Introduction
In a recent case decided by the Court of Appeals of Washington State, the Court considered whether a title insurance company could deny coverage to a policyholder based on an exception for loss by reason of "matters disclosed by a record of survey." Here, "the matter disclosed by the survey" was a recorded boundary line adjustment that consolidated the purchased property's two lots into one. High Definition Homes, LLC v. Stewart Title Guar. Co., No. 58677-1-II, 2024 Wash. App. LEXIS 1601 (Ct. App. Aug. 6, 2024). The Court determined that the policyholder was on notice of the boundary line adjustment since it was specifically identified in the title policy and was publicly recorded; since the document was akin to a record of survey, losses resulting from such a record were expressly excluded under the policy.
Background
In April of 2021, HDH, a Washington limited liability company, purchased a parcel of property (the "Property") in Centralia, Washington, with the understanding that it was purchasing two separate lots. In connection with the purchase, HDH obtained a title insurance policy (the "Policy") through Stewart Title Guaranty Company ("Stewart Title"). Schedule B of the Policy provided exceptions from coverage. In addition to various general exceptions, Schedule B also listed five "special" exceptions. The most relevant special exception was Number Five, which stated:
This policy does not insure against
loss or damage by reason of the (and [Stewart Title] will not pay
costs,
attorney's fees or expenses), which arise by reason of:
...
5. Matters disclosed by a record of survey
Recorded : OCTOBER 30, 2020
Auditor's No. : 3535886
The boundary line adjustment agreement was expressly identified on the survey obtained by HDH and made part of the Policy via the Survey Endorsement. It was recorded on October 30, 2020 as Auditor No. 3535886 (the "Boundary Line Adjustment").
Despite the agreement being identified on the survey by Auditor Number, HDH did not investigate and thus failed to recognize that the sellers of the Property had previously consolidated the two lots into a single lot. After learning of the Boundary Line Adjustment, HDH submitted a claim for coverage to Stewart Title, which denied the claim based on the above exclusion.
The Decision
In August of 2022, HDH brought a complaint against Stewart Title. After answering the complaint, Stewart Title moved for judgment on the pleadings. The lower court granted Stewart Title's motion on the grounds that the Boundary Line Adjustment was identified on the Survey. HDH appealed.
The Washington Court of Appeals held that the title insurance policy exclusion for the recorded Boundary Line Adjustment unambiguously excluded coverage for HDH's loss. The Court determined that the document met the definition for a "record of survey" under the Policy, as well as under Washington state law, which identified a survey as "the locating and monumenting in accordance with sound principles of land surveying by or under the supervision of a licensed land surveyor, of points or lines which define the exterior boundary or boundaries common to two or more ownerships or which reestablish or restore general land office corners." RCW 58.09.020(3). Additionally, while Stewart Title had not directly provided the Boundary Line Adjustment to HDH, the document was reasonably available for HDH to review since it was publicly-recorded and expressly identified in the Survey. Moreover, HDH had notice of the special exclusion concerning surveys, which was one of only five of such "special" exclusions listed in Schedule B of the Policy, rather than "a multi-page laundry list with dense, boilerplate language." Finally, the Court found that the Policy, including its exclusions and exceptions, was not procedurally unconscionable.
Takeaway
This case emphasizes the importance to policyholders of understanding exactly what is disclosed in a survey and asking to see any instruments identified therein.
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