JANUARY 2013 BAD FAITH CASES: COURT DENIES INSUREDS’ BAD FAITH CLAIM BECAUSE TITLE INSURANCE POLICY DOES NOT PROVIDE “GOOD” TITLE, BUT PROTECTS AGAINST TITLE DEFECTS (New Jersey Federal)

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In Granelli v. Chi. Title Ins. Co., the court granted the carrier’s summary judgment motion seeking to dismiss the insureds’ breach of contract and bad faith claims stemming from the insureds’ purchase of a title insurance policy from the carrier. After the insureds discovered several boundary disputes with adjacent properties, they contacted the carrier, which investigated the claims for a year, sought to resolve the disputes amicably, and subsequently filed a successful quiet title action after a non-legal resolution fell apart.

The insureds nevertheless brought suit for breach of contract and bad faith. The court granted the carrier’s motion on the breach of contract count because the insureds improperly alleged that the carrier failed to provide it with good title. Recognizing that this is not the function of a title insurance carrier, an entity that can only be sued for breach resulting from actions that occur after it issues a policy, the court rejected the claim. The court also rejected the bad faith action because the carrier complied with the terms of the policy in good faith.

Date of Decision: December 6, 2012

Granelli v. Chi. Title Ins. Co., No.: 10-2582, 2012 U.S. Dist. LEXIS 173611, U.S. District Court for the District of New Jersey (D.N.J. Dec. 6, 2012) (Linares, J.)

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