Title: First American Title Insurance Company v. Dennis A. Dahlmann

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2006 WI 65 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2004AP2318 
 
 
COMPLETE TITLE: 
 
 
First American Title Insurance Company, 
          Plaintiff-Respondent, 
     v. 
Dennis A. Dahlmann, 
          Defendant-Appellant-Petitioner. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
Reported at: ___ Wis. 2d ___, 706 N.W.2d 702 
(Ct. App. – Unpublished) 
 
 
OPINION FILED: 
June 7, 2006   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
April 25, 2006   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Dane   
 
JUDGE: 
John C. Albert  
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
        
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the defendant-appellant-petitioner there were briefs by 
Timothy J. Yanacheck and Bell, Gierhart & Moore, S.C., Madison, 
and oral argument by Timothy J. Yanacheck. 
 
For the plaintiff-respondent there was a brief by J. 
Bushnell Nielsen and Reinhart Boerner Van Deuren S.C., Waukesha, 
and oral argument by J. Bushnell Nielsen. 
 
 
 
2006 WI 65
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2004AP2318  
(L.C. No. 
2002CV2022) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
First American Title Insurance Company, 
 
          Plaintiff-Respondent, 
 
     v. 
 
Dennis A. Dahlmann, 
 
          Defendant-Appellant-Petitioner. 
 
 
 
FILED 
 
JUN 7, 2006 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed and 
remanded.   
 
¶1 
N. PATRICK CROOKS, J.   Petitioner Dennis A. Dahlmann 
(Dahlmann) seeks review of an unpublished decision of the court 
of appeals,1 affirming the circuit court's declaratory judgment 
in favor of First American Title Insurance Company (First 
American). 
 The issue 
before this 
court 
is 
whether an 
encroachment by an improvement onto adjacent land constitutes a 
defect or encumbrance in the title of the insured property for 
                                                 
1 First Am. Title Ins. Co. v. Dahlmann, No. 2004AP2318, 
unpublished slip op. (Wis. Ct. App. Oct. 13, 2005). 
No. 
2004AP2318   
 
2 
 
the purpose of the title insurance contract at issue in this 
case.   
¶2 
We reverse the decision of the court of appeals.  We 
hold that a substantial encroachment, created by an improvement 
onto adjacent land, constitutes an encumbrance on the title of 
the insured property for the purpose of the title insurance 
contract at issue in this case.  We further hold that such a 
substantial encroachment, and thus an encumbrance, is covered 
under the terms of the title insurance policy at issue.  
However, 
the 
issue 
of 
whether 
the 
encroachment 
here 
is 
"substantial," so as to constitute an encumbrance on title, for 
purposes of the title insurance contract, presents a question of 
fact for the trier of fact to resolve.2  We, therefore, remand 
the case to the circuit court for such a determination.   
I 
¶3 
On January 15, 1999, Dahlmann purchased the Madison 
Inn (Inn), a hotel that abuts Frances Street in Madison.   At 
the time Dahlmann purchased the Inn, he also purchased title 
insurance from First American on the property.3  The policy 
provided: 
                                                 
2 Petitioner presents an alternate question of whether the 
encroachment here renders the title unmarketable, and therefore 
falls within the insurance coverage.  Because we resolve the 
issue on the basis of an encumbrance on title, we need not reach 
the question of unmarketability, but note that such an issue 
also presents questions for the trier of fact.  See Mellinger v. 
Ticor Title Ins. Co., 93 Cal. App. 4th 691, 697 (2001).   
3 The policy affords Dahlmann $2,150,000 in coverage; the 
premium was $1,182.50. 
No. 
2004AP2318   
 
3 
 
SUBJECT 
TO 
THE 
EXCLUSIONS 
FROM 
COVERAGE, 
THE 
EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B AND 
THE CONDITIONS AND STIPULATIONS, FIRST AMERICAN TITLE 
INSURANCE COMPANY . . . insures . . . against loss or 
damage . . . sustained or incurred by the insured by 
reason of:  
1) 
Title to the estate or interest described 
in Schedule A being vested other than as 
stated therein;  
2) 
Any defect in or lien or encumbrance on 
the title;  
3) 
Unmarketability4 of the title[.] 
¶4 
In addition, the policy defined the "land" for which 
title is being insured:  
[T]he land described or referred to in Schedule (A),5 
and 
improvements 
affixed 
thereto 
which 
by 
law 
constitute real property.  The term "land" does not 
include any property beyond the lines of the area 
described or referred to in Schedule (A), nor any 
right, title, interest, estate or easement in abutting 
streets, roads, avenues. . . . 
¶5 
In issuing the title insurance policy, First American 
relied upon a survey completed by Jeffrey Johnson in 1994 
(Johnson survey), and an affidavit from the landowner who sold 
                                                 
4 The policy defines "unmarketability of the title" as 
an alleged or apparent matter affecting the title to 
the land, not excluded or excepted from coverage, 
which would entitle a purchaser of the estate or 
interest described in Schedule A to be released from 
the obligation to purchase by virtue of a contractual 
condition requiring delivery of marketable title. 
5 Schedule A provides, in relevant part, "[t]he land 
referred to in this policy is described as follows:  Lot Seven 
(7), and the East 25 feet of Lot Six (6), Block Seven (7), 
Original Plat of the City of Madison, Dane County, Wisconsin." 
No. 
2004AP2318   
 
4 
 
the Inn 
to Dahlmann. 
 
The 
Johnson 
survey 
depicted the 
encroachment of an exterior wall of the parking garage and a 
vent into a four-foot right-of-way.6  However, the survey did not 
depict the encroachment of the garage under Frances Street.  The 
seller's affidavit stated that no changes had been made to the 
Inn to affect the structure's size or location since the Johnson 
survey was conducted.  As a result, at the request of Dahlmann's 
attorney, First American agreed to omit from the title insurance 
policy two potentially relevant exceptions, which were included 
in the standard form title commitment7: (1) "Any discrepancies or 
conflicts in boundary lines, any shortages in area, or any 
encroachment or overlapping of improvements." (Encroachment 
exception); (2) "Any facts, rights, interests or claims which 
are not shown by the public record but which could be 
ascertained by an accurate survey of the land." (Survey 
exception).  As a result of the policy amendments, Dahlmann paid 
an additional premium.  
¶6 
 The Inn and its underground parking garage were built 
in 1960.  From the time of its initial construction, the parking 
                                                 
6 The encroachment of the exterior wall of the parking 
garage and the vent into the four-foot right-of-way was 
specifically identified as an exception to coverage in both 
Schedule B and in an appended endorsement.   
7 "A title commitment is a document which describes the 
property as the title insurer is willing to insure it and 
contains the same exclusions and general and specific exceptions 
as later appear in the title insurance policy."  Greenberg v. 
Stewart Title Guar. Co., 171 Wis. 2d 485, 488, 492 N.W.2d 147 
(1992). 
No. 
2004AP2318   
 
5 
 
garage encroached upon the land beneath Frances Street, which is 
owned by the City of Madison (City).  Although the encroachment 
is not recorded in any record maintained by the City, the 
original building plans depict the encroachment.  The City 
discovered the encroachment in March 2002 when it was repairing 
a sidewalk adjacent to 
the 
Inn. 
 
Upon 
discovering the 
encroachment, the City sought to collect a $3,980 annual fee 
from Dahlmann for the privilege of encroaching under Frances 
Street pursuant to a city ordinance.  Otherwise, the City 
suggested it would require Dahlmann to remove the encroachment.8 
¶7 
In response to the City's demand for the privilege 
fee, Dahlmann requested that First American provide a defense 
and indemnification.  First American, in turn, filed this 
action, seeking a declaratory judgment that its policy did not 
afford Dahlmann coverage for the encroachment.  The Dane County 
Circuit Court, John C. Albert, Judge, agreed with First 
American, and granted the motion for a declaratory judgment.  
The circuit court determined that the policy did not afford 
coverage because the policy only covered the land within the 
legal description in Schedule A.  Therefore, because the 
encroachment was outside the described property, it did not fall 
within the title insurance coverage.  The court of appeals 
affirmed, and Dahlmann petitioned for review. 
 
 
                                                 
8 The encroachment occupies 1,980 square feet. 
No. 
2004AP2318   
 
6 
 
II 
¶8 
The facts were stipulated to before the circuit court, 
including the date of purchase, the existence of an encroachment 
from the time the Inn was built, the absence of the buyer's 
agent's knowledge of the encroachment, and the striking of the 
Survey and Encroachment exceptions from the title policy.  Since 
the parties do not dispute any of the facts, this case presents 
a question of law, of insurance policy interpretation, which 
this court reviews de novo.  Mau v. N.D. Ins. Reserve Fund, 2001 
WI 134, ¶12, 248 Wis. 2d 1031, 1041, 637 N.W.2d 45; Blackhawk 
Prod. v. Chicago Ins., 144 Wis. 2d 68, 77, 423 N.W.2d 521 
(1988). 
III 
¶9 
The 
issue 
before 
this 
court 
is 
whether 
the 
encroachment of the Inn's parking garage onto property owned by 
the City is covered under First American's policy as an 
"encumbrance on the title."  The parties dispute the correct 
interpretation 
of 
the 
policy, 
and 
in 
particular, 
the 
significance of the deletion of the Survey and Encroachment 
exceptions.   
¶10 Dahlmann 
argues 
that 
coverage 
for 
the 
Inn's 
encroachment onto City land under Frances Street exists under 
the title insurance policy, as the encroachment constitutes an 
encumbrance on the title.  Dahlmann maintains that it does not 
matter whether a structure encroaches upon the insured property, 
or a structure on the insured property encroaches upon adjacent 
land——if the encroachment is substantial, the result is an 
No. 
2004AP2318   
 
7 
 
encumbrance on the title of the insured property, and the title 
insurance policy insures him against any damage or loss caused 
by such an encumbrance on his title.  Dahlmann further contends 
that deleting the Survey and Encroachment exceptions from 
Schedule B demonstrates the parties' intent to insure against an 
encroachment such as the one at issue in this case.   
¶11 First American does not claim that any exclusion or 
exception from coverage precludes coverage.  Rather, First 
American 
claims 
that 
the 
loss 
for 
which 
Dahlmann 
seeks 
compensation does not fall within the initial grant of coverage, 
as limited by the definition of "land" in Schedule A.  First 
American argues that the title insurance policy does not insure 
the title to any property beyond the bounds of what is described 
in Schedule A.  In other words, there is no encumbrance on 
title, because Dahlmann does not have title to any part of 
Frances Street.  Further, it is First American's position that 
the policy insures the title to a specifically described piece 
of land, and land is defined in the policy to exclude "any 
property beyond the lines of the area described or referred to 
in Schedule A," as well as "any right, title, interest, estate 
or easement in abutting streets, roads, avenues. . . ."  First 
American notes that the policy issued to Dahlmann is a standard 
form, which many other jurisdictions have had occasion to 
No. 
2004AP2318   
 
8 
 
interpret as failing to provide coverage for encroachments 
similar to that in the present case.9  
¶12 "Title insurance is a contract of indemnity which 
obligates the title insurer to pay loss as defined by the 
policy."  Duane H. Wunsch, Wisconsin Commercial Real Estate 
Transactions, § III-1 (2000).  The purpose of title insurance 
"is to indemnify the insured for impairment of its interest due 
to failure of title as guaranteed in the title insurance 
report."  Greenberg v. Stewart Title Guar. Co., 171 Wis. 2d 485, 
493, 492 N.W.2d 147 (1992)(quoting Blackhawk, 144 Wis. 2d at 
78).   
¶13 There are three steps necessary in our consideration 
of whether the encroachment of the Inn parking garage onto 
adjoining property is covered under the terms of the title 
policy. 
 
First, 
we 
must 
determine 
when 
an 
encroachment 
                                                 
9 See Havstad v. Fid. Nat'l Title Ins. Co., 58 Cal. App. 4th 
654, 660 (1997)(title insurance policy did not insure title to 
improvements that encroached into a public street when the 
policy "clearly and explicitly" defined "land" not to include 
"any property beyond the lines of the area described . . . in 
Schedule A, nor any right, title, interest, estate or easement 
in abutting streets . . ." (emphasis omitted)); Heyd v. Chicago 
Title Ins. Co., 354 N.W.2d 154 (Neb. 1984)(title insurance 
policy did not cover the encroachment of insured's house onto 
public street because encroachment did not create a defect in 
title to insured land); Transamerica Title Ins. Co. v. Northwest 
Bldg. Corp., 773 P.2d 431, 433 (Wash. 1989)(title insurance 
policy did not insure title to paved area encroaching onto 
adjacent private land, as "[t]he encroaching areas of land and 
improvements at issue extend beyond the borders of the legal 
description, and thus are expressly excluded from coverage by 
the 
policy's 
unambiguous 
terms.")(abrogated 
by 
Denny's 
Restaurants, Inc. v. Sec. Union Title Ins. Co., 859 P.2d 619 
(Wash. Ct. App. 1993)). 
No. 
2004AP2318   
 
9 
 
constitutes an "encumbrance on title."  Second, we need to 
examine the terms of the policy, including the effect of the 
omission of the Survey and Encroachment exceptions.  Finally, we 
must discuss the effect on coverage of the definition of "land" 
in Schedule A. 
A 
¶14 A title defect is a claim or interest that is 
inconsistent with the title purportedly transferred.  Turner v. 
Taylor, 2003 WI App 256, ¶8, 268 Wis. 2d 628, 673 N.W.2d 716.  
One treatise explains there are four types of defects: (1) 
defects in the chain of title; (2) lack of record title because 
the seller claims ownership through adverse possession; (3) lack 
of title in the seller because a third-party claims adverse 
possession against the seller; and (4) encumbrances.  14 Michael 
Allan Wolf, Powell on Real Property § 81.03[6][d], at 81-126 to 
81-127 (2000).  The only type of defect relevant in this case is 
an encumbrance. 
¶15 An encumbrance is a "'claim or liability that is 
attached to property . . . that may lessen its value. . . .'"  
O'Connell v. O'Connell, 2005 WI App 51, ¶12, 279 Wis. 2d 406, 
694 N.W.2d 429 (citation omitted).  Examples of encumbrances 
include leases, mortgages, easements, and encroachments.  Powell 
§ 81.03[6][d], at 81-132 to 81-136.  Thus, the question of 
whether the policy affords coverage for the encroachment by the 
parking garage under Frances Street turns, first, on the 
No. 
2004AP2318   
 
10 
 
question 
of 
whether 
this 
particular 
encroachment 
is 
an 
"encumbrance on the title." 
¶16 In In re Meehan, this court considered a case in which 
the buyer of a motel sued the seller for breach of warranty 
against encumbrances, after learning that part of a stone wall 
and a sign for the motel at issue encroached upon a public 
right-of-way.  In re Meehan, 30 Wis. 2d 428, 430-31, 141 N.W.2d 
218 (1966).  The court concluded that the warranty against 
encumbrances extended to structures originating on the seller's 
property that encroach upon adjoining property.  Id. at 433.   
An encroachment occurs not only when a structure on 
adjoining property encroaches substantially on your 
property 
without 
the 
benefit 
of 
an 
appurtenant 
easement, but conversely, when a structure on your 
property 
encroaches 
upon 
the 
adjoining 
property 
without the benefit of such an easement.  A warranty 
against [e]ncumbrances 
extends to 
both 
types of 
encroachment. 
Id. (footnote omitted).  The Meehan court also held that "an 
encroachment amounts to an [e]ncumbrance if it is substantial."  
Id. at 432 (footnote omitted).   
¶17 The 
Meehan 
court 
laid 
out 
four 
factors 
to 
be 
considered 
"in 
determining 
whether 
or 
not 
a 
substantial 
encroachment exists . . . [1] 'the character or extent of the 
encroachment, [2] the cost or possibility of its removal, [3] 
the length of time the encroachments had continued, [and] [4] 
municipal acquiescence, or the like.'"  Id. at 433 (citation 
omitted) (citing L.S. Tellier, Annotation, Encroachment of 
No. 
2004AP2318   
 
11 
 
Structure on or Over Adjoining Property or Way as Rendering 
Title Unmarketable, 47 A.L.R.2d 331, 335, § 2 (1956)).  
¶18 The Inn's parking garage is an encroachment onto the 
City’s property.  Although Meehan concerned a title warranty, as 
opposed to title insurance, the Meehan court set forth a test to 
determine whether an encroachment was substantial, so as to 
constitute an encumbrance.10  Meehan, 30 Wis. 2d at 432-33.  We 
can see no reason why the reasoning of Meehan should not be 
extended to an analogous situation involving title insurance.  
Both title insurance and title warranties exist to protect a 
buyer from an unknown defect or defects.11  Furthermore, property 
law is best served by applying consistent meanings to language 
used in the same or a similar context.  We, therefore, conclude 
that the Meehan test should be applied to this case to determine 
if an encroachment is substantial, so as to constitute an 
encumbrance on title.   
                                                 
10 The 
Meehan 
court 
adopted 
the 
rule 
regarding 
substantiality based upon what was the general rule in the 
United States.  Citing L.S. Tellier, Annotation, Encroachment of 
Structure on or Over Adjoining Property or Way as Rendering 
Title Unmarketable, 47 A.L.R.2d 331 (1956), the court explained, 
"[a]lthough this appears to be a question of first impression in 
Wisconsin, the rule elsewhere is that an encroachment amounts to 
an [e]ncumbrance if it is substantial."  In re Meehan, 30 Wis. 
2d 428, 432, 141 N.W.2d 218 (1966).    
11 Defects known to both parties are exceptions from 
coverage, unless otherwise addressed in Schedule B and/or a 
separate endorsement.  Encroachments known to the buyer, but 
unknown to the title insurance company, are specifically 
excluded from coverage. 
No. 
2004AP2318   
 
12 
 
¶19 While articulating the factors to be considered in 
assessing the substantiality of an encroachment, Meehan is 
silent on whether each of the factors deserves equal weight, or 
if the factors are to be applied in an equitable manner, 
weighing the totality of circumstances.  We conclude that a 
court should apply the Meehan factors using a totality of the 
circumstances approach.  We reach this conclusion for two 
reasons. 
¶20 First, the Meehan factors were drawn from 47 A.L.R.2d 
331.  Based on the summary of cases reported by the author in 
A.L.R.2d, it appears most courts employ an equitable, totality 
of the circumstances analysis, with a heavy emphasis on how much 
the structure physically encroaches, and how much it would cost 
to remove the encroachment. See, e.g., Loeffler v. Roe, 69 So.2d 
331 (Fla. 1954); Sinclair v. Weber, 104 A.2d 561 (Md. 1954).  
Second, substantiality is a relative concept, and the test 
itself does not lend itself to a bright-line approach.   
¶21 The issue of whether an encroachment is substantial, 
and thus constitutes an encumbrance, presents a question for the 
trier fact to resolve.12  We, therefore, remand that issue to the 
                                                 
12 Meehan, 30 Wis. 2d at 433.  See also Mellinger, 93 Cal. 
App. 4th at 696; and see Wilson v. Pac. Coast Title Ins. Co., 235 
P.2d 431, 433 (Cal. Ct. App. 1951) wherein the California Court 
of Appeal clearly stated that: "[w]hether such title was 
defective was a question of fact for the determination of the 
trial court, as was the question of whether such title was 
'unmarketable.'"  As we have stated earlier, an encumbrance is 
one type of title defect.  See Supra ¶14.  
No. 
2004AP2318   
 
13 
 
circuit court for determination of whether, based upon the 
totality of the circumstances, the encroachment of the Inn's 
parking 
garage 
is 
substantial, 
so 
as 
to 
constitute 
an 
encumbrance.   
¶22 If the circuit court finds the encroachment of the 
garage to be substantial, and thus an encumbrance, it becomes 
necessary to resolve the issue of whether the title insurance 
policy here covers such an encumbrance.  To do so, we must next 
consider 
the 
effect of 
the 
deletion 
of 
the 
Survey and 
Encroachment exceptions.   
B 
¶23 The title insurance policy issued to Dahlmann by First 
American provides:  "SUBJECT TO THE EXCLUSIONS FROM COVERAGE, 
THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B AND THE 
CONDITIONS AND STIPULATIONS, FIRST AMERICAN . . . insures . . . 
against a loss or damage . . . sustained or incurred by the 
insured by reason of . . . [a]ny defect in or lien or 
encumbrance on the title."  
¶24 "Title insurance policies are subject to the same 
rules of construction as are generally applicable to contracts 
of insurance." Laabs v. Chicago Title Ins. Co., 72 Wis. 2d 503, 
510, 241 N.W.2d 434 (1976) (citations omitted). "An insurance 
policy 
must 
be 
construed 
with 
consideration 
for 
what 
a 
                                                                                                                                                             
We 
acknowledge, 
however, 
that 
there 
may 
be 
extreme 
situations when the encroachment is so de minimis or so complete 
that the court may determine the question as a matter of law.  
No. 
2004AP2318   
 
14 
 
reasonable person in the position of the insured would have 
understood its words to mean."  Id. at 511 (citing Luckett v. 
Cowser, 
39 
Wis. 
2d 
224, 
231, 
159 
N.W.2d 
94 
(1968)).  
Furthermore, "[a] construction of an insurance policy which 
entirely neutralizes one provision should not be adopted if the 
contract is susceptible of another construction which gives 
effect to all of its provisions and is consistent with the 
general intent. . . ."  Id., (citing Inter-Insurance Ex. v. 
Westchester Fire Ins. Co., 25 Wis. 2d 100, 106, 130 N.W.2d 185 
(1964)). Construction of an insurance policy presents a question 
of 
law; 
"it 
is 
the 
process 
that 
determines 
the 
legal 
consequences that follow from a contractual term."  Denny's 
Restaurants, Inc. v. Sec. Union Title Ins. Co., 859 P.2d 619, 
623 (Wash. Ct. App. 1993).   
¶25 Title 
insurance 
policies 
contain 
two 
types 
of 
provisions that reduce coverage:  exclusions and exceptions.  
"'Exclusions and exceptions are similar in that each class of 
items limits the coverage of the policy.  However, exclusions 
refer to subjects beyond the ambit of the policy, while 
exceptions are matters generally within the scope of the 
insuring provisions.'"  Wunsch at § III-6 (quoting J. Nielsen, 
Title Escrow Claims Guide, § 12.1, at 354 (1996)).  Exceptions, 
not exclusions, are at issue in this case.   
                                                                                                                                                             
See Mellinger, 93 Cal. App. 4th at 697. 
No. 
2004AP2318   
 
15 
 
¶26 Commentators have noted that: 
[r]ecently, 
title 
insurers 
have 
indicated 
a 
willingness to delete the survey exception from the 
[American Land Title Association]13 loan policy, when 
issued, 
to 
insure 
mortgages 
involving 
commercial 
property, without a current land survey, provided that 
a non-contemporaneous land survey of the same property 
is supplied for examination along with an affidavit by 
the landowner to the effect that nothing described in 
the non-contemporaneous land survey has changed.   
Wunsch at § III-9.14  This is, of course, precisely what occurred 
in this case.   
¶27 In Greenberg v. Stewart Title, this court explained: 
the issuance of a title commitment does not . . . 
constitute an independent undertaking by the insurer 
to search the title for the benefit of the insured.  
Rather, the title commitment "generally constitutes no 
more than a statement of the terms and conditions upon 
which the insurer is willing to issue its title policy 
. . . ." Any search done by an insurer in preparation 
for preparing a title commitment is done to protect 
itself in deciding whether to insure the property and 
to protect against losses covered in the policy.   
                                                 
13 The American Land Title Association, founded in 1907, is 
the national trade association representing the title insurance 
industry. 
14 "The least negotiable of the standard policy exceptions 
is the standard survey exception."  Duane H. Wunsch, Wisconsin 
Commercial Real Estate Transactions, § III-8 (2000).  Title 
insurers generally demand a current land survey and surveyor's 
certificate, which the title insurance provider then examines 
for encroachments.  Id. at § III-8 - 9.  "[A]t a minimum, the 
surveyor should certify that he has examined the property for 
encroachments, 
that 
the 
survey 
depicts 
all 
buildings, 
structures, fences and improvements, and that the description 
represents a complete and accurate description of the land."  
Id. at § III-9.   
No. 
2004AP2318   
 
16 
 
Greenberg, 171 Wis. 2d at 494, (internal citation omitted).  It 
is generally recognized that "[t]itle insurance is unique in the 
world of insurance, for it is based largely upon a search of the 
public records of interests in real property to ascertain pre-
existing defects.  This places the title insurer in the 'unique 
position of being able, through its own work, to eliminate 
claims.'"  Paul Bintinger, Conflict of Interest: Attorney as 
Title Insurance Agent, 4 Geo. J. Legal Ethics 687, 690 (1991) 
(quoting D. Burke, Law of Title Insurance 2, 22 (1986)). 
¶28 We are satisfied that the deletion of exceptions does 
not, in and of itself, create coverage where none exists.  See 
Barlow Burke, Law of Title Insurance, § 9.03 at 9-10 (3d ed. 
2000) ("An exception is not the opposite of coverage and so 
eliminating it does not automatically provide coverage.").  
However, the effect of the deletion of the Schedule B standard 
exceptions supports Dahlmann's position, that the policy covers 
an encumbrance on title, in at least two ways.  First, the 
deletion of the Survey and Encroachment exceptions has an effect 
on the plain meaning of the policy, which, along with the 
additional premium Dahlmann paid, may be properly read as having 
created an "extended" policy.  Second, the elimination of the 
two exceptions speaks to the reasonable expectations of the 
parties, especially the insured, to the contract.  Both of these 
issues must be considered against the background that title 
insurance is intended, at least in part, to protect the buyer of 
the insurance/property.   
No. 
2004AP2318   
 
17 
 
¶29 First American argues that it waived the Survey and 
Encroachment exceptions from Schedule B because the policy was 
amended to include coverage for the known encroachment of the 
parking garage wall and the vent into the four-foot right-of-
way.  First American explains that the right-of-way encroachment 
would have been excepted from coverage, were it not for the 
payment of an additional premium paid by Dahlmann.  First 
American also contends that its policy does not insure against 
the risk of unknown encroachments.  It maintains that the 
deletion of the Survey and Encroachment exceptions was intended 
to cover other aspects of the property. 
¶30 First 
American's 
arguments 
are, 
ultimately, 
unconvincing. 
 
In 
its 
willingness 
to 
delete 
the 
Survey 
exception, and rely on the accuracy of the Johnson survey, First 
American assumed the risk that it would be providing coverage 
for an encroachment not documented on the land survey.  If the 
policy exceptions were intended to be waived only with respect 
to 
the 
known 
encroachment, 
First 
American 
certainly 
was 
experienced and sophisticated enough to state this limited 
waiver of the exceptions by so stating in the policy.  Its 
failure to do so leads to the logical conclusion that the 
parties contracted to cover encroachments through the deletion 
of the exception. 
¶31 Under a standard policy in which all Schedule B 
exceptions are present, no encroachments are covered by the 
policy, even substantial ones.  Under an extended policy, the 
parties may agree to remove some exceptions to coverage, 
No. 
2004AP2318   
 
18 
 
exposing the title insurer to greater liability under the 
policy.  See Denny's, 859 P.2d at 621-22, 627-28.  The effect of 
removing much of the substance of Subsection B, along with the 
additional premium Dahlmann paid, had the effect of providing 
Dahlmann with "extended coverage."  Furthermore, the logical 
application of Meehan’s treatment of substantial encroachments 
leads to a conclusion that policies that do not except 
encroachments cover loss or damage due to a substantial 
encroachment, consistent with the encumbrance provision of the 
policy, here. 
¶32  Construing the policy to include coverage for defects 
based upon a substantial encroachment seems consistent with the 
reasonable expectation of the insured here. 
¶33 Other jurisdictions faced with construing similar 
contract provisions have reached the same conclusion.  For 
example, in Rackouski v. Dobson, 634 N.E.2d 1229 (Ill. App. Ct. 
1994), the Illinois Appellate Court considered a case in which 
the title insurance contract which covered loss or damage due to 
an encumbrance on title under Schedule A, had also modified 
Schedule B to delete the standard exceptions, including the 
exception for encroachments.   
¶34 The Illinois court held that the encroachment of the 
insured’s barn upon adjoining property was covered under the 
policy, because the waiver of standard exceptions to coverage 
was evidence that the parties agreed to cover encroachments 
under the Schedule A terms.  Id. at 1231.  The Rackouski court 
reasoned that when an insurer expressly waives exceptions to 
No. 
2004AP2318   
 
19 
 
coverage for encroachments, the logical conclusion is that 
coverage is available for encroachments. Id. 
¶35 Similarly, in Denny’s the Washington Court of Appeals 
held that the deletion of the standard exceptions created 
ambiguity in regard to the extent of policy coverage.  The 
Washington court concluded that extrinsic evidence of the 
party’s intent supported a finding that the policy provided 
coverage for encroachments. 
¶36 The Denny’s court reasoned that the rationale for 
"extended coverage" is so that items excluded in the standard 
contract will be covered in the policy at issue.  The same 
reasoning 
should 
be 
applied 
to 
the 
case 
before 
us.  
Additionally, the Washington court said that logic compels this 
result: "Logically, a deleted exclusion indicates that the 
former exclusion is no longer applicable; any other result would 
undermine the rationale for paying additional consideration to 
obtain extended coverage."  Denny's, 859 P.2d at 627. 
¶37 Ordinarily, the existence of the Survey exception and 
the Encroachment exception in Schedule B make it clear that the 
risk insured against is limited to the risk of a defect in the 
chain of title or some other recorded encumbrance on the title.  
When these exceptions are present, a title insurer should only 
be liable for defects in the record of the title.  Absent these 
exceptions or other applicable exclusions, however, it would 
seem that coverage extends to any discrepancy between the record 
of title and the physical reality of the corresponding property.  
Therefore, a plain reading of the language of the contract, and 
No. 
2004AP2318   
 
20 
 
the 
reasonable 
expectation 
of 
the 
insured, 
lead 
to 
the 
conclusion that an undetected encroachment is covered by the 
title insurance policy.   
C 
¶38 Before we conclude that a substantial encroachment 
onto adjacent property constitutes an encumbrance on title that 
is covered under the terms of this policy, we must also consider 
the effect of a finding of coverage in relation to the policy's 
definition of "land" in Schedule A.  At the heart of the 
arguments made by First American is its claim that the title 
insurance policy does not insure title to any property beyond 
the bounds of what is described in Schedule A.  In other words, 
First American argues that the policy only covers encumbrances 
on title for land listed in Schedule A in accord with the 
contract definition of land.  We are satisfied that such an 
argument misconstrues the purpose of title insurance as insuring 
land rather than insuring title.  Again, we turn to precedent 
from other jurisdictions that have considered issues similar to 
those in this case.   
¶39 In concluding that the title insurance policy covered 
the encroachment of an improvement onto adjoining property, the 
Illinois court in Rackouski explained "[t]he policy insures 
against defects or clouds in . . . title to the land, not the 
land itself."  Rackouski, 634 N.W.2d at 1231.  The court 
reasoned that, to construe the word "land . . . to exclude 
coverage for the encroachment . . . would contradict the 
No. 
2004AP2318   
 
21 
 
apparent intent of the parties demonstrated by the execution of 
the policy with the standard exclusions deleted."  Id.   
¶40 The Denny's court cited Shotwell v. Transamerica Title 
Ins. Co., 588 P.2d 208 (Wash. 1978), for the notion that "often 
policy descriptions were taken directly from the deed conveying 
title, and the purpose of the legal description in a title 
insurance policy was to identify the land covered, not to limit 
the protection."  Denny's, 859 P.2d at 626 (citing Shotwell, 588 
P.2d at 213).  In Shotwell, the Washington Supreme Court 
rejected the position that the description of land within the 
policy limited the insurance protection.  The court in Denny's 
followed similar reasoning in its conclusion that "the purpose 
of the legal description in a title insurance policy was to 
identify the land covered, not to limit the protection.  To 
limit protection to that found in the legal description would 
effectively require purchasers of title insurance to become 
their own insurers."  Denny's, 859 P.2d at 626 (citation 
omitted).  
¶41 The 
Denny's 
court 
reasoned 
that 
a 
"restrictive 
definition of 'land' becomes ambiguous in light of circumstances 
indicating the purpose of the extended coverage policy is to 
insure against off-record defects, defects which may fall 
outside the legal description of land contained within the 
policy."  Id.  We agree that the definition of "land" is 
ambiguous, 
in 
light of 
the 
omission 
of 
the 
Survey and 
Encroachment exceptions.  Therefore, because ambiguous terms in 
an insurance policy are construed against the drafter, we 
No. 
2004AP2318   
 
22 
 
conclude that the definition of "land" is not controlling on the 
scope of coverage, and, therefore, that the definition of "land" 
in Schedule A does not limit coverage.  Frost v. Whitbeck, 2002 
WI 129, ¶19, 257 Wis. 2d 80, 654 N.W.2d 225.   As we have 
previously stated, "ambiguous terms are to be construed in favor 
of coverage, and exclusions are to be narrowly construed against 
an insurer."  Id. (footnotes omitted). 
IV 
¶42 We reverse the decision of the court of appeals.  We 
hold that a substantial encroachment, created by an improvement 
onto adjacent land, constitutes an encumbrance on the title of 
the insured property for the purpose of the title insurance 
contract at issue in this case.  We further hold that such a 
substantial encroachment, and thus an encumbrance, is covered 
under the terms of the title insurance policy at issue.  
However, 
the 
issue 
of 
whether 
the 
encroachment 
here 
is 
"substantial," so as to constitute an encumbrance on the title 
of the insured property, for purposes of the title insurance 
contract, presents a question for the trier of fact to resolve.  
We, therefore, remand the case to the circuit court for such a 
determination.   
By the court——The decision of the court of appeals is 
reversed, and the case remanded to the circuit court for further 
proceedings consistent with this opinion. 
 
 
 
No. 
2004AP2318   
 
 
 
1