Plaintiffs challenged decision from the Superior Court of San Diego County (California) granting defendant, insurer’s, motion for summary judgment in an action for insurer bad faith. Plaintiff alleged that defendant had wrongfully failed to pay claim on title policy. The court held plaintiffs had not suffered any insured loss because they had recouped all their money. Plaintiffs argued, inter alia, that there remain triable issues of fact.

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Overview

Plaintiffs challenged decision granting defendant, insurer’s, motion for summary judgment in an action alleging that defendant wrongfully failed to pay a claim on their title policy, a tax lien purportedly senior to plaintiff’s trust deed. Defendant argued plaintiffs had not suffered any loss insured by the policy because they had recouped all of their money. On appeal, the court considered the scope of coverage afforded by a title policy issued to insure the priority of a mortgage. A title insurance policy was a contract of indemnity, not one of guarantee. Defendant did not represent that title was in any particular condition, but only agreed to indemnify to the extent the insured suffered a loss caused by defects in the title or encumbrances on the title. Absent a loss there was no obligation to pay benefits. Further, a secured lender suffered an indemnifiable loss under a title policy only if the lender failed to recoup the debt because of insured-against senior lien. The court reversed on another issue, holding there were triable issues of fact as to whether plaintiffs received property the fair market value of which exceeded the amounts owed on the insured indebtedness.

Outcome

The judgment was reversed and the action remanded. The court concluded that the state of the record raised triable issues of fact as to whether plaintiffs received property the fair market value of which exceeded the amounts owed on the insured indebtedness.