Crossman v. Yacubovich

• Decision Date: 16 June 2009
• Docket Number: No. ED 91947.,ED 91947.
• Citation: 290 S.W.3d 775
• Parties: Michael D. CROSSMAN and Kimberly H. Crossman, husband and wife, Appellants, v. Peter YACUBOVICH and Sharon Yacubovich, et al., Respondents.
• Court: Missouri Court of Appeals

290 S.W.3d 775

Michael D. CROSSMAN and Kimberly H. Crossman, husband and wife, Appellants, v. Peter YACUBOVICH and Sharon Yacubovich, et al., Respondents.

No. ED 91947.

Missouri Court of Appeals, Eastern District, Division Five.

June 16, 2009.

Gary M. Siegel, Gina C. Mitten, Clayton, MO, for appellants.

William L. Sauerwein, John Hein, St. Louis, MO, for respondent.

LAWRENCE E. MOONEY, Judge.

The plaintiff homeowners, Michael and Kimberly Crossman, appeal from summary judgment entered by the Circuit Court of St. Charles County against them and in favor of the defendant insurer, Lawyers Title Insurance Corporation. The homeowners filed three contract counts and one negligence count against the insurer, and the trial court granted summary judgment. At issue is an asserted exception to coverage contained in the title-insurance policy issued to the homeowners, who claim a loss based on petroleum pipelines and related easements that traverse their property. Because the subdivision plat, to which the exception in the title-insurance policy refers, does not clearly, precisely, and unambiguously show the pipeline easements, the title-insurance policy does not effectively except coverage. Consequently, the insurer has not established its entitlement to judgment as a matter of law on the homeowners' contract counts. Therefore, we reverse and remand that portion of the judgment concerning the three contract counts to the trial court.¹

The material facts are not in dispute. The homeowners contracted to purchase the home of the sellers, the defendants Peter and Sharon Yacubovich. Located in the Shadow Creek subdivision in the City of St. Peters, St. Charles County, Missouri, the homeowners chose the home because of its large backyard. They envisioned extending the deck, adding a pool, planting a garden, building a batting cage for their children, and fencing the yard for their dogs.

In connection with their home purchase, the homeowners hired Investors Title Company (the "title company") to conduct a title search, order a survey, arrange for a title commitment and title insurance, and conduct the homeowners' closing. The homeowners obtained their survey from Topos Surveying & Engineering Corporation (the "surveyor") and their title commitment and policy for title insurance from the insurer, Lawyers Title. Schedule A of the homeowners' title commitment described the insured property as "Lot 33 of Shadow Creek, Plat Two, a subdivision in St. Charles County, Missouri, according to the plat thereof recorded in Plat Book 21, Pages 55-56 of the St. Charles County Records." Schedule B-II asserted an exception to coverage for "[b]uilding lines and easements according to the plat thereof recorded in Plat Book 21, Pages 55-56." This exception refers to the Shadow Creek Plat Two subdivision plat. No mention whatsoever of a pipeline or pipeline easement appeared in the homeowners' survey, title commitment, or title-insurance policy.

Having secured a title search, survey, and title commitment, the homeowners completed their home purchase, and their title commitment converted to a title-insurance policy. The exception for "easements according to the plat" remained in the policy. Shortly after the homeowners completed their purchase, Explorer Pipeline representatives came through the neighborhood to clear the Explorer easement of trees and structures, and to mark its pipeline. Explorer removed nine trees from the homeowners' property, and the homeowners were alerted that their work shed would probably be removed eventually. Thus, the homeowners learned that an easement for a petroleum pipeline crosses their backyard, consuming roughly half of their property, and that as a result they cannot improve and use their backyard as hoped. The homeowners contend that neither the easement nor the pipeline was disclosed to them when they purchased their home. Discovery ultimately revealed the existence of three separate easements, owned by three separate companies, for multiple petroleum pipelines.²

The homeowners sought coverage under their title-insurance policy for loss arising from the restricted use and diminished value of their property. The insurer denied the claim under the exception contained in the title-insurance policy. The homeowners filed a 15-count petition against the sellers, the title company, the surveyor, and the insurer. The homeowners pleaded one count of negligent misrepresentation against the insurer, as well as counts for breach of contract, vexatious refusal to pay, and declaratory judgment that the homeowners are entitled to compensation under the policy. The insurer filed a motion for summary judgment, which the trial court granted based on the policy exception for "[b]uilding lines and easements according to the plat thereof recorded in Plat Book 21, Pages 55-56." The judgment contains no reasoning as to its judgment on the negligence count, but appears to adjudicate all of the homeowners' counts against the insurer.

The trial court determined there was no just reason for delay, and the homeowners appeal the entry of summary judgment in favor of the insurer.³ The homeowners claim the trial court erred in granting summary judgment because the insurer failed to establish that the policy exception at issue expressly and specifically excluded coverage.

Summary judgment allows a trial court to enter judgment for the moving party where the party demonstrates a right to judgment as a matter of law based on facts about which there is no genuine dispute. ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 377 (Mo. banc 1993). The key to summary judgment is the party's undisputed right to judgment as a matter of law; it is not simply the absence of a fact question. Id. at 380. When considering an appeal from summary judgment, we review the record in the light most favorable to the party against whom judgment was entered, and we afford the benefit of all reasonable inferences to the non-movant. Id. at 376. Our review is essentially de novo. Id.

Where the parties do not dispute the underlying facts, disputes arising from the interpretation and application of insurance contracts are matters of law for the court. Watters v. Travel Guard Int'l, 136 S.W.3d 100, 107 (Mo.App. E.D.2004). When interpreting an insurance policy, we must determine whether the language is ambiguous, which is a question of law. Id. "Language is ambiguous if, when viewed in the meaning that would ordinarily be understood by the lay people who bought the policy, it is reasonably open to different constructions." Id. at 108 (quoting Eagle Boats, Ltd. v. Continental Ins. Co. Marine Office of Am. Corp., 968 S.W.2d 734, 736 (Mo.App. E.D.1998)).

Title insurance differs from most other types of insurance because it seeks to eliminate risk of loss arising from past events, rather than assuming risk of loss for future events and then distributing the risk among policyholders. Stephen M. Todd, Title Insurance, in 1 Mo. Real Estate Practice 2-1, § 2.2, at 2-4-2-5 (Mo. Bar ed., 4th ed.2000). A title insurer eliminates risk by searching county records for all documents affecting title to the subject property, and analyzing those documents to determine whether any defects exist. Id., § 2.2, at 2-4. The insurer, however, must assume some risk that certain title defects will not appear in the records or will be overlooked or misinterpreted. Id.

The insurer receives one sum in consideration for its agreement to indemnify the insured, up to a specified amount, against loss caused by title defects or encumbrances on the subject property. Joyce D. Palomar, Title Insurance Law § 1:8, at 1-21 (2008). An exception is an uninsured interest in property, and is expressly eliminated from coverage via identification on a separate "Schedule B." D. Barlow Burke, Law of Title Insurance § 16.1, at 16:1 (2d ed.1993). Title insurance policies use exceptions to eliminate from coverage title defects that actually affect the insured property. Palomar, § 1:8, at 1-23. Title insurers are not required to insure every title defect, and excepting existing defects from coverage does not violate public policy or constitute an unfair trade practice. Id., § 7:17, at 7-63. But "if a lien, encumbrance or other title defect is to be excepted from coverage, the title insurer must use clear, precise[,] and unambiguous language in the exception." Id. See also Burke, § 4.1, at 4:4 ("[T]he insurer who wishes to exclude a claim from coverage must have done so in clear and unambiguous language."); Santos v. Sinclair, 76 Wash.App. 320, 884 P.2d 941, 944 (1994)(unless policy specifically excludes easement, title insurer must insure it); Amidano v. Donnelly, 260 N.J.Super. 148, 615 A.2d 654, 657-58 (N.J.Super.Ct.App.Div.1992)(where title policy excepted easements recorded at specified deed books and page numbers, an easement reserved under a deed recorded elsewhere was not unambiguously removed from coverage); San Jacinto Title Guar. Co. v. Lemmon, 417 S.W.2d 429, 431-32 (Tex.Civ.App.1967)(where title policy specified exemptions from coverage but did not specifically mention, exclude, or except a water-line easement shown on plat, easement was not excepted from coverage).

"[P]rovisions limiting or cutting down, or avoiding liability in the coverage made in the policy are construed most strongly against the insurer." Foremost Const. Co. v. Killam, 399 S.W.2d 593, 596 (Mo.App.K.C.1966) (quoting State Farm Mut. Auto. Ins. Co. v. Mid-Continent Cas. Co., 378 S.W.2d 232, 235 (Mo.App.St.L. 1964)). The insurer has the burden to prove that an exclusionary clause applies. Id. Likewise, ambiguities in the terms of the insurance policy, including ambiguities in the exceptions, generally are strictly construed against the insurer. James L. Gosdin, Title Insurance: A Comprehensive Overview, 2000 A.B.A. Sec. Real Prop., Prob. & Tr. L. 43.

In this case, the trial court granted summary...