Procedural Posture

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Defendant title insurer appealed a judgment from the Superior Court of Los Angeles County (California), which awarded damages to plaintiff insured for breach of the duty to defend. The insured filed a cross-appeal asserting evidentiary and instructional errors regarding its claim for breach of the implied covenant of good faith and fair dealing, as to which the jury found in the insurer’s favor

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Overview

The insuring clause of the title insurance policy covered losses sustained because of defects in title. The underlying complaint against the insured, which included contract and tort claims and a quiet title cause of action, alleged that the insured had committed fraud in acquiring title to the property at a foreclosure sale. The court held that there was no potential for coverage because the action did not allege that the insured’s title was defective. Although the underlying complaint included a quiet title claim, its inclusion did not preclude a claim that legal title had been acquired through fraud. Thus, it was not inconsistent for the complaint to allege that the insured had acquired full title through tortious means while also stating a claim for quiet title. Title insurance did not protect against alleged tortious conduct by an insured in acquiring title. Accordingly, the insurer had no duty to defend the action. This conclusion rendered the insured’s appeal moot because, absent a duty to defend under the terms of the insurance policy, the insured had no cause of action for breach of the implied covenant of good faith and fair dealing.

Outcome

The court dismissed the insured’s appeal, reversed the judgment against the insurer, and remanded with directions to the trial court to enter judgment on all causes of action for the insurer.