Appeal from Superior Court of King County. Docket No: 94-2-04145-2. Date filed: 09/01/95. Judge signing: Hon. Charles W. Mertel.
Released for Publication May 19, 1997.
Authored by H. Joseph Coleman. Concurring: William W. Baker, Susan R. Agid.
The opinion of the court was delivered by: Coleman
COLEMAN, J. -- In 1986, Farrington Corporation bought binder insurance for a residential home from Commonwealth Land Title Insurance Company of Philadelphia. Farrington's sole officer, Mandel Kuber, lived in the home with his wife. Two of Kuber's creditors subsequently brought motions for quiet title to the property, alleging that Kuber had fraudulently conveyed the property to Farrington to shield his assets. When Farrington requested Commonwealth's defense against the actions, Commonwealth first claimed that it had issued no insurance policy. Later, however, Commonwealth admitted that it should have automatically issued an insurance policy following the expiration of the binder insurance. Commonwealth still, however, refused to provide coverage, asserting that the claims were not covered under the policy's exclusions. Farrington sued and Commonwealth moved for summary judgment, which was granted.
Farrington appeals, arguing that the exclusions are inapplicable because Commonwealth never provided them to Farrington. We need not decide whether the exclusions are applicable because we hold that Commonwealth had no duty to defend the creditors' claims under the title insurance contract itself.
Farrington's shareholders are Mandel's children, Douglas, Mark, and Anne Kuber. The corporation was formed in December 1985, and it purchased a residential property in Seattle in May 1986. Incident to this purchase, Farrington obtained a title insurance binder from Commonwealth. Before providing the binder, Commonwealth had sent Farrington a commitment for title insurance. The Commitment indicated that other exclusions would follow. The parties, however, disagree as to whether those exclusions were ever provided.
The binder provided for insurance of $200,000 "subject only to the exceptions shown herein and to all of the provisions of the policy[.]" The binder further stated that it was "null and void 730 days from the date shown above or when the policy is issued, whichever shall first happen."
In April 1990, Antoine Puech brought a complaint to quiet title and execute on judgment against Mandel Kuber and Farrington. The complaint alleged that Mandel was the original stockholder of Farrington and that he had transferred his stock to his children. The complaint further claimed that there was a unity of ownership and interest between Mandel and Farrington. The complaint therefore asked the court to hold that the Seattle home was Mandel's property and to quiet title to him. The complaint further alleged that the acts were intended to delay and hinder Puech from executing on the Seattle property to satisfy his judgment lien and asked the court to enter a judgment that the property was subject to Puech's judgment as of September 17, 1987. In January 1991, Franklin Bonin filed a nearly identical quiet title action, asking the court to enter a judgment that the property was subject to his lien as of January 28, 1991.
In July 1991, Farrington's counsel tendered defense of these lawsuits to Commonwealth under Farrington's policy. Commonwealth refused to accept, claiming that it had no record that a policy was ever issued to Farrington. Commonwealth claimed that the binder became null and void after 730 days. Commonwealth further claimed that even if a policy had been issued, the claims were excluded because they were in the particular knowledge of Farrington and because they involved postpolicy events.
After Commonwealth's continued refusals to represent Farrington, Farrington retained outside counsel to defend the Puech and Bonin actions. The Puech action settled, and Farrington won at trial in the Bonin action. Farrington claims that it paid over $160,000 in legal fees and suffered additional consequential damage resulting from Commonwealth's refusal to defend.
In February 1994, Farrington sued Commonwealth. During discovery, Commonwealth at first denied that it had issued Farrington a title insurance policy. But in August 1994, Commonwealth's Clayton Janecky stated in his deposition that a rate manual existed that would explain Commonwealth's responsibility under a binder. That manual provided that Commonwealth should have automatically issued Farrington a title insurance policy at the expiration of the binder period at no additional charge.
On January 13, 1995, Commonwealth issued Farrington that policy. Commonwealth still, however, denied that it should have covered Farrington. The policy insured Farrington for claims involving any defect in or lien or encumbrance on such title. The policy also provided a duty to defend Farrington in any action based on an alleged defect, lien, ...