The United States District Court for the Northern District of Florida recently held that a property owner was not entitled to coverage under its title insurance policy when the owner had entered into an agreement with the seller that gave the seller the option to purchase the property if the owner failed to build on the property within two years. See Salas v. Commonwealth Land Title Ins. Co., 2022 U.S. Dist. LEXIS 96339 (N.D. Fla. Apr. 5, 2022). In 2009, the plaintiff purchased a property from a developer, and the defendant title insurance company issued a policy in connection with the purchase. The policy included an exception for a declaration containing a provision that the developer had an option to repurchase the property if plaintiff failed to build on the lot within two years. Plaintiff also entered into a separate purchase agreement with the developer that reiterated developer’s repurchase rights, and also included a liquidated damages provision if plaintiff failed to build within two years. In 2015, after plaintiff failed to build, the developer brought a lawsuit seeking to repurchase the property and seeking liquidated damages. Plaintiff filed a claim with defendant, who denied coverage. Plaintiff ultimately settled with the developer and then brought this action against defendant. Defendant then filed this motion to dismiss. Plaintff opposed, arguing that the policy did not include the purchase agreement despite the title agent having known about it and therefore that defendant agreed to “insure over” the purchase agreement’s risks.

The Court granted the defendant title company’s motion. First, the Court found that there was no evidence that defendant agreed to insure over the purchase agreement, regardless of whether the title agent knew about it. Second, the Court found that the claim was excluded under Exclusion 3(a) of the policy, which bars claims for matter “created, suffered, assumed, or agreed to by the insured claimant.” In this case, plaintiff both “agreed to” the purchase agreement and “created” the defect by failing to comply with its obligation to build and allowing the developer to exercise its repurchase option. The Court finally found that plaintiff’s claim that defendant should be liable would “turn[] the purpose of title coverage on its head” because “the purpose of title insurance . . . is to protect a purchaser of real estate against title surprises.”