Opinion ID: 1250066
Heading Depth: 4
Heading Rank: 2

Heading: Does First American's title policy preclude tort claims until the title companies have had an opportunity to cure the title defect?

Text: The appellees also argue that clause 7 of the policy, taken in conjunction with clause 11 precludes any claim in tort until the curative action brought against Johnson is resolved. Paragraph 11 of the policy provides: Any claim of loss or damage, whether or not based on negligence, and which arises out of the status of the lien of the insured mortgage or of the title to the estate or interest covered hereby or any action asserting such claim, shall be restricted to the provisions and conditions and stipulations of this policy. Paragraph 7 of the policy provides: No claim shall arise or be maintainable under this policy (a) if the Company, after having received notice of an alleged defect, lien or encumbrance insured against hereunder, by litigation or otherwise, removes such defect, lien or encumbrance, or establishes the title, or the lien of the insured mortgage, as insured, within a reasonable time after receipt of such notice; (b) in the event of litigation until there has been a final determination by a court of competent jurisdiction, and disposition of all appeals therefrom, adverse to the title or to the lien of the insured mortgage, as insured, as provided in paragraph 3 hereof; or (c) for liability voluntarily assumed by an insured in settling any claim or suit without prior written consent of the Company. We do not find that these clauses prohibit the present maintenance of a tort action. Assuming that paragraph 11 applies to tort claims based on misrepresentations made before the policy was issued, paragraph 11 does no more than trigger the need to review the policy provisions to see if any of them apply. In our view, paragraph 7 of the policy does not apply because it explicitly pertains only to claims arising under this policy. The Bank's misrepresentation claim is based on the preliminary commitment rather than the title policy.