2012 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-24-2012

Nationwide Life Ins v. Commonwealth Land Title

Ins

Precedential or Non-Precedential: Precedential

Docket No. 11-3123

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Recommended Citation

"Nationwide Life Ins v. Commonwealth Land Title Ins" (2012). 2012 Decisions. Paper 613.

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 11-3123

_____________

NATIONWIDE LIFE INSURANCE COMPANY

v.

COMMONWEALTH LAND TITLE 

INSURANCE COMPANY,

 Appellant

_______

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. No. 2-05-cv-00281)

District Judge: Honorable Ronald L. Buckwalter

_______

Argued June 25, 2012

Before: SLOVITER, CHAGARES, and JORDAN, 

Circuit Judges

(Filed: July 24, 2012)

______

Craig R. Blackman (Argued)

Michelle C. Orloski

Neal R. Troum

Stradley, Ronon, Stevens & Young

Philadelphia, PA l9l03

Attorneys for Appellant
2

Justin K. Miller

C. Paul Scheuritzel (Argued)

Larsson & Scheuritzel

Philadelphia, PA l9l02

Attorneys for Appellee

Edward J. Hayes

Lauren P. McKenna

Fox Rothschild

Philadelphia, PA l9l03

Attorneys for Amicus-Appellants

___________

OPINION OF THE COURT

____________

SLOVITER, Circuit Judge.

This interlocutory appeal requires interpretation of a 

title insurance policy that contains a widely-used endorsement 

known as the American Land Title Association 9 

Endorsement (“the ALTA 9 Endorsement”). Specifically, 

this court must decide whether the scope of coverage under 

¶ 1(b)(2) of the ALTA 9 Endorsement encompasses losses 

resulting from entire instruments, or whether the coverage is 

limited to losses caused by the particular types of 

encumbrances listed in that paragraph.

I. 

Background

Commonwealth Land Title Insurance Co. 

(“Commonwealth”) issued the title insurance policy at issue 

in this case to Nationwide Life Insurance Co. (“Nationwide”)

in connection with real property in the Franklin Mills Mall in 

Philadelphia County, Pennsylvania (“the Property”). The 

Franklin Mills Mall is a large shopping center specializing in 

retail stores. The Property was owned by Liberty Mills 
3

Limited Partnership (“Liberty Mills”) when Liberty Mills 

entered into a Master Declaration and Agreement of 

Easements, Covenants, Conditions and Restrictions (the 

“Master Declaration”) with Liberty Mills Residual Limited 

Partnership in 1988, which governs all stores in the Mall. 

Later that year, PMI Associates (“PMI”) purchased the 

Property from Liberty Mills, at which time PMI and Liberty 

Mills also entered into a Declaration of Restrictions. The 

Declaration of Restrictions vested Liberty Mills with, inter 

alia, the right to prior approval of future purchasers of the 

Property and an express option to purchase.

PMI borrowed $3.5 million from Nationwide in 2001, 

using the Property as collateral. Nationwide purchased a title 

insurance policy (“the Policy”) from Commonwealth to 

insure its lender‟s interest in the Property. The Policy 

contains a specific endorsement that is known as the ALTA 9 

Endorsement, which states (in relevant part):

The Company [Commonwealth] insures the 

owner of the indebtedness secured by the insured

mortgage [Nationwide] against loss or damage 

sustained by reason of:

1. The existence at Date of Policy of any of 

the following:

...

 (b) Unless expressly excepted in Schedule B

 ...

(2) Any instrument referred to in 

Schedule B as containing covenants, 

conditions or restrictions on the land 

which, in addition, (i) establishes an 

easement on the land; (ii) provides a lien 

for liquidated damages; (iii) provides for 

a private charge or assessment; 

(iv) provides for an option to purchase, a 

right of first refusal or the prior approval 

of a future purchaser or occupant

....
4

J.A. at 317.

1 Among the documents listed in Schedule B Part 

I were the Declaration of Restrictions and the Master 

Declaration, but no specific restriction found within those 

documents was explicitly listed. 

PMI defaulted on its loan from Nationwide in 2003 

and conveyed the Property to Nationwide by fee simple deed 

in lieu of foreclosure. Nationwide attempted to sell the 

Property to Ironwood Real Estate, LLC (“Ironwood”), but 

Liberty Mills‟ successor in interest—Franklin Mills Limited 

Partnership (“Franklin Mills”)—refused to approve Ironwood 

as a buyer in accordance with the rights conferred by the 

Declaration of Restrictions.2 Ironwood‟s offer to purchase 

the Property was contingent upon Franklin Mills‟ approval of

the anticipated use by Ironwood of the Property as a technical 

school. Franklin Mills rejected this proposed use, perhaps as 

being inconsistent with the use restrictions found within the 

Declaration of Restrictions, which required the Property to be 

used “only for the purposes of a variety or general 

merchandise store” absent prior consent from Franklin Mills. 

J.A. at 329. These use restrictions were left in force under a 

settlement agreement reached in another case, in which 

Nationwide had sued Franklin Mills in an attempt to 

invalidate the encumbrances on title that prevented this sale. 

See Nationwide Life Ins. Co. v. Franklin Mills Assocs. Ltd. 

P’ship, No. 04-5049 (E.D. Pa. Feb. 28, 2008), ECF No. 30. 

 

1

The restrictions listed in (i)-(iv) will hereinafter be 

referred to as “the ¶ 1(b)(2) restrictions.” 

2

The parties dispute whether this refusal was based on 

one of the ¶ 1(b)(2) restrictions or, instead, the use 

restrictions. The parties agree, however, that whatever 

restrictions formed the basis for the refusal were found within 

the Declaration of Restrictions. See Appellee‟s Br. at 6; 

Reply Br. at 2 n.1 (“There is no dispute that the use 

restrictions contained within the Declaration of Restrictions 

were largely (if not solely) to blame for the fall through of 

this particular sale.”).
5

Nationwide submitted a claim for coverage to 

Commonwealth, asserting that the restrictions relied upon by 

Franklin Mills to justify its refusal of Ironwood as a purchaser 

rendered the Property unusable and unsalable. 

Commonwealth denied Nationwide‟s claim. 

Nationwide filed a complaint in the District Court, and 

Commonwealth filed a motion to dismiss, asserting that 

Nationwide was seeking coverage for harm alleged to arise 

from the Declaration of Restrictions, which was listed in 

Schedule B and was thus expressly excepted from coverage 

under the Policy. The District Court granted 

Commonwealth‟s motion, and Nationwide appealed.

After oral argument, this court reversed and remanded, 

holding that “Commonwealth bore the burden of detecting the 

restrictions stated in the Declaration, and had to list those 

restrictions explicitly [and not just the Declaration itself] as 

exceptions to avoid covering loss from them.” Nationwide 

Life Ins. Co. v. Commonwealth Land Title Ins. Co., 579 F.3d 

304, 319 (3d Cir. 2009) (“Nationwide I”).

3

 

3 Nationwide argues that Commonwealth‟s current 

position is barred by the law of the case doctrine. To the 

extent that the language in this court‟s prior opinion appears 

to suggest that Commonwealth is obligated to cover 

Nationwide‟s claim, the procedural posture of the last appeal

restricts the impact of this language: this court held only that 

Commonwealth is obligated to cover Nationwide‟s claim if

the facts as alleged in Nationwide‟s complaint are true. In 

other words, this court only held that Commonwealth must 

cover Nationwide‟s claim if the restriction causing 

Nationwide‟s harm was covered by the ALTA 9 Endorsement 

and not expressly excepted from coverage on Schedule B. 

Because Nationwide asserted its harm was caused by a ¶ 

1(b)(2) restriction, this court had no reason to determine 

whether the failure to list a ¶ 1(b)(2) restriction on Schedule B 

meant the entire instrument containing that restriction was 

covered by the ALTA 9 Endorsement. Thus, the question 

certified for this interlocutory appeal has not yet been
6

On remand, Nationwide filed an amended complaint, 

and Commonwealth and Nationwide filed cross-motions for 

summary judgment. The District Court denied 

Commonwealth‟s motion in its entirety and granted 

Nationwide‟s motion in part, holding, inter alia, that the 

Policy with the ALTA 9 Endorsement affords insurance 

coverage for losses and damages incurred by Nationwide as a 

result of the Declaration of Restrictions. See Nationwide Life 

Ins. Co. v. Commonwealth Land Title Ins. Co., No. 

05-281, 2011 WL 611802 (E.D. Pa. Feb. 17, 2011).4 

Commonwealth filed a motion for reconsideration or, 

alternatively, for interlocutory appeal, and Nationwide filed a 

response in opposition. The District Court denied the motion 

for reconsideration but granted a certificate of appealability. 

The question certified by the District Court is:

Whether the American Land Title 

Association 9 Endorsement provides 

title insurance coverage for whole 

instruments listed in Schedule B or 

whether the scope of coverage is limited 

to particular types of encumbrances.

Nationwide Life Ins. Co. v. Commonwealth Land Title Ins. 

Co., Order at 1, No. 05-281 (E.D. Pa. Mar. 23, 2011), ECF 

No. 67.

 

II. 

Jurisdiction and Standard of Review

 

answered by this court, and the law of the case doctrine is 

inapplicable.

4

The District Court also held that Nationwide is entitled 

to appropriate prejudgment interest but that issues of material 

fact preclude summary judgment as to the questions of 

Commonwealth‟s alleged bad faith and the precise 

determination of damages. See id. at *32.
7

The District Court had jurisdiction pursuant to 28 

U.S.C. § 1332. This court has jurisdiction over this 

interlocutory appeal pursuant to 28 U.S.C. § 1292(b).

 

When this case was previously before us, we noted 

that “[i]nterpretation of an insurance policy is a question of 

law over which we exercise plenary review.” Nationwide I, 

579 F.3d at 307. We stated, “[u]nder Pennsylvania law, 

which applies to this action, we ascertain the intent of the 

parties by reading the policy as a whole, and we give 

unambiguous terms their plain meaning. We also consider 

evidence of industry custom and practice. We construe 

ambiguous terms strictly against the insurer, but avoid 

reading the policy to create ambiguities where none exist.” 

Id. at 307-08 (internal citations and quotation marks omitted); 

see also Sunbeam Corp. v. Liberty Mut. Ins. Co., 781 A.2d 

1189, 1193 (Pa. 2001) (“If words have a special meaning or 

usage in a particular industry, then members of that industry 

are presumed to use the words in that special way, whatever 

the words mean in common usage and regardless of whether 

there appears to be any ambiguity in the words.”).

III. 

Discussion

Commonwealth does not dispute that Nationwide‟s 

harm was caused by provisions within the Declaration of 

Restrictions. Commonwealth also does not dispute that ¶ 

1(b)(2) of the ALTA 9 Endorsement applies to the 

Declaration of Restrictions.5 Commonwealth argues only that 

 

5

See also Nationwide I, 579 F.3d at 309-10 (“[B]ecause 

the Declaration is an „instrument referred to in Schedule B as 

containing . . . restrictions on the land which . . . provides for 

an option to purchase, a right of first refusal or the prior 

approval of a future purchaser or occupant,‟ loss arising from 

it is covered under paragraph 1(b)(2) of the ALTA 9 

Endorsement „[u]nless expressly excepted in Schedule B.‟”

(alterations in original) (quoting the Policy)). Specifically, 

Commonwealth agrees that the Declaration of Restrictions 
8

its listing the Declaration of Restrictions on Schedule B 

excluded losses arising from that instrument from coverage 

except as to the ¶ 1(b)(2) restrictions found therein, which 

(under this court‟s prior decision) must be expressly listed in 

Schedule B to be excluded from coverage. Therefore, the 

remaining question is whether the failure to expressly except 

a ¶ 1(b)(2) restriction in Schedule B places only losses arising 

from that specific restriction back into coverage, or whether 

losses sustained by reason of any provision in the entire 

instrument in which the ¶ 1(b)(2) restriction is found are

placed back into coverage. 

The District Court held that “[a]ny loss arising as a 

result of any portion of that instrument—and not from any 

particular provision contained therein—falls within the scope 

of the ALTA 9 Endorsement coverage.” Nationwide, 2011 

WL 611802, at *14 (footnote omitted). The District Court 

reasoned that “[b]y its plain language, . . . the Endorsement 

only defines what types of instruments are covered and then 

clearly insures against any loss sustained from the instrument 

itself.” Id. The District Court noted that “[h]ad the 

Endorsement meant otherwise, it would have eliminated the 

language „any instrument‟. . . .” Id.

We agree, and thus hold that the ALTA 9 Endorsement 

provides coverage to losses arising from entire instruments 

that fit within its plain language, not just the ¶ 1(b)(2) 

restrictions within those instruments that have not been 

expressly excepted. If ¶ 1(b)(2) was not intended to cover 

losses arising due to entire instruments, then the phrase “any 

instrument” would have been omitted, as it was in ¶ 1(b)(1), 

(3), (4), and (5) of the same ALTA 9 Endorsement. 

Commonwealth and the Amici argue that this plain 

language interpretation of the ALTA 9 Endorsement provides 

far more coverage to the insured than the interpretation that is 

accepted by the vast majority of the title insurance industry. 

Commonwealth argues that “evidence of the ALTA 9 

 

contains at least an option to purchase and a prior approval of 

a future purchaser provision. See Reply Br. at 6. 
9

endorsement‟s customary usage within the title insurance 

industry makes clear that ALTA 9 is intended to provide 

additional coverage only for harm arising from a very specific 

category of extraordinary encumbrances that would affect the 

validity, priority, or enforceability of the insured mortgage—

i.e., the ALTA 9 [¶] 1(b)(2) encumbrances.” Appellant‟s Br. 

at 24. Indeed, it may be that the title insurance industry has 

been using the ALTA 9 Endorsement with the understanding 

that it only provides coverage for loss resulting from the 

¶ 1(b)(2) restrictions.6 Nevertheless, caselaw requires us to 

follow the plain language of the ALTA 9 Endorsement rather 

than deferring to industry custom and usage that does not give 

the phrase “any instrument” special meaning, but instead 

simply ignores that language. J.C. Penney Life Ins. Co. v. 

Pilosi, 393 F.3d 356, 363 (3d Cir. 2004) (Under Pennsylvania 

law, “[w]here . . . the language of an insurance contract is 

clear and unambiguous, a court is required to enforce that 

language.” (internal quotation marks and citation omitted)); 

Sunbeam, 781 A.2d at 1193 (allowing evidence of the 

“special meaning” of words within an industry); see also

Meyer v. CUNA Mut. Ins. Soc., 648 F.3d 154, 167 (3d Cir. 

2011) (“[U]nder Pennsylvania law, in close cases, a court 

should resolve the meaning of insurance policy provisions in 

favor of coverage for the insured.” (citing Motley v. State 

Farm Mut. Auto. Ins. Co., 466 A.2d 609, 611 (Pa. 1983))).

IV. 

Conclusion

We will affirm the District Court‟s holding that the 

ALTA 9 Endorsement insures against any loss sustained from 

 

6 Both parties address recent proposed amendments to the 

ALTA 9 Endorsement, which will ensure that the effect of 

this court‟s decision will be limited to title insurance policies 

that were issued with the older version of the ALTA 9 

Endorsement. Because the amendments show only that the 

ALTA 9 Endorsement was changed to reflect a recent

relevant court opinion, the significance of the changes can 

only be determined through speculation.
10

an instrument that is covered by the plain language of 

¶ 1(b)(2). This case will return to the District Court for the 

determination of damages owed to Nationwide.