THE STATE OF SOUTH CAROLINA 

In The Court of Appeals 

Jericho State Capital Corp. of Florida, Plaintiff, 

v. 

Chicago Title Insurance Company, Defendant, 

AND 

Lynx Jericho Partners, LLC, Plaintiff, 

v. 

Chicago Title Insurance Company, Defendant, 

Of which Jericho State Capital Corp. of Florida and Lynx 

Jericho Partners, LLC are the Appellants, 

and Chicago Title Insurance Company is the Respondent. 

Appellate Case No. 2017-001646 

Appeal From Horry County 

Karl A. Folkens, Special Referee 

Opinion No. 5731 

Heard February 6, 2020 – Filed June 10, 2020 

AFFIRMED IN PART, REVERSED IN PART, AND 

REMANDED 

Fred B. Newby, Sr., and C. Scott Masel, both of Newby 

Sartip & Masel LLC, of Myrtle Beach, for Appellants. 
Demetri K. Koutrakos, of Callison Tighe & Robinson, 

LLC, of Columbia, for Respondent. 

HILL, J.: We are presented with the question of whether a reservation of a 

right-of-way on an official county map—as authorized by section 6-7-1220 of the 

South Carolina Code (2004) and a county ordinance—constitutes a defect in or 

encumbrance on the title to the affected land or renders its title unmarketable so as 

to come within the coverage of two title insurance policies. Based on the specific 

circumstances of this case, we hold it does. We further conclude none of the policies' 

coverage exclusions apply. We therefore reverse the order of the special referee 

granting Chicago Title Insurance Company (Chicago Title) summary judgment as 

to Jericho State Capital Corporation of Florida's (Jericho's) and Lynx Jericho 

Partners, LLC's (Lynx Jericho's) (collectively Appellants) claims for breach of 

contract and breach of the covenant of good faith and fair dealing. We affirm, 

however, the order granting summary judgment to Chicago Title on Appellants' bad 

faith claim. 

I. FACTS 

South Carolina law allows counties and municipalities to "establish official maps to 

reserve future locations of any street, highway, or public utility rights-of-way, public 

building site or public space open for future public acquisition and to regulate 

structures or changes in land use in such rights-of-way, building sites or open 

spaces." § 6-7-1220. In 1999, the Horry County Council established an official map 

by passing Ordinance 107-98 or the Official Map Ordinance (Ordinance). 

The Ordinance created the official map to "show the location of existing or proposed 

public streets, highways and utility right-of-ways, public building sites and public 

open spaces." The Ordinance further provided that after the official map was 

adopted, "no building, structure, or other improvement, shall hereinafter be erected, 

constructed, enlarged or placed within the reservation area . . . without prior 

exemption or exception . . . ." The purpose of the Ordinance and the official map 

was to provide for the public welfare and Horry County's financial convenience by 

"designating and reserving" such locations. The Ordinance established a procedure 

for landowners to appeal land use restrictions and provided a criminal penalty for 

violating the Ordinance. Later in 1999, Horry County created the index map, which 

included the proposed locations for segments of the Carolina Bays Parkway. 
 

 

 

In 2002, Horry County Council adopted Ordinance 88-202 (the 2002 Amendment), 

which amended the official map to add "the right-of-way identified as Alternative 1 

for the proposed Carolina Bays Parkway . . . as shown in the document entitled 

'Carolina Bays Parkway, Phase V FEIS Conceptual Roadway Plans.'" The roadway 

plan was attached to the 2002 Amendment, and the amended index map showed the 

Parkway bisecting the property at issue in this appeal and crossing the intracoastal 

waterway. Both the Ordinance and the 2002 Amendment were recorded with the 

Register of Deeds and indexed under Horry County. 

In 2006, Peachtree Properties of North Myrtle Beach, LLC (Peachtree) purchased 

131.40 acres in Horry County (the Property), which it planned to develop as a 

residential subdivision along the waterway, from the McClam family for 

$22,500,000. Peachtree financed the purchase with two mortgage loans, granting a 

first mortgage to R.E. Loans, LLC (REL) and a second mortgage to Jericho. Both 

REL and Jericho received title insurance from Chicago Title. The title insurance 

policies are printed on the 1992 standard form of the American Land Title 

Association and contain the following identical language and provisions: 

SUBJECT TO THE EXCLUSIONS FROM 

COVERAGE, THE EXCEPTIONS FROM COVERAGE 

. . . AND THE CONDITIONS AND STIPULATIONS, 

CHICAGO TITLE INSURANCE COMPANY . . . 

insures, as of Date of Policy . . . against loss or damage . . . 

sustained or incurred by the insured by reason of: . . . 

*** 

2. Any defect in or lien or encumbrance on the title; 

3. Unmarketability of the title . . . . 

In 2007, Peachtree defaulted on its loans. Jericho foreclosed, successfully bid on the 

Property at sale, and received a master's deed subject to the REL mortgage. In 2009, 

the South Carolina Department of Transportation (SCDOT) filed an eminent domain 

action against Jericho to take 10.18 acres of the Property for the Carolina Bay 

Parkway. Meanwhile, for reasons not pertinent here, the REL mortgage was 

assigned to Lynx Jericho. In 2014, a jury awarded Jericho and Lynx Jericho $2.1 

million as just compensation for the taking. During the five-year condemnation 

litigation, Jericho and Lynx Jericho submitted title insurance claims to Chicago 

Title, which Chicago Title denied. 
 

 

 

In response to the denial of coverage, Jericho and Lynx Jericho sued Chicago Title 

for breach of contract, breach of the covenant of good faith and fair dealing, and bad 

faith refusal to pay insurance benefits. The cases were consolidated and referred to 

the special referee, who heard arguments on the parties' cross motions for summary 

judgment and conducted the proceedings expertly. The special referee denied 

Appellants' motion for summary judgment and granted Chicago Title summary 

judgment, ruling: 1) the Ordinance did not create a defect or encumbrance on the 

Property; 2) the Ordinance did not make title to the Property unmarketable; 3) 

exclusions 1, 2 and 3(d) barred coverage; and 4) Chicago Title did not act in bad 

faith by contesting Appellants' claims. This appeal followed. 

II. STANDARD OF REVIEW 

We review grants of summary judgment using the same yardstick as the trial court. 

Woodson v. DLI Props., LLC, 406 S.C. 517, 528, 753 S.E.2d 428, 434 (2014). We 

view the facts in the light most favorable to Appellants, the non-moving parties, and 

draw all reasonable inferences in their favor. NationsBank v. Scott Farm, 320 S.C. 

299, 303, 465 S.E.2d 98, 100 (Ct. App. 1995). Chicago Title is entitled to summary 

judgment only if "there is no genuine issue as to any material fact". Rule 56(c), 

SCRCP. Summary judgment is a drastic remedy to be invoked cautiously and must 

be denied if Appellants demonstrate a scintilla of evidence in support of their claims. 

Hancock v. Mid-South Mgmt. Co., 381 S.C. 326, 330, 673 S.E.2d 801, 803 (2009). 

III. COVERAGE UNDER THE TITLE INSURANCE POLICIES 

A. General considerations regarding title insurance policy coverage 

Title insurance is designed to protect a real estate purchaser or mortgagee against 

defects in or encumbrances on the title; the purpose of title insurance is to "place the 

insured in the position he thought he occupied when the policy was issued." Pres. 

Capital Consultants, LLC v. First Am. Title Ins. Co., 406 S.C. 309, 316, 751 S.E.2d 

256, 260 (2013). "Title insurance, instead of protecting the insured against matters 

that may arise during a stated period after the issuance of the policy, is designed to 

save him harmless from any loss through defects, liens, or encumbrances that may 

affect or burden his title when he takes it." Firstland Vill. Assocs. v. Lawyer's Title 

Ins. Co., 277 S.C. 184, 186, 284 S.E.2d 582, 583 (1981) (quoting Nat'l Mortg. Corp. 

v. Am. Title Ins. Co., 261 S.E.2d 844, 847–48 (N.C. 1980)); see also Loflin v. BMP 

Dev., LP, 427 S.C. 580, 595–96, 832 S.E.2d 294, 302 (Ct. App. 2019). One court 

has well explained: 
The sole object of title insurance is to cover possibilities 

of loss through defects that may cloud the title. . . . Some 

defects will be disclosed by a search of the public transfer 

records; others will be disclosed only by a physical 

examination or a survey of the property itself. Often the 

existence of title defects will depend upon legal doctrines 

and judicial interpretations of various applicable statutes. 

Since the average purchaser has neither the skill nor the 

means to discover or protect himself against the myriad of 

defects, he must rely upon an institution holding itself out 

as a title insurer. 

United States v. City of Flint, 346 F. Supp. 1282, 1285 (E.D. Mich. 1972). 

As a leading commentator notes: 

[T]itle insurance policies usually cover risks arising from 

errors in title examination, some known defects, defects 

that would be disclosed by examination, and some 

undisclosed defects that would remain hidden even after 

competent examination of public records . . . . In that 

sense, title insurance is "all-risks" coverage, under which 

a loss must fall within the basic description of the covered 

peril—such as a "defect in or a lien or encumbrance on the 

title"—and not be within any explicit exclusions. 

11A Maldonado et al., Couch on Ins. § 159:20 (3d ed. 2019) (footnotes omitted). 

We interpret the language of title insurance policies like other contracts and enforce 

plain and unambiguous language as written, giving the words their common 

meaning. Williams v. Gov't Ins. Co. (Geico), 409 S.C. 586, 594, 762 S.E.2d 705, 

709 (2014). Whether coverage exists under an insurance policy is a matter of law. 

Id. at 593, 762 S.E.2d at 709. The insured bears the burden of proving its claim falls 

within the policy's coverage. Gamble v. Travelers Ins. Co., 251 S.C. 98, 103, 160 

S.E.2d 523, 525 (1968). 
 

B. Defect, lien, or encumbrance 

The policies insure Appellants from damages incurred by any "defect in or lien or 

encumbrance on title." Appellants assert the Ordinance caused a defect in or 

encumbrance on the title because it created a third-party interest in the Property in 

favor of the County, which burdened the land and depreciated its value. We agree. 

The policies do not define the term "encumbrance," but we have. An early case, 

noting encumbrance was a catch-all term found in English conveyances, defined it 

as any weight on the land that lowers its value without conflicting with passing of 

the fee. Grice v. Scarborough, 29 S.C.L. (2 Speers) 649, 652–53 (1844). More 

recent decisions have said the same thing in different ways, defining an encumbrance 

as "a right or interest in the land granted 'which may subsist in third persons to the 

diminution in value of the estate although consistent with the passing of the fee.'" 

Truck S., Inc. v. Patel, 339 S.C. 40, 48, 528 S.E.2d 424, 428–29 (2000) (quoting 

Martin v. Floyd, 282 S.C. 47, 51, 317 S.E.2d 133, 136 (Ct. App. 1984)); see also 

Pres. Capital Consultants, LLC, 406 S.C. at 316, 751 S.E.2d at 259 ("[D]efects for 

which title insurance policies provide coverage may generally be defined as liens 

and encumbrances that result in a loss in the title's value."). An encumbrance is a 

burden on the land that is adverse to the landowner's interest and impairs the value 

of the land but does not defeat the owner's title. Butler v. Butler, 67 S.C. 211, 45 

S.E. 184, 185 (1903); see 21 C.J.S. Covenants § 18 (2020) ("[A]n 'encumbrance' is 

any right or interest held by someone other than the grantee or grantor which 

diminishes the value of the estate but not so much that it leaves the grantee with no 

title at all. That is, an 'encumbrance,' within the meaning of a covenant against 

encumbrances, is any interest in a third person consistent with a title in fee in the 

grantee, if such outstanding interest injuriously affects the value of property or 

constitutes a burden or limitation upon the rights of the fee title holder." (footnotes 

omitted)). 

The Ordinance described the location of the highway as a "right-of-way," and 

defined "right-of-way" as "land reserved . . . for a road." The Ordinance declared its 

intention to "reserve" future locations of highways and proscribed any use of the 

Property that would interfere with the County's future acquisition of the highway 

parcel, and the Ordinance and amended map showing the location of the proposed 

highway were publicly recorded. As Chicago Title argues, the Ordinance allowed 

affected property owners to appeal their property's inclusion on the map, but that 

proves Appellants' point that the Ordinance encumbered the Property. 
 

Ordinances may regulate land use without encumbering title, but the Ordinance here 

went beyond regulating use and created a third-party interest in the property in favor 

of the County. The enabling statute separates the concept of right-of-way from land 

use. See § 6-7-1220 (noting one purpose of official map is to "regulate structures or 

changes in land use in such rights-of-way"). We agree with Appellants that the 

Ordinance, including its provisions regarding the appeal procedures and penalties 

for violations, constituted an encumbrance within the meaning of the policy 

coverage. Although Chicago Title is correct that the Ordinance did not create a 

right-of-way, the policy coverage turns not on whether the Ordinance created a legal 

right-of-way but whether it created a defect or encumbrance. 

We find the Ordinance similar to the acquisition map at issue in Ascot Homes, Inc. 

v. Lawyers Mortgage & Title Co., 237 N.Y.S.2d 179, 180–81 (N.Y. Sup. Ct. 1962). 

There, a 1949 county map marked a strip of certain land for public acquisition. 

When Plaintiff purchased the land in 1960, he applied to the zoning authority for a 

building permit. The permit was denied because, without the marked strip, plaintiff's 

lot was not large enough to meet setback requirements. When plaintiff then tried to 

sell the land, a purchaser refused to close, citing the map. Plaintiff's title insurer 

denied his claim, pointing to the exclusion from coverage for "[z]oning restrictions 

or ordinances imposed by any governmental body." The court, however, held 

plaintiff's loss was covered because the acquisition map qualified as a lien or 

encumbrance not excepted by the policy. 

We conclude the Ordinance constituted a defect and an encumbrance. We therefore 

reverse the special referee's grant of summary judgment to Chicago Title as to this 

issue. 

C. Unmarketability of title 

The policies define unmarketability of title as "an alleged or apparent matter 

affecting the title to the land, not excluded or excepted from coverage, which would 

entitle . . . the insured mortgage to be released from the obligation to purchase by 

virtue of a contractual condition requiring the delivery of marketable title." This 

opaque definition—a model of circularity—is unenlightening. We are confident, 

though, that a purchaser who discovered a portion of the real estate he was about to 

buy purportedly in fee simple absolute had been reserved by ordinance in favor of a 

governmental right-of-way may be entitled to rescind the sale. "To be marketable, 

a title need not be flawless. Rather, a marketable title is one free from encumbrances 

and any reasonable doubt to its validity. It is a title which a reasonable purchaser, 

well-informed as to the facts and their legal significance, is ready and willing to 
accept." Gibbs v. G.K.H., Inc., 311 S.C. 103, 105, 427 S.E.2d 701, 702 (Ct. App. 

1993). 

Delivery of marketable title requires title be free of not only defects and 

encumbrances but also the reasonable probability of litigation. Sales Int'l Ltd. v. 

Black River Farms, Inc., 270 S.C. 391, 398, 242 S.E.2d 432, 435 (1978) (providing 

a "reasonable probability of litigation" renders title unmarketable). The Ordinance 

created a reasonable probability of litigation concerning the title because the 

right-of-way was reserved for acquisition, making future condemnation reasonably 

probable. 

The Ordinance differs from land use and zoning regulations, which can restrict 

development and impose an economic burden on the owner but do not create a 

third-party interest in property. See McMaster v. Strickland, 305 S.C. 527, 530, 409 

S.E.2d 440, 442 (Ct. App. 1991) (holding wetlands designation did not render title 

unmarketable); Patel, 339 S.C. at 49, 528 S.E.2d at 429 ("Because the wetland 

designation does not render the title unmarketable, Patel cannot rescind the contract 

based upon an encumbrance."); Martin, 282 S.C. at 52, 317 S.E.2d at 136 ("While 

marsh or water might be a burden upon property, it is certainly not a lien, easement, 

or a right existing in a third party."). We recognize the Ordinance resembled zoning 

and other land use tools, given it was to be enforced by the zoning administrator and 

the enabling statute described the official maps as "instruments of land use control." 

§ 6-7-1220. In substance, though, the Ordinance created a third party interest in the 

property and is so foreign from typical land use measures that there is no genuine 

issue of material fact that it rendered Appellant's title unmarketable. 

A marketable title is one free from doubt and any reasonable threat of litigation. 

Unmarketability cannot be based on just any doubt or defect, for almost any title can 

be flyspecked. But if the doubt is an objectively reasonable one concerning a 

material defect, then the title is unmarketable. A material defect is one that interferes 

or conflicts with the rights and incidents of title—the insured's fee simple absolute's 

"bundle of rights"—to the extent that an ordinary and prudent purchaser would not 

buy the title, or only buy it at a discount reflecting the defect. 1 Palomar, Title Ins. 

Law § 5.7 (2019 ed.). This meshes with the policy definition of marketability, which 

explains coverage extends to any "alleged or apparent" matter affecting title. 

Chicago Title argues the Ordinance did not affect marketability of the title because 

it only regulates use of the Property. We conclude, however, that the Ordinance 

interferes with the insured's title because it limits the rights and incidents of 

ownership. It is true that matters that affect only the use of land are not title matters, 

but it does not follow that a matter that affects use cannot also affect title. Id. No 
one would contend, for example, that a covenant restricting use does not also affect 

title and, therefore, marketability. Because the Ordinance created an interest in the 

land by reserving a right-of-way and restricting use of the reserved land, we conclude 

it diminished the owner's bundle of rights and, consequently, affected title. And the 

diminishment was enough to cause a reasonable buyer to decline or discount a sale 

for a price less than what an unclouded title would demand on the market. 

There is no factual dispute the Ordinance created a reasonable probability of 

litigation, thereby making the title unmarketable as a matter of law. The Ordinance, 

which, again, was publicly recorded, reserved the future site of the highway and took 

steps to minimize the County's future acquisition costs. Although we agree with 

Chicago Title that in general all landowners are at risk of eminent domain 

proceedings at any given time, the County's intent and preliminary steps set forth in 

the Ordinance foreshadowed a reasonable probability of condemnation. Black River 

Farms, Inc., 270 S.C. at 398, 242 S.E.2d at 435 (mere possibility or remote 

probability of litigation is not sufficient to make title unmarketable). Therefore, we 

hold the Ordinance rendered Appellants' title unmarketable and reverse the special 

referee's grant of summary judgment to Chicago Title. 

IV. EXCLUSIONS FROM COVERAGE 

In deciding whether a policy exclusion bars coverage, the burden of proof flips: the 

insurer must prove the exclusion applies. Owners Ins. Co. v. Clayton, 364 S.C. 555, 

560, 614 S.E.2d 611, 614 (2005) ("Insurance policy exclusions are construed most 

strongly against the insurance company, which also bears the burden of establishing 

the exclusion's applicability."). 

A. Exclusion 1 

In relevant part, Exclusion 1 bars coverage for losses arising by reason of: 

Any law, ordinance or governmental regulation (including 

but not limited to building and zoning laws, ordinances, or 

regulations) restricting, regulating, prohibiting or relating 

to (i) the occupancy, use or enjoyment of the land . . . . 

In granting Chicago Title summary judgment, the special referee ruled Exclusion 1 

excluded coverage because the Ordinance merely affected the use of the land. As 

we have just discussed, the Ordinance related to and affected the title of the land, not 

just its use. Exclusion 1 therefore does not apply as a matter of law. We reverse the 

special referee's grant of summary judgment to Chicago Title as to this issue. 
 

 

 

B. Exclusion 2 

Exclusion 2 bars coverage for losses arising by reason of: 

Rights of eminent domain unless notice of the exercise 

thereof has been recorded in the public records at Date of 

Policy, but not excluding from coverage any taking which 

has occurred prior to the Date of Policy which would be 

binding on the rights of a purchaser for value without 

knowledge. 

Neither Appellants nor Chicago Title claim the Ordinance constitutes an eminent 

domain action, and Appellants are not seeking coverage for the 2009 condemnation 

action, which began after the effective date of the policies. The special referee noted 

the exclusive procedure for eminent domain in this state is the Eminent Domain 

Procedure Act, S.C. Code Ann. §§ 28-2-10 to -510 (2007 & Supp. 2018). But this 

misses the mark. Appellants are not seeking recovery of loss for the 2009 

condemnation action but for loss the Ordinance caused to the value of their title when 

they took it in 2007. Appellants contend these losses exceed and are different in 

kind from those sought in the condemnation action. Therefore, Exclusion 2 does not 

apply, and the special referee erred in granting Chicago Title summary judgment 

based on Exclusion 2. 

C. Exclusion 3(d) 

Exclusion 3(d) excludes coverage for "[d]efects, liens, encumbrances, adverse 

claims or other matters . . . attaching or created subsequent to Date of the Policy." 

The Ordinance and the 2002 Amendment were filed years before the effective date 

of the policies, and therefore clouded the title as of the Date of the Policy. The 

special referee therefore erred in finding this exclusion applied. 

Parties to title insurance contracts are free, within the bounds of public policy, to 

allocate risks as they see fit. Chicago Title's inability to pigeonhole this unique 

Ordinance into an exclusion to coverage is unsurprising. Real estate investors buy 

title insurance to protect against such unforeseen "off the record" risks. Old soldiers 

say it is the bullet you never hear that kills you, and the fundamental idea behind 

title insurance is to cover rather than exclude unforeseen and unknown risks; 

otherwise, title insurance would not provide the peace of mind it touts. 

V. BAD FAITH 
 

The special referee ruled Chicago Title had a reasonable, good faith basis for 

contesting Appellants' claims. We agree. 

Appellants' bad faith cause of action fails because they did not demonstrate Chicago 

Title acted unreasonably in denying Appellants' claims. See Crossley v. State Farm 

Mut. Auto. Ins. Co., 307 S.C. 354, 359, 415 S.E.2d 393, 396–97 (1992) ("The 

elements of a cause of action for bad faith refusal to pay first party benefits under a 

contract of insurance are: (1) the existence of a mutually binding contract of 

insurance between the plaintiff and the defendant; (2) refusal by the insurer to pay 

benefits due under the contract; (3) resulting from the insurer's bad faith or 

unreasonable action in breach of an implied covenant of good faith and fair dealing 

arising on the contract; (4) causing damage to the insured."). The unusual nature of 

the Ordinance presented close policy interpretation issues. Chicago Title had a 

reasonable basis for denying the claims, and we affirm summary judgment to them 

as to this issue. BMW of N. Am., LLC v. Complete Auto Recon Servs., Inc., 399 S.C. 

444, 453, 731 S.E.2d 902, 907 (Ct. App. 2012) ("[W]here an insurer has 

a reasonable ground for contesting a claim, there is no bad faith."). 

VI. CONCLUSION 

Accordingly, we affirm the special referee's grant of summary judgment to Chicago 

Title on Appellants' cause of action for bad faith, but we reverse the grant of 

summary judgment to Chicago Title on Appellants' remaining claims and remand to 

the special referee for proceedings consistent with this opinion. 

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED. 

WILLIAMS and KONDUROS, JJ., concur.