Brenner v. Lawyers Title Ins. Corp.

• Decision Date: 21 September 1990
• Docket Number: No. 891441,891441
• Citation: 240 Va. 185,397 S.E.2d 100
• Parties: Janet Maybin BRENNER v. LAWYERS TITLE INSURANCE CORPORATION. Record
• Court: Virginia Supreme Court

Page 100

397 S.E.2d 100

240 Va. 185

Janet Maybin BRENNER v. LAWYERS TITLE INSURANCE CORPORATION.

Record No. 891441.

Supreme Court of Virginia.

Sept. 21, 1990.

William F. Etherington (Beale, Wright, Balfour & Davidson, Richmond, on briefs), for appellant.

Robert W. Wooldridge, Jr., McLean (Frederick H. Kruck, Jr., Springfield, McGuire, Woods, Battle & Boothe, McLean, Matricardi & Kruck, Springfield, on brief), for appellee.

Present: CARRICO, C.J., COMPTON, STEPHENSON, RUSSELL and WHITING, JJ., and POFF, Senior Justice, and COCHRAN, Retired Justice.

COMPTON, Justice.

In this action brought on a title insurance policy, the dispositive question is whether the insurer violated its contractual duty to defend suits founded upon alleged defects, liens, or encumbrances insured against by the policy.

In 1966, appellant Janet Maybin Brenner, then Janet Maybin Jonas, purchased property in the City of Alexandria described as Parts of Villa Site "A" and Lot 28, Block 23, Section 4 of the Rosemont subdivision. The eastern 50 feet of the property was subject to a storm sewer easement previously conveyed to the City. That easement is shaped like a parallelogram lying generally northwest to southeast diagonally across the Brenner property. At the time of the purchase, appellee Lawyers Title Insurance Corporation issued an owner's policy to Jonas as the named insured insuring the title to the property.

By deed dated in March 1982, Robert and Linda Preshlock purchased property adjoining Brenner's to the east from Charles C. and Augustine C. Walker. In January 1984, an attorney for the Preshlocks wrote Brenner claiming that the Preshlocks had an easement by prescription over a portion of Brenner's property. The portion subject to the claim was at the southeastern tip of the parallelogram where part of a driveway crossed which provided an outlet from the Preshlocks' property to a public street.

In March 1984, the Preshlocks brought a chancery suit against Brenner and the City asking the trial court to determine that they had acquired a prescriptive easement to the outlet. Brenner forwarded the suit papers and exhibits, including a copy of the Walker to Preshlock deed, to the title insurer and called upon it to defend the suit on her behalf. The insurer refused.

Subsequently, the trial court sustained Brenner's demurrer, granted the City summary judgment, and dismissed the Preshlocks' bill of complaint. The court ruled that no prescriptive right could be acquired in property affected with a public interest or dedicated to a public use.

In September 1984, Brenner filed the present action against the insurer based on the insurer's alleged breach of its duty to furnish a defense to the Preshlock suit. In two counts, the plaintiff sought recovery in damages for breach of contract and a declaratory judgment that the insurer had a duty to defend the Preshlock suit. In July 1986, the plaintiff filed an amended motion for judgment, adding a third count asserting a tortious bad faith refusal to defend.

In the meantime, the Preshlocks appealed the dismissal of their suit. In November 1987, we reversed the trial court, ruling that the Preshlocks could acquire Brenner's rights in the portion of the driveway by prescription, which rights would be subject to the rights of the City. Preshlock v. Brenner, 234 Va. 407, 411, 362 S.E.2d 696, 698 (1987). Concluding that the trial court erred in sustaining Brenner's demurrer, we remanded the suit for further proceedings.

In January 1989, after a trial in the Preshlock suit, the court below ruled against Brenner, held that the Preshlocks had acquired a prescriptive easement to the portion of the driveway in issue, and permanently enjoined Brenner from interfering with the prescriptive rights.

In May 1989, a jury trial of the present action was held and, at the conclusion of the plaintiff's evidence, the court sustained the insurer's motion to strike the evidence. In July 1989, we refused Brenner's petition for appeal to the judgment entered upon remand in Preshlock. In August 1989, the trial court entered summary judgment in the present action in favor of the insurer. In January 1990, we awarded Brenner this appeal from that order.

The pertinent provisions of the title policy in question should be summarized. In the insuring agreement, the company promised to insure "against loss or damage" not exceeding a specified amount, "together with costs, attorneys' fees and expenses which the Company may become obligated to pay as provided in the Conditions and Stipulations" of the policy, "which the Insured shall sustain by reason of ... any defect in or lien or encumbrance on the title to the estate or interest covered hereby in the land described ... existing at the date hereof...."

The policy also provided that it did not insure against loss or damage by reason of: "Encroachments, ... or any matters not of record which would be disclosed by an accurate survey and inspection of the premises" (the Survey Exception).

Additionally, the policy excluded from the coverage "loss or damage" by reason of: "Defects, liens, encumbrances, adverse claims against the title as insured or other matters ... attaching or created subsequent to the date" of the policy (the Post-Policy Exclusion).

Finally, the policy provided that: "The Company, at its own cost and without undue delay, shall provide for the defense of the Insured in all litigation consisting of actions or proceedings commenced against the Insured ... which litigation ... is founded upon an alleged defect, lien or encumbrance insured against by this policy, and may pursue such litigation to final determination in the court of last resort."

Settled principles apply to an insurer's duty to defend under policy conditions like those in this case. The insurer's obligation to defend is broader than its obligation to pay. Lerner v. General Ins. Co. of America, 219 Va. 101, 104, 245 S.E.2d 249, 251 (1978). The obligation to defend arises whenever the complaint against the insured alleges facts and circumstances, some of which, if proved, would fall within the risk covered by the policy. Id. However, if it appears clearly that the insurer would not be liable under its contract for any judgment based upon the allegations, "it has no duty even to defend." Travelers Indem. Co. v. Obenshain, 219 Va. 44, 46, 245 S.E.2d 247, 249 (1978).

The duty to defend is to be determined initially from the allegations of the complaint. But if it is doubtful whether the case alleged is covered by the policy, the refusal of the insurer to defend is at its own risk. London Guar. Co. v. White & Bros., Inc., 188 Va. 195, 199-200, 49 S.E.2d 254, 256 (1948). And, if it be shown subsequently upon development of the facts that the claim is covered by the policy, the insurer necessarily is liable for breach of its covenant to defend. Id. at 200, 49 S.E.2d at 256.

As we review the facts developed at trial, attention should be focused upon the precise nature of the Preshlocks' claim and whether the claim was for prescriptive rights to the driveway portion or to the entire area of Brenner's property which was subject to the City's easement. Brenner first learned of the claim upon receipt of the attorney's January 1984 letter. The relevant portion of the letter stated: "Obviously, Mr. Preshlock has an easement by prescription over the portion of the property in question, as it has been used as a driveway for a period in excess of forty-three years." Brenner promptly forwarded a copy of this letter to the insurer along with a copy of a 1962 plat showing the southeast corner of her property and a "CONCRETE DWY." crossing it. The insured wrote: "At my SE corner there is an old concrete driveway, crossing a triangle of my property and also crossing the City's easement." The remainder of the letter referred to her discussions with Mr. Preshlock about the "driveway" and the "triangle."

Claims counsel for the insurer immediately responded to the insured's letter, noting it would conduct an investigation of the "potential claim" and calling attention to the Survey Exception. In March 1984, claims counsel wrote the insured that the claim of prescriptive easement across her property was "not covered by your policy."

When the Preshlock suit was filed in March 1984, as we have noted, the insured sent the bill of complaint and exhibits to the insurer with a request for the...