The United States District Court for the Middle District of Florida recently held that a title insurance company was not liable for the alleged failure to diligently prosecute an action or the alleged failure to conduct a reasonable title search after another court held that the public had a right to access a portion of the beach-front property. See Kahama VI, LLC v. HJH, LLC, 2016 WL 7104175 (M.D. Fla. Dec. 6, 2016). In the case, the plaintiff-insured acquired a mortgage, note and guarantees on a beachfront property in 2010. The property had been purchased in 2004, but its development had been obstructed by a 2007 city land-use regulation that limited the construction and a 2008 claim that the county owned a portion of the beach for the benefit of the public based on a 1917 plat. The insured owner filed a claim with the title insurance company, who initiated a litigation regarding the county’s claim to title. That litigation went up on appeal, where the appellate court held that the insured owner had fee simple title to the property under Florida law because it could “trace its title to a transaction recorded more than 30 years earlier and purporting to convey a fee simple estate.” However, the appellate court also found that the public, “by virtue of its perennial and uninterrupted access to and use of the sandy portion of the beach, had acquired a customary right to that access and use, a right with which neither [the insured owner] nor any subsequent owner could interfere.”
The plaintiff-insured then filed this lawsuit against the title insurance company, alleging that the title company had failed to diligently prosecute the action and had breached its duty to conduct a reasonable title search when it failed to discover the 1917 plat. The title insurance company moved for summary judgment, which the court granted. First, it held that the title insurance company has a right under the policy to pursue a litigation to a final determination, and that if a final determination by a court cures the title defect, the failure to prosecute claim is precluded under Florida law. The court then held that the policy only insures title to the property, not use, and that the appellate court’s finding of fee simple title had cured the title defect regardless of whether the public had the right to use the property. Second, the court held that the public’s right to use the beach accrued before the insured owner’s grantor acquired title, and that the title insurance company had no obligation to search the public records before this date. Additionally, the court found that the public’s right to use the beach was based on Florida law, not anything found in the public records.