Property he owned pursuant to the deed decreased. As a result, plaintiff claims, Lot No. 9 lost roughly 75% of its fair market value and Lot No. 7 lost all of its fair market value. (Id. at PP 34-35, 37-39.) Plaintiff alleged in his first cause of action that despite his notice and demands, defendant refused to compensate him for either loss. Pursuant to the settlement agreement, plaintiff has withdrawn this cause of action.
Beginning in 1992, plaintiff became aware of nine alleged encroachments on the Property, each of which, he asserts, clouds his title to property covered by the Policy. Plaintiff claims that he brought each alleged encroachment to the attention of defendant and requested that defendant take steps to defend against them and to remove the clouds on his title, but that defendant refused to honor the Policy or to take action to remove the clouds on plaintiff's title.
Plaintiff alleges that as a result of the encroachments, claims, and clouds upon his title to the Property, he has (1) lost the right to use, sell, or occupy any of the roads and lots subject to encroachments; (2) incurred taxes upon and costs associated with portions of the Property as to which his rights have been impeded or extinguished; (3) incurred costs and fees; and (4) been deprived of the ability to reconfigure lots and roads to APA specifications so as to improve the configurations of the existing subdivision. (Id. at P 61.) Plaintiff seeks a declaration that defendant must take steps to clear plaintiff's title to the Property and that its failure to do so constitutes a breach of contract, and an order directing defendant to take steps to resolve the alleged clouds on plaintiff's title, or in lieu of such injunctive relief, to pay him the costs reasonably associated with retaining independent counsel to do so.
2. Summary Judgment Standard
Under Fed. R. Civ. Pro. 56(c), if there is "no genuine issue as to any material fact . . . the moving party is entitled to a judgment as a matter of law . . . where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986), on remand, 807 F.2d 44 (3d Cir. 1986), cert. denied, 481 U.S. 1029 (1987). The burden to demonstrate that no genuine issue of material fact exists falls solely on the moving party, Heyman v. Commerce and Indus. Ins. Co., 524 F.2d 1317 (2d Cir. 1975), and the trial court must resolve all ambiguities and draw all inferences in favor of that party against whom summary judgment is sought. Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 249 (2d Cir. 1985) cert. denied 484 U.S. 918, 98 L. Ed. 2d 226, 108 S. Ct. 269 (1987). The Court has examined plaintiff's complaint in light of the preceding considerations.
A. Title Insurance Policies
Federal courts exercising diversity jurisdiction must apply state substantive law. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938). The parties agree that New York law should control. Under New York law, a title insurance policy "is a contract by which the title insurer agrees to indemnify its insured for loss occasioned by a defect in title." Smirlock Realty Corp. v. Title Guar. Co., 52 N.Y.2d 179, 418 N.E.2d 650, 653, 437 N.Y.S.2d 57 (N.Y. 1981). It represents the insurer's opinion that the title is valid, "backed by an agreement to make that opinion good, in case it should prove to be mistaken, and loss should result in consequence to the insured." First Nat'l Bank & Trust Co. v. New York Title Ins. Co., 171 Misc. 854, 12 N.Y.S.2d 703, 710 (N.Y. Sup. Ct. 1939).
As with other insurance contracts, the title insurance policy defines the title insurer's obligations. Cummins v. U.S. Life Title, 40 N.Y.2d 639, 357 N.E.2d 975, 975, 389 N.Y.S.2d 319 (N.Y. 1976); see also Citibank, N.A. v. Chicago Title Ins. Co., 214 A.D.2d 212, 1995 N.Y. App. Div. LEXIS 9623, at 8, 632 N.Y.S.2d 779. (N.Y. App. Div. 1995). If the insurer wishes to exclude coverage from its policy obligations, it must do so in clear and unmistakable language. Rajchandra Corp. v. Title Guar. Co., 163 A.D.2d 765, 558 N.Y.S.2d 1001, 1004 (N.Y. App. Div. 1990). The insurer bears the burden of proving that an insured's claim falls within such an exclusion, strictly and narrowly construed. Id.
B. Defendant's Argument
Defendant advances three main arguments in support of its motion for summary judgment. First, defendant argues that while the Policy obligates it to defend the insured in all "actions or proceedings founded on a claim of title or incumbrances not excepted," the Policy permits but does not require defendant to maintain actions on the insured's behalf. Second, defendant contends that under the Policy, its duty to indemnify plaintiff does not arise unless and until there has been a "final determination" with respect to the subject parcel, and that there have been no final determinations with respect to any of plaintiff's parcels currently at issue. Third, defendant argues that its obligation to defend and indemnify only pertains to parcels covered by the Policy, and that certain of plaintiff's claims fall within Policy exceptions. (D's Mem. 3.)
1. Duty to Defend
The first paragraph of the Policy reads, in relevant part, as follows:
IN CONSIDERATION OF the payment of its charges for the examination of title and its premium for insurance, insures the within named insured against all loss or damage not exceeding the amount of insurance stated herein and in addition the costs and expenses of defending the title, estate or interest insured, which the insured shall sustain by reason of any defect or defects of title affecting the premises described in Schedule A or affecting the interest of the insured therein as herein set forth, or by reason of unmarketability of the title of the insured to or in the premises, or by reason of liens or incumbrances affecting title at the date hereof, . . . excepting all loss and damage by reason of the estates, interests, defects, objections, liens, incumbrances and other matters set forth in Schedule B, or by the conditions of this policy hereby incorporated into this contract . . . .
(Beaumont Aff. Ex. B. p. 6.) Also relevant is the Policy provision entitled "2. Defense and Prosecution of Suits," which reads, in pertinent part, as follows:
(a) This company will, at its own cost, defend the insured in all actions or proceedings founded on a claim of title or incumbrances not excepted in this policy.