Although it did not break new ground, the Hawaii Supreme Court reaffirmed its strong commitment to the insurer's duty to defend in Hart v. Ticor Title Ins. Co., 2012 Haw. LEXIS 83 (Haw. March 27, 2012).
The Harts owned two lots in Ewa Beach. They purchased a title insurance policy from TICOR which provided, in part, that TICOR would insure title against loss incurred by any defect in or lien or encumbrance on the title. The policy also agreed to pay in the defense of the title.
In 2005, the Harts filed a Land Court petition to consolidate their two lots into one parcel. The State filed an answer, asserting, among other things, it reserved any interests in the property that may have escheated to the State, and asked the court to so rule.
In response, the Harts tendered their defense against all the State's claims to TICOR, who refused to defend. TICOR argued that the State merely reserved its right to make that claim at some point in the future. In fact, the State responded to the Harts' motion for summary judgment be stating it was not pursuing any claim of escheat to the State. The Land Court granted, in part, the Harts' motion for summary judgment, determining that there was no basis for the State's claims for escheat.
The Harts then sued TICOR in state district court for breach of contract and bad faith for its refusal to defend. The court denied the Harts' motion for summary judgment, finding that the State's escheat defense was a routine reservation of a possible defense and did not trigger coverage. The Intermediate Court of Appeals affirmed.
The Supreme Court reversed, determining the ICA erred in concluding that TICOR did not have a duty to defend the Harts against the State's escheat claim.
TICOR's argument that the State did not assert a "claim" within the meaning of the policy was unpersuasive. The State asserted that it had an interest in the property, including its reserving any interests in the property that may have escheated to the State. Therefore, the States' pleadings obligated TICOR to defend at the time the State asserted its escheat claim. Once the possibility of coverage triggered the duty to defend, TICOR had the duty to defend, regardless of whether the allegations were "groundless, false or fraudulent." The fact that the State ultimately clarified that it was not pursuing any claim of escheat did not excuse TICOR from its initial duty to defend.
My Damon Key blogging colleague, Rebecca Copeland, gives her view of the case from the appellate advocate's perspective in her post [here] at www.recordonappeal.com.
