers of Bayside's encroachment claim on October 9, 2000. After reviewing and investigating the claim, Lawyers responded on May 3, 2001:

[I]t is the position of this company that as the floating dock is outside the insured premises, we did not insure that it may remain where presently located. As such, we deny coverage in regard to this matter.

On October 29, 2001, Bayside filed a complaint in the Chancery Division against plaintiffs in which it demanded the removal of the floating dock. The complaint sought: (1) ejectment of respondent's continuous possession of property alleged to belong to Bayside, (2) damages due to plaintiffs' alleged trespass, and (3) punitive damages for plaintiffs' alleged malicious and knowing improvement of Bayside's alleged property contrary to Bayside's perceived rights, without making a specific title claim.

As litigation with Bayside ensued, plaintiffs' counsel continued to request Lawyers' involvement and defense of plaintiffs' interests in the matter. Lawyers continued to deny such requests, contending that the focus in Bayside's complaint was on the floating dock itself and not on the integrity of plaintiffs' pierhead line and access to the inlet and, therefore, this issue was not covered under the title insurance policy.

The Chancery Division dismissed Bayside's ejectment claim on May 21, 2003. Judge Seltzer's written opinion of May 21, 2003, focused on the extent of Bayside's riparian rights as implicated by the conflicting surveys. The judge determined that Bayside's riparian grant fixing the pierhead line upon which Bayside relied did not extend as far as Bayside claimed, and that plaintiffs' dock was removed from any area properly claimed by Bayside. The judge reformed the deed by establishing the eastern pierhead line approximately forty feet further east. The Chancery Division's order was upheld by this court in our November 9, 2004 unpublished decision, Docket No. A-951-03T3.

Plaintiffs filed the present action in order to seek reimbursement of counsel fees and costs accrued in the Bayside litigation on the basis that Lawyers should have defended and indemnified plaintiffs pursuant to coverage afforded by the title insurance policy. Both parties moved for summary judgment with Lawyers seeking a declaratory judgment that plaintiffs' claims were not afforded coverage by the title insurance policy.

On June 3, 2004, Judge Perskie in the Law Division action issued a thorough and well-reasoned letter opinion in favor of plaintiffs, memorialized by the August 5, 2004 order, requiring Lawyers to pay plaintiffs' legal fees and costs totaling $64,431.66. The judge concluded that had Bayside prevailed against plaintiffs in the original Chancery Division litigation, the pierhead line of plaintiffs' property would have been redefined, which would have prevented plaintiffs from locating the floating dock off the pierhead line. The court concluded:

Plaintiffs' legal position with regard to the floating dock rests upon the facts that: (1) Plaintiff had legal title to the Property, to the pierline, and (2) only as an abutting landowner would Plaintiff have had the standing to seek a riparian lease from the State for the placement of the floating dock in the Inlet adjacent to the Property.

. . . .

Bayside's claim directly attacked Plaintiffs' legal right to seek access from the State to the portion of the Inlet that abutted the Property, a claim that most certainly "affected" Plaintiffs' title to the Property because Plaintiffs' right derived directly and exclusively from, and was completely dependent upon, the validity and perquisites associated with that title.

Lawyers presents the following arguments for our consideration:

POINT I

THE TRIAL COURT ERRED IN FINDING COVERAGE FOR PLAINTIFFS BASED ON A POTENTIAL IMPACT ON PLAINTIFFS' PIERHEAD LINE, AS THERE WAS NO COVERED CLAIM CHALLENGING PLAINTIFFS' TITLE UNDER THE POLICY.

A. THE BAYSIDE LITIGATION NEVER JEOPARDIZED A TITLE INTEREST INSURED UNDER THE POLICY.

B. ANY POTENTIAL "THREAT" TO THE PIERHEAD LINE THAT MAY HAVE ARISEN IN THE BAYSIDE LITIGATION DID NOT AFFECT A TITLE INTEREST INSURED UNDER THE POLICY.

POINT II

THE TRIAL COURT ERRED IN DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AS THERE IS NO OTHER BASIS TO AFFORD COVERAGE UNDER THE POLICY.

A. PLAINTIFFS' FLOATING DOCK WAS NOT WITHIN THE INSURED'S INTEREST IN LAND AND WAS NOT COVERED BY THE TITLE POLICY.

B. PLAINTIFFS' RIGHT TO ACCESS TO THE WATER WAS NOT CHALLENGED IN THE BAYSIDE LITIGATION AND WAS NOT COVERED UNDER THE TITLE POLICY.

C. THE "OTHER DEFECTS" CLAUSE IN THE TITLE POLICY DOES NOT PROVIDE A BASIS FOR COVERAGE.

I

The Law Division granted summary judgment in favor of plaintiffs, determining that Lawyers was responsible for the costs of defense of the Chancery Division action between plaintiffs and Bayside and for the legal expenses and costs associated with plaintiff's prosecution of the Law Division action.

Summary judgment must be granted "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c); see also Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 528-29 (1995).

The trial court is required "to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Id. at 540. The opposing party must nevertheless offer facts, which are substantial or material in opposing the motion, in order to defeat the grant of summary judgment. Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 74-75 (1954).

Lawyers contends that the potential threat to the pierhead line imagined by the trial court only related to waters beyond plaintiffs' property borders and the rights to apply for a permit to construct in those waters, and never affected plaintiffs' title insured under the policy. Lawyers claims plaintiffs' title interests in the pierhead line and riparian grant area were never in question, because plaintiffs' riparian grant was recorded prior to Bayside's grant, and the earlier grant has priority. Lawyers further contends that the battle to maintain the floating dock involved only the "privilege relating to the waters outside the insured property description and not a property right protected by the title insurance policy." We disagree.

We are convinced, as was Judge Perskie, that plaintiffs' pierhead line came directly into dispute and would have been subject to change had Bayside prevailed in the Chancery Division litigation. Plaintiffs purchased their property intending to utilize the riparian grant to gain access to the inlet. Readjusting plaintiffs' pierhead line would have left them with virtually no access to navigable water.

Defendant asserts that it insures only the integrity of the metes and bounds description in the deed relied upon. The policy description clearly describes the property up to and including the "pierhead line." That line is depicted on the November 22, 1999 survey prepared by Doran Engineering for the plaintiffs, which survey was accepted by the title company by removal of exception (1) the survey exception, at the issuance of the title policy. Water outside the pierhead line is owned by the State. The water within plaintiffs' pierhead line is shallow. A riparian owner may place a dock within the pierhead line of his property but, if desiring to go beyond that line onto State property, a permit must be obtained and a lease entered into with the State. Had Bayside prevailed, use of the property by plaintiffs for boating would have been precluded, as a permit and lease from the State would have been no longer available.

If Bayside's pierhead line had prevailed, the plaintiffs would have had almost no pierhead line in front of their property. Lawyers insured that plaintiffs' property had a pierhead line of 83.09 feet as depicted on plaintiffs' survey. Had Bayside prevailed, plaintiffs' pierhead line would have been almost entirely eliminated by the Vargo survey. Since the pierhead line is the lot line, any change in that line would be a change to the property owned and insured.

Course (3) of the metes and bounds description of plaintiffs' deed reads: "Northwestwardly, making an interior angle of 120 degrees with the preceding course, a distance of 46.19 feet to a point in the pierhead line as established by the State of New Jersey in the aforesaid [riparian] grant . . . ." The area of plaintiffs' property clearly covered by the title insurance policy is, therefore, dependant on the location of the pierhead line, because the extending boundary is determined from the 120 degree angle. If the pierhead line were subject to change, the property boundaries would be altered as well.

"[A] title insurance policy is a contract of indemnity under which the insurer, for a valuable consideration, agrees to indemnify the insured in a specific amount against loss through defects of title to . . . realty on which the insured has interest." Enright v. Lubow, 202 N.J. Super. 58, 67 (App. Div. 1985), certif. denied, 104 N.J. 376 (1986); see also Sandler v. N.J. Jersey Realty Title Ins. Co., 36 N.J. 471, 478-79 (1962). When interpreting a policy of title insurance, a court views it "like other policies of insurance," which "are construed to give effect to the intention of the parties as manifested by the reasonable meaning of policy terms." Amidano v. Donnelly, 260 N.J. Super. 148, 154 (App. Div. 1992) (citing Sandler, supra, 36 N.J. at 479; Feldman v. Urban Commercial, Inc., 87 N.J. Super. 391, 402 (App. Div. 1965)), certif. denied, 133 N.J. 435 (1993). Because of the unequal bargaining power between the title insurance company and the insured, and in light of the insurance companies' expertise in this field, title insurance policies are viewed as adhesion contracts. Id. at 154 (citing Zuckerman v. Nat'l Union Fire Ins. Co., 100 N.J. 304, 320-21 (1985); Allen v. Metro. Life Ins. Co., 44 N.J. 294, 305 (1965)). Although a court will not write a better policy for the insured than that which was purchased, it will strictly construe exceptions to coverage under an insurance policy against the insurer. Id. at 154. In the wake of the above stated principles has emerged the "doctrine of reasonable expectations under which 'courts will enforce only the restrictions and the terms in an insurance contract that are consistent with the objectively reasonable expectations of the average insured.'" Id. at 154-55 (quoting Meier v. N.J. Life Ins. Co., 101 N.J. 597, 612 (1986)).

The Chancery Division, in Costagliola v. Lawyers Title Insurance Corp., 234 N.J. Super. 400 (Ch. Div. 1988), expressed clearly the legal duty owed by a title insurer to its insured:

It is the law that "a title Insurer has three related duties under a title policy: (1) to indemnify the loss upon payment of damages; (2) to cure the title defects if feasible; and (3) to defend the insured in a judicial attack on its title." As noted, its prime duty is to vindicate the title. If there is a question as to the extent of the land title insured, the company must defend.

[Id. at 407 (citations omitted).]

The Law Division, in granting summary judgment, determined that the action brought by Bayside threatened more than an order requiring plaintiffs to remove the floating dock to inside the pierhead line. Judge Perskie determined that had Bayside prevailed, plaintiffs would have been required not only to withdraw their floating dock from outside the pierhead line but also would have modified the pierhead line on plaintiffs' property. Therefore, that aspect of plaintiffs' property rights, as contained in the metes and bounds description of the property and as shown on the Doran Engineering survey, is covered by the title policy.

We are also satisfied that Lawyers was obligated to defend plaintiffs in light of its removal of the survey exception in the title policy and because of the ambiguous nature of the "covered title risks" under the policy. An insurer's "duty to defend is not abrogated by the fact that the claim may have no merit and cannot be maintained against the insured, either in law or in fact, because the cause of action is groundless, false, or fraudulent." Sears Roebuck & Co. v. Nat'l Union Fire Ins. Co., 340 N.J. Super. 223, 241-42 (App. Div. 2001) (citing Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 174 (1992)). The guiding criterion in determining the existence of the insurer's duty to defend is not whether the insured is liable to the plaintiff in an action, but rather whether the allegations in a complaint will impose a liability which is covered by the policy in question if the cause of action is sustained against the insured. Id. at 242.

In essence, the risk or threat of adverse judgment in an action against an insured triggers the insurer's duty to defend. An insurer is obligated to reimburse an insured for failing to defend the insured where directed by the underlying policy. "In SL Indus., Inc. v. Am. Motorists Ins. Co., 128 N.J. 188, 214-15 (1992), it was established that 'when the insurer has wrongfully refused to defend an action and is then required to reimburse the insured for its defense costs, its duty to reimburse is limited to allegations covered under the policy . . . .'" Sears Roebuck, supra, 340 N.J. Super. at 242.

Lawyers argues that the pierhead line was not covered by the title insurance policy. Judge Perskie, however, relied in part, on the policy's "catch-all" provision, Risk 14, "other defects, liens or encumbrances." In construing the generic "catch-all" provision as covering the risk to which plaintiffs' title was exposed in the action brought by Bayside, the judge stated:

This provision can have substantive and relevant meaning only if it is construed to refer to claims, other than those expressly articulated in the list of covered risks, that assert an interest by others in, or a limitation of an owner's rights to, the subject property. In this case, Plaintiffs' (insured) rights of ownership include the ability, as an abutting landowner, to seek authority to utilize the State's riparian land in the Inlet. The forced removal of the floating dock (which had been constructed before the policy was issued and was shown on the survey that Defendant insured) would have resulted from a finding in the Chancery Division that the dock was located on "adjoining land" to which Plaintiff would have had no right, rather than simply from a determination that the dock was beyond the metes and bounds description of the Property.

Accordingly, . . . I think that the "other defects" section of the covered risk provisions of the policy could be interpreted as insuring Plaintiff against the forced removal of the floating dock so long as Plaintiff had a proper legal claim to use of the "adjoining land." Bayside's claim directly attacked Plaintiffs' legal right to seek access from the State to the portion of the Inlet that abutted the Property, a claim that most certainly "affected" Plaintiffs' title to the Property because Plaintiffs' right derived directly and exclusively from, and was completely dependent upon, the validity and prerequisites associated with that title. I believe that this risk is well within the "reasonable expectations of the average insured" and is generically of the same nature as those delineated in the enumerated "covered risks" of the policy.

We agree that title risk 14, "Other defects . . ." was a title risk implicated in this case. In the case of McMinn v. Damurjian, 105 N.J. Super. 132, 140 (Ch. Div. 1969), the Chancery Division held that the restricted use of an insured's side entrance to property constituted a title defect, which was covered by a title insurance policy. The facts in McMinn and in the instant case are analogous. The threat to the plaintiffs' use of the waterfront side of their property, destroying the chance of ever using the property for the purpose intended, i.e., boating, and compelling removal of the floating dock from what had been indicated as State property and creating an overlap of property lines, all threatened "defects" in title for which the defendant owed the plaintiffs a defense and indemnity. Black's Law Dictionary, 376 (5th ed.) defines a defect as: "The want or absence of some legal requisite; deficiency; imperfection; insufficiency . . . ."

In this case, the pierhead line was insured by Lawyers as an existing lot line, the integrity of which was necessary to the configuration of the property purchased and insured. If lost, it effectively precluded a lease from the State as was intended and as all properties along Lagoon Boulevard had done. The plaintiffs' pierhead line was essential to the proper use for the purpose for which the property was to be used.

Judge Perskie also noted: "As normal, the preliminary exclusions from coverage included 'easements, encroachments, overlaps, boundary line disputes or other matters affecting title which a survey would disclose . . . .' This exclusion was eliminated at closing. Accordingly, [Lawyers] insured [plaintiffs'] title against all 'overlaps and boundary line disputes' that 'affected title.'" Since Bayside's claim was clearly an overlap or boundary line dispute that would have significantly affected the property had Bayside prevailed, plaintiffs' title would have been affected.

We are satisfied that the location of the floating dock outside the metes and bounds of the insured property description was not the determinative issue in the Chancery Division litigation. Although the floating dock is located outside the metes and bounds in the deed, the land at issue in this case clearly implicates riparian grants dependant on bulkhead and pierhead lines that were contained as part of the metes and bounds description of the deed.

Lawyers contends that Judge Perskie mistakenly determined the "other defects" covered under the policy included the risk to plaintiffs here because "other defects" does not include risks which are known to the property owner. Although plaintiffs purchased the property with the knowledge that the floating dock was beyond the metes and bounds description of their property, plaintiffs believed they had rights to the dock because of their status as riparian land owners as granted by the State. If, by virtue of an improperly surveyed pierhead line, plaintiffs had lost their riparian landowner status to Bayside, the floating dock would not have belonged to them. The conflicting surveys were not an issue at the time title was transferred to plaintiffs, therefore this was not a known risk to plaintiffs.

We are convinced that the title insurance policy in this case covered the risk implicated by the Bayside lawsuit. While the initial issue presented to the court was the location of the floating dock, the conflicting surveys, depicting different locations of plaintiffs' pierhead line, potentially threatened plaintiffs' title. Lawyers insured plaintiffs' survey and the unknown threat to plaintiffs' title constituted coverage under the "other defects" provisions of the title policy. We are convinced, therefore, that plaintiffs are entitled to a defense and indemnity under the title policy issued by Lawyers.

 
Affirmed.

This court affirmed the trial court's decision in an unpublished decision under Docket No. A-951-03T3.

Exception 1 read: "Easements, encroachments, overlaps, boundary line disputes or other matters affecting title which a survey would disclose, and which are not shown by the public record."

Course (2) refers to the bulkhead line as established by the State of New Jersey in riparian grant to Sachar Brigantine Development Corporation, dated August 2, 1965.

(continued)

(continued)

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A-0329-04T2

June 5, 2006