In Cynergy, LLC v. First American Title Insurance Company, No. 12-10495, 2013 WL 309052 (11th Cir. Jan. 28, 2013), the Eleventh Circuit concluded that a title insurance policy did not provide coverage for lack of access to land where the policyholder knew of lack of access before purchasing the policy.

In September 2006, a land development company purchased a parcel of land using a purchase loan obtained from a local bank.  Id. at *1.  The company promptly began developing the land, but the project stalled.  Id. at *1.  Among other problems, the company faced issues because the property could not be accessed through public roads.  Id.  The development company “was aware of this condition before it purchased the property and had intended to obtain an easement” but abandoned the plan due to cost.  Id.

To protect itself on the loan, the bank had purchased a title insurance policy with First American Title Insurance Company.  Id. at *1.  The policy covered, among other things, “‘lack of a right of access to and from the land.’”  Id. at *1 (quoting policy).  The policy, however, excluded “coverage for matters ‘assumed or agreed to’ by the insured.”  Id. at *2 (quoting policy). 

After the development stalled, in part because of the lack of access, the company wanted the bank to seek coverage under the title insurance policy.  Id. at *2.  The bank declined, stating that “‘[w]hen we originally made this loan, we knew that there was no designated access to the property, but it was in your plans to create one’ from a nearby highway.”  Id.  

The investors in the development company purchased the promissory note from the bank and then sought coverage as successors-in-interest to the bank under the insurance policy.  Id.  The insurer denied the claim because “the property’s lack of dedicated access was a condition ‘assumed or agreed to’ by the [b]ank” and, therefore, was excluded.  Id.  The litigation ensued. 

The district court granted summary judgment in favor of the insurer, concluding that the exclusion regarding “assumed or agreed to” matters precluded coverage.  Id. at *3.  The Eleventh Circuit affirmed on appeal.

On appeal, the policyholder argued that the policy covered, without exception, any losses due to lack of access, regardless of the policyholder’s knowledge.  Id. at *5.  Specifically, the policyholder argued that the lack of a right of access did not fall under the terms of the exclusion because lack of access was not one of the specific enumerated examples in the exclusion.  Id. The court rejected this assertion and reasoned that lack of access could fall under the “other matters” term of the exclusion.  Id.  

The policyholder also tried to obtain coverage by arguing that the exclusion was impermissible because it was inconsistent with the insuring language of the policy.  Id.  The court rejected this assertion because “that is the nature of an exclusion – to exclude things that otherwise would be covered,” so long as the exclusions do not completely eviscerate coverage in all circumstances.  Id.

After rejecting each of the policyholder’s arguments, the Eleventh Circuit reviewed the evidence and determined there were no material issues of fact as to the policyholder’s knowledge of the access issues.  Id. at *8-11.  The court then affirmed summary judgment in favor of the insurer.  Id.

This decision is an example of a court strictly interpreting insurance policy exclusions, particularly exclusions involving a policyholder’s knowledge regarding the scope of the risk insured.