First American Title Ins. Co. v. J.B. Ranch, Inc.

• Decision Date: 12 May 1998
• Docket Number: No. 960530,960530
• Citation: 343 Utah Adv. Rep. 6,966 P.2d 834
• Parties: 343 Utah Adv. Rep. 6 FIRST AMERICAN TITLE INSURANCE COMPANY, a California corp., Plaintiff and Appellee, v. J.B. RANCH, INC., a Texas corp., Pace Ranches, a partnership, Lucile H. Pace, Sidney M. Pace, and Joseph S. Pace, Defendants and Appellant.
• Court: Utah Supreme Court

Page 834

966 P.2d 834

343 Utah Adv. Rep. 6

FIRST AMERICAN TITLE INSURANCE COMPANY, a California corp. Plaintiff and Appellee, v. J.B. RANCH, INC., a Texas corp., Pace Ranches, a partnership, Lucile H. Pace, Sidney M. Pace, and Joseph S. Pace, Defendants and Appellant.

No. 960530.

Supreme Court of Utah.

May 12, 1998.

Bruce A. Maak, Ronald G. Russell, Jeffrey J. Hunt, Salt Lake City, for plaintiff.

Mark O. Morris, Daniel E. Garrison, Salt Lake City, for J.B. Ranch.

Mark A. Hermundstad, Grand Junction, for the Paces.

HOWE, Chief Justice:

INTRODUCTION

J.B. Ranch, Inc., appeals from the trial court's order granting its insurer, First American Title Insurance Company, summary judgment. J.B. Ranch contends that First American had a duty to defend it in an action brought against it by Grand County, in which the county asserted the existence of public roads across J.B. Ranch's property. We must decide whether road maps filed with the county clerk and not the county recorder constitute "public records" as defined by the title insurance policy issued to J.B. Ranch.

BACKGROUND

The facts of this case are largely undisputed. However, because this is an appeal from an order granting First American summary judgment, any disputed facts are stated in a light most favorable to J.B. Ranch.

On February 6, 1984, J.B. Ranch purchased land located in both Grand County and San Juan County, Utah (hereinafter "the Ranch"). In conjunction with this purchase, First American issued a $2,000,000 title insurance policy to J.B. Ranch. Under the terms of the policy, First American was required to defend J.B. Ranch in the litigation of any claims adverse to its title. Schedule B of the policy, however, excepted "[e]asements, claims of easement or encumbrances which are not shown by the public records" from coverage under the policy. The policy further defined "public records" as "those records which by law impart constructive notice of matters relating to said land."

Shortly after J.B. Ranch purchased the Ranch, the Grand County Commission sent it a letter claiming that certain public roads traversed the Ranch and that J.B. Ranch could not lawfully obstruct public access to those roads. There were no documents filed or recorded with the Grand County Recorder's Office that showed the existence of these public roads on the Ranch. However, in 1978, the county had filed some class "D" road maps with the county clerk's office which indicated that certain roads on the Ranch were county roads. On February 11, 1991, over seven years after sending the claim letter to J.B. Ranch, Grand County filed a declaratory judgment action against J.B. Ranch seeking a judgment declaring that certain roads located on the Ranch were public roads. On May 15, 1992, J.B. Ranch sent a notice of claim and tender of defense to its insurer, First American. However, First American denied coverage of the claim and refused to defend J.B. Ranch in the litigation. J.B. Ranch nevertheless successfully defended the Grand County lawsuit at its own expense and without First American's assistance.

After the Grand County lawsuit was concluded, J.B. Ranch again requested that First American reimburse it for defense expenses that amounted to $279,878. First American refused coverage and instead filed this declaratory judgment action against J.B. Ranch. First American sought a judgment declaring that it had no duty under its policy to defend J.B. Ranch in the Grand County lawsuit. J.B. Ranch then counterclaimed against First American seeking recovery of its expenses in defending the Grand County lawsuit.

First American moved for summary judgment in the court below asserting that the Grand County litigation was excepted from coverage under the insurance policy. J.B. Ranch opposed the motion and filed affidavits averring that class "D" road maps on file in the Grand County Clerk's Office since 1978 showed public roads traversing the Ranch and that First American's agents had requested copies of such maps on past occasions.

The trial court ultimately granted First American's motion holding that the class "D" road maps were not public records that imparted constructive notice under Utah law. The court thus concluded that the Grand County litigation was excepted from coverage under schedule B of the First American insurance policy.

J.B. Ranch appeals contending that the trial court erred in granting First American summary judgment and holding that the First American insurance policy did not cover Grand County's claims against J.B. Ranch. It argues that (1) the court failed to properly construe the policy and coverage exceptions in favor of coverage; (2) the policy's definition of "public records" includes records that imparted inquiry notice to First American of Grand County's claims; and (3) class "D" road maps on file with the county clerk's office pursuant to Utah Code Ann. § 27-12-26 are public records that were intended to impart constructive notice to all persons of their contents. We address each of these contentions in turn.

STANDARD OF REVIEW

A party is entitled to summary judgment only where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Utah R. Civ. P. 56(c); Clover v. Snowbird Ski Resort, 808 P.2d 1037, 1039 (Utah 1991). Furthermore, "[q]uestions of contract interpretation not requiring resort to extrinsic evidence are matters of law, and on such questions, we accord the trial court's interpretation no presumption of correctness." Zions First Nat'l Bank v. National Am. Title Ins. Co., 749 P.2d 651, 653 (Utah 1988) (citations omitted).

ANALYSIS

I. RULES OF CONSTRUING INSURANCE CONTRACTS

J.B. Ranch first contends that the trial court erred in not construing the insurance policy at issue against its insurer, First American, and in favor of coverage. It asserts that a court is required to construe all insurance policies against the insurer. We disagree.

First American correctly points out that unless the language of an insurance contract is ambiguous or unclear, the court must construe it according to its plain and ordinary meaning. In Alf v. State Farm Fire & Cas. Co., 850 P.2d 1272 (Utah 1993), we stated that "[a]n insurance policy is merely a contract between the insured and the insurer and is construed pursuant to the same rules applied to ordinary contracts." Id. at 1274 (footnote omitted); see also Nielsen v. O'Reilly, 848 P.2d 664, 665 (Utah 1992) (stating that "the terms of insurance contracts ... are to be interpreted in accordance with their usually accepted meanings and should be read as a whole, in an attempt to harmonize and give effect to all of the contract provisions"). In sum, "if a policy is not ambiguous, no presumption in favor of the insured arises and the policy language is construed according to its usual and ordinary meaning." Alf, 850 P.2d at 1274 (footnote omitted).

Moreover, contrary to J.B. Ranch's assertion, the foregoing rule also applies to policy provisions excepting certain losses from coverage. It is well settled that an " 'insurer may exclude certain losses from coverage if it uses "language which clearly and unmistakably communicates to the insured the specific circumstances under which the expected coverage will not be provided." ' " Id. at 1275 (quoting Village Inn Apartments v. State Farm Fire & Cas. Co., 790 P.2d 581, 583 (Utah Ct.App.1990) (quoting Wagner v. Farmers Ins. Exch., 786 P.2d 763 (Utah Ct.App.1990) (other citations omitted))). A provision excepting certain losses from coverage is therefore not automatically construed against the insurer. Rather, it is only when the insurer uses language that is ambiguous, that "doubt is resolved against the insurer." Alf, 850 P.2d at 1274.

A policy is ambiguous only if it is not " 'plain to a person of ordinary intelligence and understanding.' " Nielsen, 848 P.2d at 666 (quoting LDS Hosp. v. Capitol Life Ins. Co., 765 P.2d 857, 858-59 (Utah 1988)). "A contract may be ambiguous because it is unclear or omits terms or ... 'if the terms used to express the intention of the parties may be understood to have two or more plausible meanings.' " Alf, 850 P.2d at 1274 (quoting Village Inn, 790 P.2d at 583) (footnote omitted). "However, policy terms are not necessarily ambiguous just because one party seeks to endow them with a different interpretation according to his or her own interests." Id. at 1274-75 (footnote omitted). Rather, the other interpretation proposed must be plausible and reasonable in light of the language used.

In sum, we reject J.B. Ranch's broad assertion that "[it] is entitled to a strong presumption in favor of coverage under the Policy." This assertion is only true if the policy or provision at issue is first determined to be ambiguous. Absent a finding of ambiguity, we simply construe the policy according to its plain and ordinary meaning. With these principles in mind, we now turn to J.B. Ranch's arguments concerning the meaning of the policy at hand.

II. CONSTRUCTIVE NOTICE THAT ARISES FROM A DUTY TO INQUIRE FURTHER

J.B. Ranch contends that the court erred by construing the policy's definition of "public records" too narrowly. As set forth above, schedule B of the policy excepted "[e]asements, claims of easement or encumbrances which are not shown by the public records" from coverage. The policy further defined the term "public records" as "those records which by law impart constructive notice of matters relating to said land." (Emphasis added.) J.B. Ranch asserts that this definition includes the class "D" road maps on file with the Grand County Clerk's Office because First American allegedly had constructive notice of them. We disagree.

We note that J.B. Ranch is correct that there are two types of constructive notice that are generally recognized.

One kind of constructive notice is notice which results from a record or which is imputed by the recording statutes; and the other is notice...