Lick Mill Creek Apartments v. Chicago Title Insurance Co.

California Court of Appeal · Property

PropertyTitle insuranceMarketability of titleEncumbrancestitle insuranceALTA policymarketability of titlemarket value of land

Facts

Plaintiffs purchased three parcels of property from KSI and obtained three ALTA title insurance policies from Chicago Title and First American. Before plaintiffs' purchase, hazardous substances from prior industrial uses had contaminated the soil, subsoil, and groundwater, and public agencies maintained records disclosing the contamination. After acquiring the property, plaintiffs spent money to remove and clean up the hazardous substances to mitigate damages and avoid government-mandated compliance costs. Defendants denied plaintiffs' claim that the policies covered those cleanup expenses.

Issue

Whether ALTA title insurance policies insuring against defects in title, liens or encumbrances on title, and unmarketability of title cover the insureds' costs of cleaning up hazardous substances already present on the land when no lien had been recorded or asserted at the time the policies were issued.

Rule

Under an unambiguous title insurance policy, coverage extends only to matters affecting title, such as defects in title, liens, encumbrances, lack of access, or unmarketability of title. Physical conditions of the land, including hazardous contamination that merely impairs the land's value or use, do not constitute unmarketability of title or an encumbrance on title absent a legally recognized defect, lien, or third-party interest affecting ownership rights.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

Nina Torres bought a warehouse site in Sacramento and received an ALTA owner’s title policy insuring against defects in title, liens or encumbrances on title, lack of access, and unmarketability of title. Six months later, she discovered buried solvents had saturated the soil for years, and she spent large sums removing them even though no cleanup lien had been recorded when the policy issued.

If Nina seeks reimbursement from the title insurer for the remediation costs, what is the strongest argument for the insurer?

Explanation. The majority held that title insurance indemnifies against loss caused by matters affecting title, not against the physical condition of the land itself. Hazardous contamination may impair value or usability, but absent a title defect, lien, or other legally recognized interest affecting ownership rights, remediation costs are not covered.