Ash Development, LLC v Fidelity National Title Insurance Company
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Attorneys and Parties
Brief Summary
Insurance coverage dispute involving title insurance, specifically whether a title insurer had to defend and indemnify its insured in an adverse possession lawsuit and reimburse attorneys' fees in a related easement action.
The Supreme Court, Nassau County, after converting the insurer's CPLR 3211(a)(7) [rule allowing dismissal for failure to state a cause of action] motion into one for summary judgment, granted summary judgment to the insurer and dismissed the complaint, including the declaratory judgment claim.
The Appellate Division modified the judgment only to the extent of reinstating the form of relief on the fourth cause of action and directing that the judgment declare the parties' rights, rather than simply dismissing that declaratory judgment claim.
The policy's exception for claims arising from the rights of persons in possession barred coverage for the adverse possession action, and there was no conflict of interest requiring the insurer to pay for the insured's privately selected counsel in the easement action. However, because the case sought declaratory relief, the court was required to issue a declaration of the parties' rights instead of merely dismissing that claim.
Background
Ash Development, LLC sued Fidelity National Title Insurance Company for breach of contract and declaratory relief after Fidelity declined to provide coverage related to two underlying property disputes: an adverse possession action brought against Ash Development and an easement action brought by Ash Development. Fidelity initially moved to dismiss under CPLR 3211(a)(7) [rule allowing dismissal for failure to state a cause of action]. Ash Development cross-moved to convert the motion into one for summary judgment and sought summary judgment on its declaratory judgment claim. The trial court converted the motion, accepted additional submissions, and then ruled for Fidelity.
Lower Court Decision
The lower court held that Fidelity had no duty under the title insurance policy to defend or indemnify Ash Development in the adverse possession action and no obligation to reimburse attorneys' fees incurred after Ash Development retained private counsel not approved by Fidelity in the easement action. It therefore granted Fidelity summary judgment and dismissed the complaint.
Appellate Division Reversal
The Appellate Division agreed with the substance of the lower court's coverage ruling and affirmed the determination that Fidelity owed no defense, indemnity, or fee reimbursement. It dismissed the direct appeal from the October 19, 2023 order because that right ended upon entry of judgment, citing Matter of Aho. It also affirmed the August 27, 2024 order insofar as appealed from. The only modification was procedural: the judgment was changed to declare that Fidelity is not obligated to defend and indemnify Ash Development in the adverse possession action or reimburse attorneys' fees in the easement action, instead of dismissing the declaratory judgment cause of action outright.
Legal Significance
The decision reinforces that a title insurer's obligations are governed by the policy's specific terms and exclusions, and that clear exclusions will be enforced as written. A policy exception for claims based on the rights of persons in possession can defeat both defense and indemnity obligations in an adverse possession suit. The case also confirms that an insured is not automatically entitled to reimbursement for independently retained counsel absent a genuine conflict of interest. Finally, in a declaratory judgment action, even when the plaintiff loses on the merits, the court should enter a declaration of the parties' rights rather than simply dismissing the claim.
A clear title-policy exclusion for possessory rights can bar coverage for adverse possession claims, and when declaratory relief is sought, the proper remedy is a declaration of no coverage, not mere dismissal.