Title Insurer Properly Denied Claim
Post 5032
See the full video at https://rumble.com/v6raqt4-title-insurer-properly-denied-claim.html and at https://youtu.be/wTckVebQRzc
Title Defects Assumed by the Insured Excluded
In 2017 Yale Street Development LLC v. First National Title Insurance Company, No. 14-23-00688-CV, Court of Appeals of Texas, Fourteenth District (March 13, 2025) the court was faced with a denied title insurance claim related to a failed construction development project in Houston.
BACKGROUND:
In 2015, Terry Fisher created 829 Yale St. LLC to construct a mid-rise condominium development at 829 Yale Street in Houston. Fisher obtained loans from Steadfast Funding and D&A Alvarez Group to complete the project. 829 Yale conveyed its title to Jetall Companies, Inc. to avoid litigation, which triggered a default on the D&A Alvarez lien. 2017 Yale closed on a new loan in April 2017, but the D&A Alvarez lien remained in default, causing the new loan to default immediately.
TITLE INSURANCE CLAIM:
In February 2019, Michelle Fraga sent a claim notice to First National on behalf of 2017 Yale, requesting payment of the policy limit or a defense in the Steadfast case. First National denied the claim, stating that the policy excluded claims of title defects created or assumed by the insured and that no adverse claims caused loss or damage to 2017 Yale.
TRIAL COURT PROCEEDINGS:
2017 Yale filed a lawsuit against First National for breach of contract, fraud, and violations of the Texas Insurance Code and Deceptive Trade Practices Act.The trial court granted summary judgment in favor of First National, and 2017 Yale appealed.
ANALYSIS
2017 Yale raised 11 issues on appeal and the Court of Appeals reviewed the summary judgment as if it was a new motion. It concluded that the trial court must grant the no-evidence summary judgment unless the non-movant produces competent summary judgment evidence raising a genuine issue of material fact on the challenged elements.
A no-evidence summary judgment will be sustained when there is a complete absence of evidence of a vital fact. Once the movant has met its burden, the burden shifts to the non-movant, who must produce at least a scintilla of evidence raising a genuine issue of material fact to defeat the no-evidence challenge.
Because First National’s summary judgment motion raised specific no-evidence challenges to at least one element of 2017 Yale’s claims, the motion was sufficient to shift the burden to 2017 Yale.
The Court of Appeals reasoned that in Texas the trial court is required to look only at the pleadings and the insurance policy to determine if the insurance company had a duty to defend.
2017 Yale’s no-evidence summary judgment response was deficient because it did not point the trial court to the pleadings and allegations supporting this claim. 2017 Yale failed to defeat the no-evidence challenge on the breach of a duty to defend claim.
Having overruled 2017 Yale’s arguments challenging the trial court’s decision, the Court of Appeals affirmed the no-evidence summary judgment in favor of First National on all claims. Because it affirmed on no-evidence grounds, the Court of Appeals did not need to address 2017 Yale’s issues challenging the traditional summary judgment.
Overruling all of appellant’s issues necessary to resolve the appeal, the trial court’s judgment was affirmed.
Texas limits the interpretation of a liability insurer’s duty to defend to a review only the allegations of the complaint and the policy wording. Extrinsic evidence is not allowed. Since the insurer produced evidence to support its policy defense 2017 Yale needed to produce something in the complaint or the policy that defeated the insurer’s motion for summary judgment. Lacking such evidence or policy wording the motion for summary judgment was granted and affirmed by the Court of Appeals.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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About Barry Zalma
An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
