Rights of Tenants or Persons in Possession, if any;

This standard exception was held to relieve a title insurer of any obligation to defend a claim by a neighbor claiming adverse possession, by the New York Appellate Division, Second Department,. See Melamed v. First Am. Title Ins. Co., 190 A.D.3d 724 (2d Dept. 2021)

The Court stated that the neighbor’s claim for possession of a portion of the Plaintiffs’ property by adverse possession was a claim arising from the rights of persons in possession. Since this exception was contained in the title policy, the insurer had no obligation to defend the insured.

The relevant facts are as follows:

Plaintiffs purchased a property and obtained a title insurance policy from the Defendant title insurance company.  Plaintiffs’ neighbor later brought an action against the Plaintiffs, claiming that the neighbor owned a portion of Plaintiffs’ property via adverse possession.  Plaintiffs then submitted a claim to Defendant for coverage in the adverse possession action. The Defendant denied the claim.  After the denial, Plaintiffs brought an action seeking a judgment that the Defendant is obligated to defend and indemnify them in the adverse possession action.  The parties cross-moved for summary judgment, and the trial court granted the Defendant title insurer’s motion.

On appeal, the Court affirmed.  The Court found that “[t]he subject title insurance policy included an exception for claims arising from the rights of persons in possession. . . . [and the] claim for possession of a portion of the Plaintiffs’ property by adverse possession was a claim arising from the rights of persons in possession.  Contrary to the Plaintiffs’ contention, there was no other reasonable interpretation of this exception to the policy.”  Accordingly, it affirmed the dismissal of the complaint against the Defendant title insurer.

Contributed by:
Jean Partridge, Chief Counsel & Managing Member
BENCHMARK TITLE AGENCY, LLC