1

Filed 6/28/24

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FOUR

MARTIN TAIT et al.,

Plaintiffs and 

Appellants,

v.

COMMONWEALTH LAND 

TITLE INSURANCE 

COMPANY,

Defendant and 

Respondent.

 A166676

 (Contra Costa County

 Super. Ct. No. MSC19-

 02313)

Plaintiffs Martin Tait, Jane Tait, and Bry-Mart, LLC 

(collectively, the Taits) sued Commonwealth Land Title 

Insurance Company (Commonwealth) for breach of a title 

insurance policy and alleged that Commonwealth failed to pay 

the full amount by which their property’s value was diminished 

due to an undisclosed easement. The trial court granted 

Commonwealth’s motion for summary judgment, ruling that the 

policy required Commonwealth to compensate the Taits only for 

the value of their actual use of the property as a vacant 

residential lot suitable for only one home rather than its highest 

and best use as a subdividable lot. We agree with the Taits that 

the policy entitles them to reimbursement for the diminution in 

value of their property based on its highest and best use. As a 
2

result, the Taits’ evidence of the likelihood of subdivision and the 

value of a subdividable lot created a triable issue of fact 

regarding the amount of the Taits’ loss under the policy, thereby

precluding summary judgment. We will therefore reverse.

BACKGROUND

In 2016, the Taits purchased a residential property in 

Danville for $1.25 million. Commonwealth issued the Taits an 

American Land Title Association (ALTA) Homeowner’s Policy of 

Title Insurance for the property. The policy insures the Taits 

against “actual loss” arising from certain defined covered risks, 

which include someone else having an easement on the property.

The policy limits Commonwealth’s liability for an unknown 

easement to the lesser of the Taits “actual loss” or the policy limit 

of $1.25 million. The policy does not define “actual loss.” The 

policy excepts from coverage certain building and subdivision 

restrictions recorded by the Town of Danville (town) and a 

recorded irrevocable offer of dedication of a drainage easement. 

The building restrictions prohibit further subdivision of the 

property and the construction of any building within the area of 

the offered drainage easement.

As they had intended upon purchasing the property, the 

Taits proceeded with plans to subdivide the property into two 

lots. Between May 2016 and February 2017, the Taits engaged in 

informal talks with the town’s development services coordinator, 

Fred Korbmacher, about their proposed subdivision. The town’s 

staff recommends applicants engage in such talks prior to a 
3

formal application, to determine whether the staff will support 

the application.

The town could eliminate or modify the offer of dedication 

of the drainage easement and building restrictions to permit the 

subdivision. The town’s staff were supportive of the Taits’ 

subdivision plan. Staff support is not a guarantee that an 

application will be approved, but according to Korbmacher, it is 

“very, very rare” that the town’s planning commission or town 

council does not approve a subdivision that the staff supports. 

Korbmacher therefore believed that if the Taits had submitted an 

application, the town most likely would have approved the 

subdivision. At the end of 2016, the Taits had a complete 

application for a tentative map, ready for submission. But the 

Taits never submitted a formal subdivision or tentative map 

application.

On February 10, 2017, the Taits learned about a separate 

1988 maintenance easement covering the same area as the 

drainage easement. The Taits believed the maintenance 

easement would impact the marketability and value of property 

and interfere with its potential development, so they tendered a 

claim on the policy to Commonwealth. Commonwealth accepted 

coverage.

Commonwealth obtained an appraisal from AGI Valuations 

to calculate the property’s diminution in value resulting from the 

maintenance easement. AGI Valuations stated that it applied 

the standard in Overholtzer v. Northern Counties Title Ins. Co.

(1953) 116 Cal.App.2d 113 (Overholtzer) and analyzed the highest 
4

and best use of the property on the date of loss. This appraisal 

assumed that it was reasonably likely the town would extinguish 

the building restrictions and the offer of dedication of the 

drainage easement. It also assumed that the maintenance 

easement prohibited development within its area. AGI 

Valuations determined that the value of the property without the 

maintenance easement as of February 10, 2017, was $1.3 million, 

and with it was $1.1 million, for a diminution in value of 

$200,000.

Commonwealth asked AGI Valuations to revise the 

appraisal by omitting the assumptions that the town would 

extinguish the offer of dedication of the drainage easement and 

the building restrictions and that the maintenance easement 

prohibited development within its area. AGI Valuations 

prepared a revised appraisal stating, as it had before, that it 

applied the Overholtzer standard and omitting those

assumptions. AGI Valuations’ second appraisal concluded the 

value of the property without the maintenance easement as of 

February 10, 2017, was $1.3 million, and with it was $1,256,500 

million, for a diminution in value of $43,500. Commonwealth 

sent the Taits a check for $43,500.

The Taits obtained their own appraisal from Valbridge 

Property Advisors (Valbridge). Like both of AGI Valuations’ 

appraisals, Valbridge said it computed the property’s diminution 

in value pursuant to Overholtzer. Valbridge said there was a 

high probability that without the maintenance easement the 

Taits could expunge the building restrictions and offer of 
5

dedication of the flood control easement and could subdivide the 

property into two developable lots. Valbridge therefore valued 

the property without the maintenance easement as two separate 

developable parcels. With the maintenance easement, the 

property could not be subdivided into two developable lots, so 

Valbridge valued it as a single parcel. Valbridge determined that 

the value of the property without the maintenance easement as of 

February 10, 2017, was $2.08 million, and with it was $1.38 

million, for a diminution in value of $700,000.

The Taits provided Commonwealth a copy of the Valbridge 

appraisal and requested that it pay the $656,500 difference 

between Valbridge’s calculation of diminution in value and the 

$43,500 Commonwealth had already sent. Commonwealth 

denied their request. The Taits filed suit, and their operative 

complaint alleged a single cause of action for breach of contract. 

The trial court granted Commonwealth’s motion for summary 

judgment, ruling, as relevant here, that there was no triable 

issue of material fact about whether Commonwealth breached 

the policy by paying the Taits the $43,500.1 The court reasoned 

that the legal standard for title insurance losses did not permit 

consideration of a property’s highest and best use, only its actual 

use as vacant residential land. The trial court therefore 

disregarded the Taits’ appraisal based on the property’s highest 

and best use and found Commonwealth’s appraisal was the only 

1 The trial court also ruled that Commonwealth did not 

breach the policy in other ways the Taits alleged in their 

operative complaint. The Taits do not challenge these rulings, so 

we do not discuss them. 
6

evidence of the Taits’ losses. The trial court entered judgment for 

Commonwealth.

DISCUSSION

I. Standard of review

“On appeal after a motion for summary judgment has been 

granted, we review the record de novo, considering all the 

evidence set forth in the moving and opposition papers except 

that to which objections have been made and sustained. 

[Citation.] Under California’s traditional rules, we determine 

with respect to each cause of action whether the defendant 

seeking summary judgment has conclusively negated a necessary 

element of the plaintiff’s case, or has demonstrated that under no 

hypothesis is there a material issue of fact that requires the 

process of trial, such that the defendant is entitled to judgment 

as a matter of law.” (Guz v. Bechtel National, Inc. (2000) 

24 Cal.4th 317, 334.)2

2 Commonwealth asserts that there is a split of authority 

over whether a trial court’s rulings on objections to summary 

judgment evidence are reviewed de novo or for abuse of 

discretion. (See Lopez v. American Medical Response West (2023) 

89 Cal.App.5th 336, 343 [“there is some question as to whether a 

de novo standard should apply to evidentiary rulings made solely 

on summary judgment papers”]; Mackey v. Trustees of California 

State University (2019) 31 Cal.App.5th 640, 657 [weight of 

authority supports abuse of discretion standard].) Neither party 

contends the trial court erred in its rulings on the parties’ 

evidentiary objections to the summary judgment evidence, so any 

uncertainty over the standard of review of such objections is 

irrelevant.
7

II. Owner’s actual loss under title insurance policy

“Title insurance ‘is a customary incident of practically 

every California real estate transaction,’ including a sale or 

refinancing. [Citations.] Title insurers insure ‘the record title of 

real property for persons with some interest in the estate, 

including owners, occupiers, and lenders.’ [Citation.] A title 

insurance policy is not a guarantee as to the state of the 

property’s title. [Citations.] It instead offers indemnification to 

the insured against many losses arising from title defects not 

disclosed in the title policy or report, as well as errors by the 

entity performing the title search. [Citations.]

“Title insurance differs in some respects from other forms 

of insurance. While most other forms of insurance provide 

protection against future loss, title insurance instead relates to 

the past; it protects against undisclosed encumbrances and 

defects in title that exist at the time the policy is issued. 

[Citations.] Thus, rather than requiring periodic, ongoing 

premiums to obtain continuing future coverage, title insurance 

requires a one-time payment [citation] compensating for the risk 

assumed and the services rendered in connection with 

researching and preparing the policy [citation].” (Villanueva v. 

Fidelity National Title Co. (2021) 11 Cal.5th 104, 112–113.)

The trial court ruled there was not a triable issue of 

material fact about whether Commonwealth’s $43,500 payment 

completely discharged its duty under the policy to indemnify the 

Taits for their losses on the property. The propriety of this ruling 

hinges, in the first instance, on what losses the policy covers. The 
8

Taits’ policy requires Commonwealth to indemnify them for their 

“actual loss” resulting from a covered risk, up to the policy limit 

of $1.25 million. The policy does not define “actual loss,” but the 

Taits and Commonwealth agree that Overholtzer established that 

an owner’s actual loss when there is a cloud on title is measured 

by the diminution in market value caused by the existence of the 

cloud.3 However, they disagree over what Overholtzer has to say 

about how to calculate the depreciation in market value. We 

therefore begin by reviewing Overholtzer to determine whether it 

answers the question of how to calculate diminution in market 

value and therefore what losses are compensable under the Taits’ 

policy.

III. Overholtzer

The plaintiffs in Overholtzer bought a property and 

obtained a title insurance policy protecting them against “ ‘all 

loss or damage’ ” that they might sustain by reason of “ ‘any 

defect in, lien or encumbrance on’ ” the title to the property. 

(Overholtzer, supra, 116 Cal.App.2d at p. 117.) The maximum 

benefit under the policy was $3,000, the amount the plaintiffs 

paid for the property. (Id. at pp. 117, 121.) When they bought it, 

the property was agricultural land. (Ibid.) The plaintiffs built a 

lumber mill on the insured property. (Id. at p. 118.)

3 Commonwealth acknowledges that other forms of 

damages are recoverable in different circumstances, such as rent 

lost because of a defect in title. (Nebo, Inc. v. Transamerica Title 

Ins. Co. (1971) 21 Cal.App.3d 222, 227.) The Taits have not 

sought to recover damages under any theory other than

diminution in value, so we need not consider other possible 

theories.
9

The policy failed to note a water pipe easement on the 

property. (Overholtzer, supra, 116 Cal.App.2d at p. 117.) The 

plaintiffs and the owners of the easement got into a dispute about 

the easement. (Id. at p. 118.) At about the same time that the 

mill went into operation, the plaintiffs learned the easement 

existed and was valid. (Id. at p. 118.) They then sued the insurer 

for the damages caused by the easement. (Id. at p. 116.) The 

trial court determined that the easement caused a $15,000 

diminution in value of the property and improvements but 

disallowed any recovery for this amount. (Id. at pp. 121–122.) 

The trial court instead awarded the plaintiffs $1,000, which was 

the difference between the $3,000 they had paid for the property

and the $2,000 value of the property for agricultural purposes

with the easement on the date of purchase. (Id. at p. 121.)

The Court of Appeal held this was error. (Overholtzer, 

supra, 116 Cal.App.2d at pp. 129–131.) It stated that the 

measure of damages was “the depreciation in market value 

caused by the existence of the easement.” (Id. at p. 128.) It then 

considered whether this diminution in value should be calculated 

“at the time of purchase, market value being measured by the use 

to which the property is then devoted,” or whether it should be 

calculated “as of the time of the discovery of the defect measured 

by the use to which the property is then being used.” (Id. at 

p. 130.) The court concluded, “It seems quite apparent to us that 

liability should be measured by diminution in the value of the 

property caused by the defect in title as of the date of the 

discovery of the defect, measured by the use to which the 
10

property is then being devoted. When a purchaser buys property 

and buys title insurance, he is buying protection against defects 

in title to the property. He is trying to protect himself then and 

for the future against loss if the title is defective. The policy 

necessarily looks to the future. It speaks of the future. The 

present policy is against loss the insured ‘shall sustain’ by reason 

of a defect in title. The insured, when he purchases the policy, 

does not then know that the title is defective. But later, after he 

has improved the property, he discovers the defect. Obviously, up 

to the face amount of the policy, he should be reimbursed for the 

loss he suffered in reliance on the policy, and that includes the 

diminution in value of the property as it then exists, in this case 

with improvements. Any other rule would not give the insured 

the protection for which he bargained and for which he paid.” 

(Ibid.)

4

The trial court here, at Commonwealth’s urging, read 

Overholtzer as requiring it to assess the diminution in value of 

the Taits’ property measured by the property’s use on the date 

the Taits discovered the easement, which was vacant residential 

land suitable for only one home. The Taits argue that 

Overholtzer established only that the measure of damages is the 

depreciation in market value caused by the defect in title, and 

4 The 2021 revision of the ALTA form title insurance policy 

now specifies, consistent with Overholtzer, that an insured’s 

losses will generally be calculated as of the date of discovery of 

the title defect. (See Akawie et al., Cal. Title Insurance Practice 

(Cont.Ed.Bar 2d ed. 2023) Structure and Coverage of Title 

Insurance Policy Forms, § 6.95.)
11

then addressed the date on which that depreciation should be 

determined, selecting the date of discovery of the title defect. 

According to the Taits, Overholtzer did not address how to 

determine a property’s market value, so the market value must 

be determined based on a standard appraisal that considers the 

property’s highest and best use, meaning the most profitable use 

to which the property might be put in the reasonably near future. 

We agree with the Taits that Overholtzer does not address how to 

calculate a property’s market value and does not foreclose the use 

of the highest and best use standard.

Overholtzer’s language merges two separate valuation 

concepts, the date of valuation and the use being valued. This 

appears to have been a function of the facts of the case. When 

the title defect was discovered, the plaintiffs were already using 

the property at the higher level, as a lumber mill. (Overholtzer, 

supra, 116 Cal.App.2d at p. 118.) There was no suggestion that 

the property was suitable for any use higher than the lumber 

mill. Thus, answering the timing question also answered the use 

question. The parties apparently did not consider whether the 

property could have been valued based on the potential for the 

higher industrial use as of the date of purchase, likely because 

the plaintiffs wanted the higher value as developed land as of the 

date of discovery of the defect and the insurer wanted the lower 

value of actual use on date of purchase. Overholtzer therefore 

had no reason to discuss whether the property should have been 

valued according to its highest and best use, much less to reject 

that standard. (Helms v. Old Republic National Title Insurance 
12

Company (D.Neb., Jan. 11, 2018, No. 4:16-cv-3010) 2018 WL 

718426, at *4 (Helms) [Overholtzer “did not expressly reject the 

highest and best use standard,” citing Palomar, Title Insurance 

Law (24th ed. 2017) § 10:17]; 1 Palomar, Title Insurance Law 

(30th ed. 2023) Recovery Under Title Insurance Policy, § 10:17 

[Overholtzer “was NOT a rejection of the ‘highest and best use’ 

measure because the industrial use to which it was being devoted 

on the date the title defect was discovered was a higher and more 

valuable use than its agricultural use on the policy date that the 

title insurer had proposed”].) The language in Overholtzer

describing the measurement of damages on the date of discovery 

“by the use to which the property is then being devoted” or “as it 

then exists” must be interpreted in the context of the narrower 

timing question the court was answering. (Ixchel Pharma, LLC 

v. Biogen, Inc. (2020) 9 Cal.5th 1130, 1153 [“ ‘an unnecessarily 

broad holding is “informed and limited by the fact[s]” of the case 

in which it is articulated’ ”]; California Building Industry Assn. v. 

State Water Resources Control Bd. (2018) 4 Cal.5th 1032, 1043 

[“It is axiomatic that cases are not authority for propositions that 

are not considered”].)

On appeal, Commonwealth candidly admits that 

Overholtzer is not a case about appraisal methodology and did not 

adopt any specific methodology of appraising properties to 

calculate diminution in value. But Commonwealth nonetheless 

argues that Overholtzer’s resolution of the date of valuation 

precludes consideration of a property’s highest and best use when 

valuing a property. Commonwealth reasons that when a 
13

property’s existing use is not the highest and best use, 

considering the possibility of achieving that highest and best use 

in the future makes the date of discovery all but meaningless.

This argument improperly merges the separate concepts of 

the date of valuation and the use being valued. (Cf. Matteoni & 

Veit, Condemnation Practice in Cal. (Cont.Ed.Bar. 3d ed. 2023) 

Just Compensation, §§ 4.9–4.21 [discussing determination of 

highest and best use in context of eminent domain], 4.22 

[discussing effect of date of valuation in eminent domain cases].) 

A property’s value for any given use can and does change over 

time, sometimes dramatically over short periods of time, due to 

external market factors such as financing costs, supply of similar 

properties, and changes in demand. (E.g., Saratoga Fire 

Protection Dist. v. Hackett (2002) 97 Cal.App.4th 895, 898, 905–

906 [in eminent domain action, trial court erred in excluding 

evidence that property increased in value by over 50 percent in 

10 months from December 1999 to October 2000].) Establishing 

the date of valuation controls for the influence of such factors on 

the calculation of an insured’s losses. Conversely, on any given 

date a property can have different values for the different uses of 

which it is capable, as the appraisals in this case suggest. 

Valuing a property based on its highest and best use does not 

make the date of valuation meaningless, nor does selecting the 

date of valuation make it unnecessary to consider different uses 

of which a property is capable.

Commonwealth contends that numerous courts across the 

country have adopted and applied its understanding of 
14

Overholtzer. However, as the Taits point out, the cases 

Commonwealth cites merely agreed with Overholtzer’s statement 

of the diminution in value measure of damages or that a property 

should be valued as of the date of discovery. (Hartman v. 

Shambaugh (N.M. 1981) 630 P.2d 758, 762–763 [date of 

valuation]; Happy Canyon Inv. v. Title Ins. Co. of Minn.

(Colo.Ct.App. 1976) 560 P.2d 839, 843 [general standard]; Allison 

v. Ticor Title Ins. Co. (7th Cir. 1990) 907 F.2d 645, 652 [date of 

valuation]; Swanson v. Safeco Title Ins. Co. (Ariz.Ct.App. 1995) 

925 P.2d 1354, 1357–1359 [general standard and date of 

valuation, in dicta].) None of these cases viewed Overholtzer as 

precluding consideration of a highest and best use method of 

measuring the depreciation of a property’s value.

IV. Highest and best use

Our determination that Overholtzer is not dispositive here 

still leaves us with the question of whether the Taits’ “actual 

loss” under their title insurance policy should be measured based 

on the value of their property’s highest and best use or merely its 

current use. “The principles governing the interpretation of 

insurance policies in California are well settled. ‘Our goal in 

construing insurance contracts, as with contracts generally, is to 

give effect to the parties’ mutual intentions. [Citations.] “If 

contractual language is clear and explicit, it governs.” 

[Citations.] If the terms are ambiguous [i.e., susceptible of more 

than one reasonable interpretation], we interpret them to protect 

“ ‘the objectively reasonable expectations of the insured.’ ” 

[Citation.] Only if these rules do not resolve a claimed ambiguity 
15

do we resort to the rule that ambiguities are to be resolved 

against the insurer.’ ” (Minkler v. Safeco Ins. Co. of America

(2010) 49 Cal.4th 315, 321; Havstad v. Fidelity National Title Ins. 

Co. (1997) 58 Cal.App.4th 654, 659–660 [applying insurance 

policy interpretation rules to title insurance].)

Again, the title insurance policy is of little help because it 

does not define “actual loss.” Commonwealth’s and the Taits’ two 

different approaches to measuring the diminution in a property’s 

value are reasonable, so the term “actual loss,” even as construed 

in Overholtzer, is ambiguous. (Minkler v. Safeco Ins. Co. of 

America, supra, 49 Cal.4th at p. 321.) We must therefore 

interpret it in line with the Taits’ objectively reasonable 

expectations. (Ibid.) We agree with the Taits that a property’s 

market value is generally based on its highest and best use, as is 

established in eminent domain law.5 (See Bohr v. First Am. Title 

Ins. Co. (M.D.Fla., July 30, 2008, Nos. 3:07-cv-741-J-32MCR, 

3:07-cv-745-J-32HTS) 2008 U.S. Dist. Lexis 111191 at *22–*23 & 

fn. 13, *30–*32 [2008 WL 2977353, at *6–*7 & fn. 13, *9] [under 

Florida law, considering a property’s highest and best use in title 

insurance dispute based on analogy to eminent domain law];

accord, Regions Bank v. Chi. Title Ins. Co. (S.D.Fla., Feb. 22, 

2011, No. 10-cv-80043-RYSKAMP/VITUNAC) 2011 U.S. Dist. 

Lexis 17113, at *11–*14 [2011 WL 709853, at *4–*5] [following 

Bohr and relying on expert’s opinion of highest and best use].)

5 We could also reach the same outcome here by construing 

the ambiguity in the definition of “actual loss” against 

Commonwealth as the insurer. (Minkler v. Safeco Ins. Co. of 

America, supra, 49 Cal.4th at p. 321.)
16

When the government takes private property, “ ‘[t]he fair 

market value of the property taken is the highest price on the 

date of valuation that would be agreed to by a seller, being 

willing to sell but under no particular or urgent necessity for so 

doing, nor obliged to sell, and a buyer, being ready, willing, and 

able to buy but under no particular necessity for so doing, each 

dealing with the other with full knowledge of all the uses and 

purposes for which the property is reasonably adaptable and 

available.’ ” (City of Perris v. Stamper (2016) 1 Cal.5th 576, 

598−599.) As this definition indicates, “ ‘the fair market value of 

property taken has not been limited to the value of the property 

as used at the time of the taking, but has long taken into account 

the “highest and most profitable use to which the property might

be put in the reasonably near future, to the extent that the 

probability of such a prospective use affects the market value.” ’ ” 

(Metropolitan Water Dist. of So. California v. Campus Crusade 

for Christ, Inc. (2007) 41 Cal.4th 954, 965.)6

6 Commonwealth cites City of Ontario v. Kelber (1972) 

24 Cal.App.3d 959, 968 for the proposition that evidence of a 

specific scheme of development is inadmissible in eminent 

domain cases. Commonwealth’s reliance on Kelber is misplaced. 

Kelber involved the principle that “a jury is precluded from 

including in an eminent domain award any increase in value to 

the owner’s property attributable to the proposed improvement, 

i.e., project enhanced value.” (Id. at p. 965.) Kelber held the trial 

court properly excluded evidence of the City’s future use of the 

taken property because the proffered evidence failed to show that 

the plaintiff’s evidence of the property’s value improperly 

included project-enhanced value. (Id. at p. 966.) Kelber did not 

hold that evidence of the highest and best use of the taken 
17

We need not decide whether valuation principles in 

eminent domain law apply wholesale to the title insurance 

context, or even whether all aspects of this specific definition of 

fair market value apply. (See, e.g., 7 Miller & Starr, Cal. Real 

Estate (4th ed. 2024) Eminent Domain, § 24:22 [noting that 

appraisals typically consider the most probable price that a 

property would sell for, while eminent domain valuation is based 

on the highest price].) But we see no reason why a property 

should be valued for different uses based on whether an 

insurance company or the government is compensating the owner 

for its value. If, as Commonwealth would have it, only the 

current use matters, a buyer who pays a premium for a 

developable property and has such development potential 

destroyed by a title defect would not receive any compensation for 

what was lost. Because the title insurance policy requires 

compensation for “actual loss,” the policy should compensate for 

any such harm, even if the property could continue to be used for 

its existing use. (Helms, supra, 2018 WL 718426, at *4 [valuing 

property based on highest and best use as land with pivot 

irrigation after owners installed pivot irrigation system but had 

to remove it due to title defect].)

property in the absence of the project was inadmissible. The 

project enhancement rule discussed in Kelber simply holds that 

“when assessing fair market value (including its highest and best 

use and the reasonable probability of a zoning change), any 

increase or decrease in the property’s value caused by the project 

for which the property is condemned may not be considered.” 

(City of San Diego v. Barratt American, Inc. (2005) 

128 Cal.App.4th 917, 934.)
18

Putting aside Overholtzer’s loose language, that decision’s 

reasoning and outcome are consistent with considering a 

property’s highest and best use. (Helms, supra, 2018 WL 718426, 

at *4.) Overholtzer’s rationale for valuing a property as of the 

date of discovery was that title insurance by its nature protects 

against future losses and owners should be reimbursed for 

additional losses they suffer in reliance on the policy after it took 

effect. (Overholtzer, supra, 116 Cal.App.2d at p. 130.) 

Overholtzer’s concern with future losses based on existing title 

defects applies just as much to the loss of the ability to develop

after the date of the policy as to the loss of an actual 

development. And a property owner who pays a premium for a 

developable property has invested money in reliance on the title 

insurance policy, regardless of whether the owner intends to 

develop the property personally or merely buys the property with 

the expectation that the development potential will cause the 

property value to increase over time. The loss of the potential to 

achieve a property’s highest and best use presents a smaller 

magnitude of loss than a completed building or other 

improvement like in Overholtzer, but the nature of the insured’s 

expectations and reliance interests is similar.

Commonwealth equates the highest and best use approach 

with awarding compensation for speculative uses of a property. 

It further argues that valuing a property based on the highest 

and best use is contrary to the rule that title insurance only 

compensates for actual losses, not possible or probable ones, and 

could lead to different valuations of the same property for 
19

different insureds with different intended uses for a property. 

Eminent domain law provides a ready answer to all three 

arguments. The definition of fair market value, including the 

objective highest and best use standard, exists precisely to avoid 

the need for a subjective inquiry into the value any particular 

owner places on a property. (City of San Diego v. Neumann

(1993) 6 Cal.4th 738, 743–744.) Valuing a property based on 

highest and best use does not compensate an owner for the value 

of a property in the future; the highest and best use is to be 

considered “ ‘to the extent that the probability of such a 

prospective use affects the market value.’ ” (Id. at p. 744.) Thus, 

valuing a property based on highest and best use compensates 

the owner only for the value of the property’s potential, not as if 

the property had already been improved. Also, defining the 

highest and best use as a use “to which the property might be put 

in the reasonably near future” (ibid., italics added) grounds the 

inquiry and avoids the need to speculate about distant future 

development possibilities. In short, if the highest and best use is 

sufficiently definite to make it just for a government entity to 

compensate a property owner for its loss, it is sufficiently definite 

to constitute a basis for determining the “actual loss” under a

title insurance policy.

Commonwealth cites repeatedly to a treatise published by 

the American Land Title Association, the same entity that 

created the form of the Taits’ title insurance policy. (Nielsen, 

Title and Escrow Claims Guide (American Land Title Association

2024) Resolving Covered Claims.) This treatise actually supports 
20

the Taits. It states that in most respects “the method used for 

title insurance appraisals is the same as the method used in 

condemnation cases” because both determine the compensation to 

a property owner for a loss of property. (Id., § 3.2.3.8 & fn. 167.) 

It further states, “Generally accepted appraisal standards require 

an appraiser to establish fair market value according to the 

property’s highest and best use.” (Id., § 3.2.3.8.) That is precisely 

what we hold here. In the absence of any language in the policy 

to the contrary, the measure of a property owner’s loss from a 

cloud on title is the diminution of a property’s value caused by 

the title defect on the date the insured discovers it, measured 

according to the property’s highest and best use.

V. The Taits’ evidence of value based on highest and

best use

Commonwealth maintains that, regardless of whether the 

value of a property can be based on its highest and best use, the 

trial court properly granted summary judgment because the Taits 

did not provide competent evidence that subdivision into two 

separate parcels was the highest and best use of their property. 

Commonwealth’s position is that the Valbridge appraisal’s 

assumption that the property could be subdivided was 

speculative and contrary to the actual facts because the building 

restrictions and offer of dedication of a drainage easement 

precluded such subdivision.

The building restrictions and offer of dedication arise from 

documents recorded in the chain of title for the Taits’ property, 

but it is undisputed that the town could eliminate them. They 
21

are similar in this respect to zoning restrictions, which limit the 

development of property but, with some limitations, can be 

changed in various ways for any given property at a local 

government’s discretion. (See Neighbors in Support of 

Appropriate Land Use v. County of Tuolumne (2007) 

157 Cal.App.4th 997, 1006–1007 [property owners can seek relief 

from zoning restrictions via changes to zoning ordinances, 

conditional use permits, and variances].) The principles of 

eminent domain law for evaluating how potential changes to 

zoning rules impact the value of a property therefore provide a 

useful analogy for evaluating whether the legal restrictions on 

the Taits’ property precluded them from proving that subdivision 

was their property’s highest and best use.

In condemnation proceedings, “ ‘[w]here due to zoning 

restrictions the condemned property is not presently available for 

use to which it is otherwise geographically and economically 

adaptable, the condemnee is entitled to show a reasonable 

probability of a zoning change in the near future and thus to 

establish such use as the highest and best use of the property.’ ” 

(Metropolitan Water Dist. of So. California v. Campus Crusade 

for Christ, Inc., supra, 41 Cal.4th at p. 967.) “Evidence of a 

reasonable probability of a zoning change in the near future 

‘ “must at least be in accordance with the usual minimum 

evidentiary requirements, and that which is purely speculative, 

wholly guess work and conjectural, is inadmissible.” ’ [Citation.] 

The evidence, if credited, must also be sufficient to establish that 

rezoning is reasonably probable. [Citation.] If the trial court 
22

determines that no fact finder could find a reasonable probability 

of rezoning on the record presented, it may exclude all evidence 

and opinions of value based on a use other than that authorized 

by the existing zoning. If, on the other hand, the trial court 

determines that there is sufficient evidence of a reasonable 

probability of rezoning to warrant submitting the issue to the 

jury, it is for the jury, in considering the weight to be given 

valuation testimony based upon a reasonable probability of 

rezoning, to determine whether there was a reasonable 

probability of rezoning and, if so, its effect on the market value of 

the property.” (Id. at p. 968.)

These eminent domain rules provide a framework for 

addressing Commonwealth’s concerns about the restrictions on 

the property’s highest and best use and the trial court’s 

obligation to act as gatekeeper and exclude speculative expert 

opinion testimony. (See Sargon Enterprises, Inc. v. University of 

Southern California (2012) 55 Cal.4th 747, 772.) The trial court 

here never ruled on whether there was sufficient evidence of the 

probability of subdivision, but the Taits’ evidence easily meets 

this standard. Over the course of nine months preceding the 

discovery of the maintenance easement, the Taits engaged in at 

least preliminary review talks with the town’s staff about 

releasing the drainage easement and building restrictions and 

subdividing the property. The town’s staff supported the Taits’ 

plan. According to the testimony of the town’s development 

services coordinator, Korbmacher, when staff supports a 

subdivision, it is “very, very rare” that the town’s planning 
23

commission and town council does not approve it. With this 

support, if the Taits had submitted an application, Korbmacher 

believed the town most likely would have approved the 

subdivision. The Taits were finalizing their application for a 

tentative subdivision map and it was ready for submission when 

they discovered the maintenance easement. This evidence was 

more than sufficient to allow a factfinder to find a reasonable 

probability that the Taits could subdivide their property within 

the reasonably foreseeable future, so the Taits should have been 

allowed to present their evidence on the question at a trial.

Noting that the policy excepted from coverage losses 

“resulting from” the building restrictions and offer of dedication, 

Commonwealth contends that the property must be valued “as 

insured” and faults the Valbridge appraisal for valuing the 

property as though it was not burdened by the restrictions. This 

argument misses the mark. The Taits are not seeking 

compensation for a loss of value caused by these restrictions, but 

rather compensation for a loss of value despite these restrictions. 

The policy exceptions define the scope of the insurer’s risk; they 

do not define the value of the property. After all, the policy also 

excepts the deed of trust securing the Taits’ mortgage, but 

Commonwealth does not contend the value of the property should 

be reduced by the face value of the deed of trust.

Commonwealth also emphasizes that the Taits never 

submitted a formal subdivision application or tentative map and 

the town never approved them, review of an application would 

take six to nine months, and staff support is not a guarantee that 
24

an application will be approved. This evidence is not so strong as 

to preclude, as a matter of law, a finding of a reasonable 

probability that the building restrictions would be relaxed. At 

most, it demonstrates that there is a dispute of material fact 

about whether the Taits could achieve their proposed use of 

subdividing the property, so it does not support the trial court’s 

summary judgment ruling.

Finally, Commonwealth urges us to disregard the 

Valbridge appraisal because it valued the property as if it had 

already been subdivided rather than as one property with the 

potential to be subdivided. We need not decide that issue 

because, even if we assume for purposes of argument that the 

Valbridge appraisal is flawed for valuing the property as two 

separate parcels instead of one, Commonwealth ignores entirely 

the first appraisal it obtained from AGI Valuations. In that first 

appraisal, AGI Valuations assumed that the building restrictions 

and offer of dedication of drainage easement would likely be 

extinguished to permit the subdivision but acknowledged that 

there were uncertainties about the likelihood of that happening. 

It then valued the property as a single parcel with the potential 

for subdivision and development of one portion and found the 

maintenance easement caused a $200,000 diminution in value. 

This, combined with the evidence of the likelihood of removal of 

the legal impediments to subdivision and development, was 

sufficient to create a triable issue of fact about whether 

Commonwealth’s $43,500 payment to the Taits fully compensated 
25

them for their “actual loss.” The trial court should not have 

granted Commonwealth’s summary judgment motion.

DISPOSITION

The judgment is reversed.

BROWN, P. J.

WE CONCUR:

GOLDMAN, J.

HITE, J.

Tait et al. v. Commonwealth Land Title Insurance Company (A166676)

 Judge of the Superior Court of California, County of San 

Francisco, assigned by the Chief Justice pursuant to article VI, 

section 6 of the California Constitution.
Trial court: Contra Costa County Superior 

Court

Trial judge: Honorable Claire M. Maier

Counsel for plaintiffs and 

appellants:

NEWMEYER & DILLON LLP

James J. Ficenec

Counsel for defendant and 

respondent:

GARRETT & TULLY P.C.

Ryan C. Squire

Candie Y. Chang