Trinder v. Connecticut Attorneys Title Insurance Company, 2011 VT 46
This case seems to be a lesson in how to waste the maximum amount of money possible on litigation over what amounts to a non-dispute over property boundaries. After Homeowners purchased their house, they were notified that their septic system encroached on their neighbor’s property. Their first step was to ignore the initial overtures of a neighboring landowner to settle the dispute. Instead, homeowners contacted their real estate closing attorney and their title insurance company to demand defense against the neighbor’s non-threats. Their second step—after the insurer denied coverage and while still ignoring the neighbor’s offers to discuss the matter—was to file suit against the insurer and the neighbors. For the third step, Homeowners—after reaching a settlement with the neighbor—continued their lawsuit against the insurer, and appealed their trial court loss as a fourth step to the SCOV. After losing at the SCOV, Homeowners are unlikely to be satisfied but are now devoid of forums where they can pour their money into litigation. Lesson (hopefully) learned.
The legal issue in this case is a fairly narrow insurance contract matter. The question boils down to whether there was an actual threat or risk to the Homeowner’s title that would have triggered coverage (and obliged the insurance company to pay for the lawsuits).
Homeowners argued that there were two title risks implicated by their septic system encroachment on a neighboring property: first, being that they were “forced to remove the existing structure because it extends on adjoining land”; second, the resulting “unmarketable title” that came from their inability to sell clean title to their home and septic system. Homeowners lost on these claims at the trial court, but because the interpretation of an insurance contract is a pure question of law, Homeowners had a fresh start with the SCOV, which considered the issue de novo. As it turned out, even this low standard of review did not give them a leg up, and Homeowners lost again.
In its decision, the SCOV notes that although the neighboring landowner had contacted Homeowners to inform them of the encroachment and to engage them in discussions about it, the neighbor had never sought to force Homeowners to remove the septic system, nor did the neighbor threaten to destroy the system, nor did the neighbor revoke permission for the encroachment. In other words, the Neighbor may have rumbled, but it never grumbled or moved to cut off Homeowners. This means that the Homeowners were never “forced to remove” their encroaching septic system. By the plain language of the contract, then, there was no coverage for this situation.
Homeowners earned a similar result with their argument that the uncertainty over the septic system rendered their title unmarketable. Part of their argument here was that they had tried to sell the property at some point during this period of time, but were unable to get a “reasonable” price for it based on the uncertainty surrounding the septic encroachment. The SCOV counseled Homeowners that there is a clear distinction between holding good and marketable title to your property and being able to get a good price for your property. That is the difference between defects that make your home unmarketable and those that simply reduce its value. Further, the SCOV sagely noted that if the unmarketable title term of the insurance contract were interpreted to cover the encroachment situation, then it would render the separate encroachment term mere surplusage. Construing the contract in such a manner would violate basic tenets of contract interpretation, and the SCOV stated that it would instead follow its general rule of contract interpretation and give the more specific term (the encroachment provision) the greater weight.
Perhaps sensing the futility of this appeal, Homeowners’ appellate counsel chucked a third, Hail Mary argument at the SCOV. He attempted to argue that one additional contract term should cover the septic encroachment situation. This was a term that covered “other defects, liens or encumbrances.” Unfortunately, this contract provision received practically no air time during the trial—it was only mentioned in Homeowners’ post-trial proposed findings of fact. The SCOV decided that this was too little, too late—Homeowners had not properly presented this argument to the trial court; therefore, it was not preserved for appeal. Not this time Doug Flutie.