Opinion ID: 2600454
Heading Depth: 2
Heading Rank: 1

Heading: the policy jacket cover

Text: ¶ 10 The policy jacket cover states that First American insures ... against loss or damage ... sustained or incurred by the insured by reason of and then goes on to list nine insurable events or conditions. The condition at issue here is number two, addressing [a]ny defect in or lien or encumbrance on the title. Vestin argues that the creation of the SID and the filing of the Notice of Intention did in fact create a defect in the title. First American, on the other hand, argues that neither the creation of the SID nor the filing of the Notice of Intention created a defect. Instead, the actual levying of the assessment created the defect in the title, and the assessment was actually levied by the city of Eagle Mountain after the policies had been issued and thus falls outside the coverage of the policies. ¶ 11 Unlike other insurance contracts, title insurance does not insure against future events. [7] Thus, in order for a defect, lien, or encumbrance to fall within the insurance policy's coverage, it must have been in existence as of the effective date of the policy. At a minimum, an existing assessment that has been recorded would be considered a defect in the title and would be covered unless it had been otherwise exempted or excluded. The more difficult question, and the one before us now, is whether the recorded notice of the possibility of a future assessment also rises to the level of a defect, lien, or encumbrance. We conclude that it does not. ¶ 12 Neither the creation of the SID nor the filing of the Notice of Intention creates a lien on real property that affects the title. Utah Code section 17A-3-323 (2005) provides that an assessment becomes a lien on the property assessed on the day the ordinance levying the assessment becomes effective. In Vestin's case, the effective date of the ordinance that levied the assessment was after the date on which the policies were issued by First American. No lien could have attached as a result of this SID at the time First American provided the policies. ¶ 13 Additionally, neither the creation of the SID nor the Notice of Intention is an encumbrance on the property. No claim or liability attached to the title or property arises by virtue of the creation of the SID or Notice of Intention. [8] Likewise, no defect in the title is occasioned by the creation of the SID or the Notice of Intention. Vestin argues that the term defect should be defined broadly so as not to give it the same meaning as lien or encumbrance. However, as the court of appeals explained, While we hold that neither the SID nor the notice in this case constituted defects in Vestin's title, we also recognize that defect may be defined as something less than a lien or encumbrance. The fact that the SID and notice did not amount to a defect, lien, or encumbrance, does not mean that all three terms are given the same meaning. [9] ¶ 14 It is important to remember that the defect, lien, or encumbrance mentioned in the policy jacket cover had to be in or on the title. The SID and Notice of Intention simply had no affect in or on the title. The policies unambiguously applied only to actual assessments and did not include an obligation to disclose the SID or Notice of Intention.