A Review of Claim Processing and My Lawsuit Against Fidelity National Title Insurance Company
I would never use Fidelity National Title Insurance Company to protect my real estate. A claim was filed with Fidelity for me by their Title Officer for the loss of a mile long easement to 80 acres with views of the famous Napa Valley in California. Fidelity valued the loss at $0 by a Boise Idaho appraiser. After suing Fidelity I was forced to settle for a fraction of the loss. I question whether Fidelity National Title Insurance Company acted in Good Faith in the handling of my claim.
Paul B. Barton,James D. Zupancic, Zupancic Rathbone Law Group, PC, Lake Oswego, OR, Attorney for Plaintiffs. Erin M. Stines, Fidelity National Law Group, A Division of Fidelity National Title Group, Inc., Seattle, WA, Attorney for Defendant.
OPINION & ORDER
MARCO A. HERNANDEZ, District Judge.
Plaintiffs Richard and Jean Hansen bring this action to recover costs and attorney fees from Defendant Fidelity National Title Insurance Company, alleging that Defendant breached its duty to defend their title when Plaintiffs were sued for adverse possession. Defendant moves to dismiss for failure to state a claim upon which relief can be granted. I grant in part and deny in part the motion.
For the purpose of this motion to dismiss, I treat the alleged facts in the complaint as true. In 2004, Plaintiffs Richard and Jean Hansen purchased property located in Wilsonville, Oregon. Compl. ¶¶ 1, 4. The Hansens obtained title insurance from Defendant Fidelity to insure against any loss or damage from title of the property being vested in someone other than the Hansens.Id.at ¶¶ 5-6. Fidelity agreed to defend the Hansens against claims adverse to the title of interest for their property.Id.at ¶ 7.
In 2010, the Hansens were sued by the trustees of the Rogers Family Living Trust ("Rogers action").Id.at ¶ 8. The trustees alleged that they were fee simple owners of a portion of the Hansens' property.Id.at ¶ 9. The Hansens notified Fidelity of the Rogers action.Id.at ¶ 11. Fidelity denied coverage and refused to defend the Hansens, citing to several exceptions in the title policy that precluded coverage.Id.at ¶ 12. The Hansens successfully defended the Rogers action without Fidelity and now seek reimbursement for the costs and attorney's fees incurred.Id.at ¶¶ 14-15.
On a motion to dismiss, the court must review the sufficiency of the complaint.Scheuer v. Rhodes,416 U.S. 232, 236 (1974). All allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party.American Family Ass'n, Inc. v. City & County of San Francisco,277 F.3d 1114, 1120 (9th Cir. 2002). However, the court need not accept conclusory allegations as truthful.Holden v. Hagopian,978 F.2d 1115, 1121 (9th Cir. 1992).
A motion to dismiss under Rule 12(b)(6) will be granted if plaintiff alleges the "grounds" of his "entitlement to relief" with nothing "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action[.]"Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). "Factual allegations must be enough to raise a right to relief above the speculative level, . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact)[.]"Id.(citations and footnote omitted).
To survive a motion to dismiss, the complaint "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face[,]" meaning "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation omitted). Additionally, "only a complaint that states a plausible claim for relief survives a motion to dismiss."Id.The complaint must contain "well-pleaded facts" which "permit the court to infer more than the mere possibility of misconduct."Id.at 679.
Plaintiffs allege four claims against Defendant: (1) breach of contract, (2) breach of contractual implied duty of good faith and fair dealing, (3) violation of ORS § 746.230 for Unfair Claim Settlement Practices1, and (4) attorney's fees pursuant to the title policy and ORS § 742.061. Compl. ¶¶ 16-36. Defendant moves to dismiss the complaint.2
I. Breach of Contract
The gravamen of Plaintiffs' breach of contract claim is Fidelity's refusal to defend in the Rogers action. "Whether an insurer has a duty to defend an action against its insured depends on two documents: the complaint and the insurance policy. An insurer has a duty to defend an action against its insured if the claim against the insured stated in the complaint could, without amendment, impose liability for conduct covered by the policy."Ledford v. Gutoski,877 P.2d 80, 82 (Or. 1994) (citations omitted). From the face of the complaint, an insurer should be able to determine whether it has a duty to defend.Id."The insurer has a duty to defend if the complaint providesany basisfor which the insurer provides coverage."Id.at 83 (emphasis in original). Any ambiguity in the complaint with respect to whether the allegations could be covered by the policy must be resolved in favor of the insured.Id.
I begin by reviewing the complaint in the Rogers action. Compl. Ex. 2. The complaint is captioned "Quiet Title/Adverse Possession".Id.at 1. In the Rogers complaint, the trustees alleged the following:
Plaintiffs [Rogers] are the fee simple owners of real property adjacent to the Hansens' property.The real property . . . is not in the actual possession of any person other than the Plaintiffs [Rogers].Defendants [Hansens] claim some interest adverse to Plaintiffs [Rogers] in the real property[.]
Id.at ¶¶ 3-7. Defendant Fidelity refused to defend based on the second, third, and fourth exceptions in the title policy:
2. Any facts, rights, interests or claims which are not shown by the public records but which could be ascertained by an inspection of said land or by making inquiry of persons in possession.3. Easements, or claims of easements or encumbrances, not shown by the public records . . .4. Discrepancies, conflicts in boundary lines, shortage in area, encroachments or any other facts which a correct survey would disclose.
Compl. Ex. 1 at 5.
Defendant Fidelity argues that it had no duty to defend based on the allegations in the Rogers complaint and the title policy. Fidelity MTD, 6. Fidelity interpreted the Rogers complaint as a claim for adverse possession, found that the exceptions for coverage applied, and concluded that it had no duty to defend the Hansens.Id.at 6-7. The third and fourth exceptions do not seem implicated by the Rogers complaint. Fidelity focuses on the second exception and cites toCooper v. Commonwealth Land Title Ins. Co.in support of its argument.73 Or.App. 539(Or. Ct. App. 1985). The facts ofCooperare very similar to this case.Cooperinvolved a title company's refusal to defend the property owner for an adverse possession claim.Id.at 541. In Cooper, the title policy exception at issue mirrors the second exception of the Fidelity policy purchased by the Hansens.Id.at 542 ("Any facts, rights, interests or claims which are not shown by the public records but which could be ascertained by an inspection of said land or by making inquiry of persons in possession."). TheCoopercourt reversed the granting of the title company's motion to dismiss because the claim for adverse possession was based on a claim of rightanda deed.Id.at 543 (emphasis added). "In the absence of the language about the deed, there would be no duty to defend, because that duty only arises when there is some claim shown of record."Cooper, 73 Ore. App. at 543.
Fidelity argues thatCooper'sholding applies directly to this case. Plaintiffs do not disagree with the holding inCooper.Instead, Plaintiffs argue that the Rogers complaint did not specify the basis for the adverse possession claim, so the claim could be interpreted as based on a claim of right or a deed. Pls.' Resp., 7. It is apparent that the parties dispute the interpretation of "adverse possession" as used in the Rogers complaint. Fidelity implies that a claim for adverse possession does not include a claim by deed. Fidelity MTD, 7 ("In this case the Rogers did not claim ownership by virtue of a deed. Rather, the Rogers' claims were based solely on the theory of adverse possession."). Plaintiffs on the other hand, point out that the statute expressly defines "hostile possession", an element of adverse possession, as possession "under claim of right or with color of title". ORS § 105.620(2)(a). "Color of title" means a deed, i.e., "a written conveyance of the property or by operation of law from one claiming under a written conveyance."Id.In other words, a claim for adverse possession can be based on either a claim of right or a deed. The Rogers complaint was ambiguous because the basis for the adverse possession claim was not specified. Ambiguities in the complaint as to whether an allegation could be covered by the policy must be resolved in favor of the insured. Plaintiffs have alleged sufficient facts for its breach of contract claim for Fidelity's refusal to defend in the Rogers action.
II. Breach of Contractual Duty of Good Faith and Fair Dealing
Plaintiffs allege that Fidelity breached its contractual obligation of good faith and fair dealing by (1) failing to reasonably investigate the claim and (2) by imposing requirements on Plaintiffs that were not contained in the title policy. Compl. ¶¶ 24-27.
Every contract contains an implied duty of good faith in the performance of the contract.Uptown Heights Assocs. Ltd. Partnership v. Seafirst Corp.,320 Or. 638, 645 (Or. 1995). This duty obliges each party to "perform the contract . . . in a way that will effectuate the objectively reasonable contractual expectations of the parties. The focus is on the parties' agreed common purpose and justified expectations, both of which are closely related to the express provisions of the contract."Pollock v. D.R. Horton, Inc. Portland,190 Or.App. 1, 11-12 (Or. Ct. App. 2003) (citations omitted). This duty, however, does not "vary the substantive terms of a contract or require a party to refrain from doing what the contract expressly permits it to do."Pollock, 190 Ore. App. at 12.
Defendant Fidelity argues that it cannot breach its duty of good faith and fair dealing by invoking its rights under the contract because it simply invoked the exceptions of the title policy when refusing to defend Plaintiffs. Fidelity MSJ, 10. But this rationale depends on the correctness of Fidelity's interpretation of the policy. At this stage of the proceeding, I view the sufficiency of the complaint, and not the merits. Accepting the material facts alleged in the complaints as true, I find that Plaintiffs have stated a claim upon which relief may be granted.
III. Unfair Claim Settlement Practice
Plaintiffs allege a violation of ORS § 746.230 for Unfair Claim Settlement Practices ("UCSP") for "refusing coverage without conducting a reasonable investigation" and "failing to promptly provide a proper explanation of the basis relied on in the Title Policy" for denial of coverage. Compl. ¶¶ 29-30; ORS § 746.230(1)(d), (m). Plaintiffs rely on the following two provisions:
(d) Refusing to pay claims without conducting a reasonable investigation based on all available information, . . . and(m) Failing to promptly provide the proper explanation of the basis relied on in the insurance policy in relation to the facts or applicable law for the denial of a claim.
ORS § 746.230(d), (m). Plaintiffs argue that an insurer's violation of the UCSP may be a breach of its duty of good faith and fair dealing. Pls.' Resp., 12;Galicia-Orozco v. Country Mut. Ins. Co., 2010 U.S. Dist. LEXIS 59423 (D. Or. June 15, 2010) (holding that a failure to investigate an automobile liability insurance claim may support a claim for breach of contractual good faith). As noted earlier, this claim alleges conduct in support of claim two, breach of duty of good faith and fair dealing, and is not an independent claim. Claim three is dismissed, but Plaintiffs may use the allegations in claim three as an additional basis for their second claim.
Based on the foregoing, Defendant's motion to dismiss (#7) for failure to state a claim is granted for claim three and denied for claims one and two.
IT IS SO ORDERED.
1. During oral argument on May 2, 2012, Plaintiffs clarify that this is not an actual claim. Plaintiffs also argue in its brief that the conduct alleged in this claim supports its second claim for breach of the duty of good faith and fair dealing. Pls.' Resp., 12.
2. Defendant does not discuss claim four in its motion.
I found your name on a blog about Fidelity National Title Insurance. I recently received a certified letter from Fidelity National Title Group stating that a they settled a claim with a person (their client) who bought a house from me over 12 years ago and they are demanding that I pay the settlement of $28,425.00 they made with their client. They claim that upon investigation of the claim it was determined that a neighbor had valid ownership over a disputed part of the property. I purchased this row home in Philadelphia in 2002 from a prior owner, rented the home for two years, and sold the home to Fidelity's client. There was never any property dispute when I owned the home for 2 years and everything I did when I bought the home and sold the home was legitimate through mortgage and title companies. All the proper title searches were done etc... So essentially it looks like they settled a claim and are looking for someone else to pay the bill so they sought out the prior owner, Me. This is 100+ year old home in Philadelphia so who knows when this small discrepancy over property lines started. Fidelity is accusing me of "conveying a property I did not own" and "Demanding" I indemnify them for all costs associated with resolving the title insurance claim, $28,425.00. I am shocked and appalled. I didn't even think something like this was possible. Is title insurance supposed to cover home owners from this sort of thing? How does Fidelity have any legal leg to stand on in trying to have me pay for a claim the settled with their client? It seems crazy to me. I think the figure they have more money for lawyers than I do, which is true. Any thoughts on how to proceed? Best, D
I am merely what I consider to be another victim of Fidelity's unethical practices so I have no real advice as to how to proceed especially since I am not an attorney.
It does seem to me though that as the Seller if the Buyer was going to go after you it would have been at the same time and it would be for the reason that you knew this fact and did not disclose it. If indeed you had no idea and purchased the property yourself not knowing then I do not see where the responsibility to insure the property is yours.
I have never heard (and a lot of people write to me with their problems as if I am an advocate attorney) of anything like this where they are coming after you for their insurance claim. I did not think this was possible either and it could be there are just trying an end run. I do not know but I think it is possible that Fidelity as a company might try this.
If indeed you had no knowledge of this problem I would just either ignore their "demand" or write them a simple sentence telling them that you have absolutely no knowledge of the dispute that they are talking about and that it is between them and their client as you were not a party to that title insurance contract or, obviously, hire a real estate attorney but that will be very expensive.
Thank Ann I appreciate the guidance!
As he stated perhaps Fidelity has more money for lawyers than he does???? I do not know. Has anyone else heard of a situation like this one?
I just stumbled onto your blog. I used to work at this crap hole.
95% of the claims attorneys are trying to do the right thing, but road blocks are put in their path at every turn. It appears, from my experience, that the minute the attorney figures out how to do the job and jump through the hoops effectively, or grows a spine they are terminated.
I'm so sick of trying to explain my termination in 'nice' terms (don't bad mouth a past employer to a potential employer) when the truth is I was terminated because I was making more than the first year grads and told my manager he was wrong and I wasn't going to do what I was told. The minute I started doing my job instead of doing what I was told my days were numbered. And I can't say anything about it because it's 'sour grapes' due to the fact I was fired.
Don't really have a point to my email, other than commiseration.
I agree with you as every claims attorney I spoke to at the beginning (like the Title Officer who opened the claim) thought that Fidelity had made an error that was costly for me. Unfortunately as the claim was processed it became apparent that they were going to need to pay me a lot of money so from that point forward everything was done to lessen the credibility of my claim.
So yes, I believe that 95% at least started their employment with good intentions.
It is unfortunate that it appears that the conflict between representing the client and their insurance needs rather than the bottom line of the company becomes in my opinion a loss for the client.
I recently read an article of someone who was found guilty of liable for accusing a company of criminal wrong doing by using terms such as "scam", "con-artist" and "robs".
I believe I have carefully avoided accusing Fidelity National Title Insurance Company of criminal wrong doing. As a matter of fact considering the level of legal training of the Claims Counsels (all appear to be lawyers) it is highly unlikely that they are doing something against the law.
But does this make what they are doing ethical? If by insuring a property contractually and then failing to live up to the terms of the contract and using every power within their legal and financial means which appear to be substantial they force one (here speaking for myself) to actually sue them when they do fail to live up to the terms of the contract and then wear one down trying to collect on the insurance - is this acting in good faith and ethically.
I personally think not and this is the reason I began and continue to write this blog. Indeed Buyer Beware. My experience is that Fidelity does not live up to the terms of their own contract and the consumer is the only one that loses.
Years have now passed since I was involved in my disastrous claim with Fidelity National Title Insurance Company so even I am asking why do I continue to work on this blog.
Being involved in a claim with Fidelity National Title is in my opinion a route to disappointment and being treated like the enemy rather than the person insured - at least this was my experience. And I continue to hear from individuals who feel the same way.
Even though I was the insured and the claim was opened by Fidelity on my behalf as soon as it became apparent that the error was completely theirs and the settlement would be substantial the claim was denied and I became the enemy rather than the insured.
I did prevail and got a meager settlement after I gave up the fight. Two years of the equivalent of working full time not to mention investing thousands of dollars as a single mom needing to support my children being confronted with many more years and thousands of dollars needing to be invested (in deposing at very high rates their employees in Nebraska, the appraiser in Idaho and the local California "expert" witness at $500 an hour) or settle for approximately 10% of the loss which after paying the attorney and all of the expenses (not to mention my time which was thousands of hours) I was in my opinion literally forced to settle.
BUT THE ONE THING I TOLD MY ATTORNEY COULD NOT BE IN THE SETTLEMENT WAS A GAG ORDER.
Although since I have started this blog I have been told by others that they did get a better settlement than originally offered but had to agree to not discuss it (and two implied specifically not with me).
I recently sold my home and I took the tiny stand refusing to have the escrow handled by Fidelity.
So why do I continue to write this blog? To warn people that insuring your property with Fidelity National Title Insurance Company that this is only to benefit the bottom line of their stockholders and may not (likely not in my opinion) insure your property in the event their is a title problem - especially if it involves an error made by Fidelity in their work.
I will be documenting my story about this company. I urge others to read this. My goal is to inform the public and state law makers of how this company treats its policyholders when theres a claim. Stand by for the story.
Ann, I don't remember
where we were in terms of correspondence but finally after seven years I've
made significant progress. I believe what turned things in my favor was that
after numerous complaints to the New York State Department of Financial Services
(NYSDFS) they called a meeting in NYC and Fidelity was represented by two
attorneys and I represented myself? The purpose was to address my numerous
complaints in person. subsequent to the meeting, Fidelity withdrew the OSC to
withdraw they attorneys and allowed me to select my own attorney ( which they
agreed to pay). My new attorney prepared and established a trial date which
none of the previous Fidelity appointed attorneys seemed to be able to do( or
in my opinion did not want to do). As the court date came closer we managed to
reach an equitable settlement ... Actually the settlement was reach in front of
the trial judge as the case was about to start.
Ann, after 8+ years my
case was settled. However, I had to hire my own attorney, (the second one)
which got my case on the court calendar for trial. On the first day of trial
(which both my attorney and I were sure we were going to win, a settlement was reached
... In short, my title and survey were agreed were correct, my property
returned, and I received a financial settlement. In my opinion, the keys to my
success were my attorney (who was honest and competent), the fact that my
formal complaints and subsequent meeting with the NYSDFS ( the Insurance
Department ... Who chaired a meeting with myself and Fidelity attorneys at
their offices) and the fact that we started the trial of the case before a
Wow - finally a
success story. I wish I had been able to financially hold out for 8 years and
have some satisfaction but alas my great satisfaction is by blog and I will
enter all of this if not tonight tomorrow.
My own success ended up financially a disaster
but I feel I have some compensation by now having reached over 25,000 people
and have been able to help numerous people with their actions against Fidelity
I even heard that one person was able to
settle but part of the agreement was to not communicate with me so that I would
not be able to blog about it!!!