The United States District Court for the District of Montana recently upheld a Magistrate Judge’s recommendation for summary judgment for a title company, finding that coverage terminated when the insureds conveyed the property to their trust. See Green v. Chicago Title Ins. Co., 2021 WL 4476446 (D. Mont. Sept. 30, 2021). In this case, William Green and his wife Esther (“the Greens”) had purchased land in Montana in 1989 as joint tenants with right to survivorship, and purchased title insurance from defendant shortly thereafter. In 2012, the Greens created irrevocable trusts and quitclaimed their interests in the property to the trusts with William Green as trustee. The Greens died in 2018 and the trusts conveyed their interests in the property to the plaintiffs (the Greens’ heirs), who subsequently found out that there was no legal access to the property. Plaintiffs filed a claim with the defendant title insurance company, who denied the claim, reasoning that plaintiffs did not qualify as insureds as defined by the insurance policy because the Greens were the listed insureds, and the trusts were not listed as the insureds nor successor insureds. Plaintiffs brought this action and the parties cross-moved for summary judgment. The Magistrate Judge agreed with the defendant, holding that the Greens relinquished any interest they had in the property at the time of the transfer, despite William Green assuming title to the Property as the trusts’ trustee, and that because “the conveyance of the property by the Greens to the trusts was a voluntary conveyance to a separate and distinct entity,” the coverage lapsed and plaintiffs did not inherit the property by operation of law, as required by the Policy.
The District Court judge adopted the Magistrate’s findings and recommendations. In doing so, the Court rejected plaintiffs’ argument that coverage continued because William Green, as a named insured under the policy, assumed a trustee’s estate in the property. Instead, it held that Montana law differentiates between a grantee’s interest in property and a trustee’s interest or estate, and that any and all property rights were transferred to the trusts as separate and distinct entities, with the Greens themselves reserving no interests or estates in the land. Accordingly, coverage terminated when the Greens quitclaimed their interest in the property to the trusts, and the heirs were not entitled to coverage.