Court of Appeals of Arizona, First Division, Department A
CENTENNIAL DEVELOPMENT GROUP, LLC, an Arizona limited liability company, Plaintiff/Appellant,
LAWYER'S TITLE INSURANCE CORPORATION, Defendant/Appellee
Appeal from the Superior Court in Navajo County Cause No. S0900CV20090348 The Honorable John N. Lamb, Judge
Holland Law Firm PLLC Snowflake By Joseph E. Holland Attorneys for Plaintiff/Appellant.
Fidelity National Law Group Phoenix By Patrick J. Davis David M. LaSpaluto Attorneys for Defendant/Appellee.
DIANE M. JOHNSEN, Chief Judge.
¶1 Centennial Development Group, LLC sued Lawyer's Title Insurance Corporation after the latter's title commitment failed to disclose an easement. We affirm the superior court's holding on summary judgment that Arizona Revised Statutes ("A.R.S.") section 20-1562 (West 2013) bars Centennial's claim for negligence. We reverse the dismissal of Centennial's contract claim, however, because although the title policy that Lawyer's Title issued only covers damages sustained while the insured owns the affected property, the "continuation of insurance" provision of the policy does not bar a claim for such damages made after the property is sold.
FACTS AND PROCEDURAL BACKGROUND
¶2 Centennial contracted to buy 75 acres in Snowflake. It made a down payment of $50, 000 toward the purchase price of $1, 500, 000 and gave the seller two notes and deeds of trust to secure its obligation to pay the balance. In connection with its purchase, Centennial obtained a title commitment and a title insurance policy from Transnation Title Insurance Company, now Lawyer's Title. Roughly a year after closing, Centennial discovered a roadway and utility easement across its property that the commitment had not disclosed. Believing the easement substantially diminished the value of its property, Centennial unsuccessfully tried to sell the property, then defaulted on its carry-back loan from the seller. In lieu of foreclosure, Centennial reconveyed all but one acre to the prior owner through a warranty deed subject to all easements of record. The easement at issue does not burden the single acre Centennial retained.
¶3 Centennial sued Lawyer's Title, alleging negligence and breach of contract. The superior court granted summary judgment in favor of Lawyer's Title on both claims. We have jurisdiction of Centennial's timely appeal pursuant to Article 6, Section 9, of the Arizona Constitution, and A.R.S. §§ 12-120.21(A)(1) (West 2013) and -2101(A) (West 2013).
A. Standard of Review.
¶4 Arizona Rule of Civil Procedure 56(a) allows a court to enter summary judgment when "there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." We review a summary judgment de novo, viewing the facts and inferences drawn from those facts in the light most favorable to the party against which judgment was entered. Brookover v. Roberts Enters., Inc., 215 Ariz. 52, 55, ¶ 8, 156 P.3d 1157, 1160 (App. 2007). We will affirm if the summary judgment is correct for any reason. City of Tempe v. Outdoor Sys., Inc., 201 Ariz. 106, 111, ¶ 14, 32 P.3d 31, 36 (App. 2001). The interpretation of an insurance contract is a question of law we review de novo. First Am. Title Ins. Co. v. Action Acquisitions, LLC, 218 Ariz. 394, 397, ¶ 8, 187 P.3d 1107, 1110 (2008).
B. The Negligence Claim.
¶5 Centennial's negligence claim alleged Lawyer's Title misrepresented the condition of title by omitting the easement from the report of exceptions attached to the policy. Centennial alleged the omission of the easement constituted a negligent misrepresentation on which it reasonably relied in deciding to buy the property. The superior court granted summary judgment against Centennial based on A.R.S. § 20-1562, reasoning the statute bars an insured from relying on information contained in a report of exceptions attached to a title insurance policy. See A.R.S. § 20-1562(5).
¶6 Before a title insurer issues a policy, it reviews public records for defects, then issues a title commitment that lists exceptions to coverage. Action Acquisitions, 218 Ariz. at 398, ¶ 11, 187 P.3d at 1111. The insurance policy to which the list of exceptions is attached is not a promise that no other exceptions or encumbrances exist. Rather, the policy is a contract under which the insurer agrees to indemnify the insured for losses caused by claims arising from encumbrances not identified in the insurer's commitment. See Swanson v. Safeco Title Ins. Co., 186 Ariz. 637, 641, 925 P.2d 1354, 1358 (App. 1995) ("Title insurance does not guarantee perfect title; instead, it pays damages, if any, caused by any defects to title that the title company should have discovered but did not."); see also Action Acquisitions, 218 Ariz. at 398, ¶ 11, 187 P.3d at 1107; Siegel v. Fidelity Nat'l Title Ins. Co., 54 ...