Court Opinion

ID: 9491388
Source: CourtListenerOpinion
Date Created: 2023-08-05 14:12:46.57284+00
Date Added: 2024-06-11T17:54:42.604002
License: Public Domain

HAMILTON, Circuit Judge,
dissenting:
The majority rejects Haw River’s claim seeking title insurance coverage on two alternative theories. First, the majority concludes that Haw River’s title to the 179 acres of land lying within the environmental buffer zone is not “unmarketable” and, therefore, the ALTA policy’s coverage provision for “unmarketability of the title” does not apply. See ante at 277-79. Second, the majority concludes that even if Haw River’s title to the timber is unmarketable, the exception to the zoning ordinance exclusion does not apply and, therefore, the ALTA policy provides no coverage for the loss. See ante at 279-81. In my view, both of these conclusions rest on unpersuasive reasoning. The former conclusion is inconsistent with the North Carolina Supreme Court’s decision in Marriott Financial Serv. v. Capitol Funds, Inc., 288 N.C. 122, 217 S.E.2d 551 (1975). The latter conclusion is inconsistent with the North Carolina rule that if an insurance contract term is capable of one or more interpretations, the one most favorable to the insured applies. Because I believe Haw River suffered a loss covered by the ALTA policy and that the exception to the zoning ordinance exclusion does apply, I respectfully dissent.
I
In Marriott, the plaintiff purchased land near a bridge in a heavily traveled area of Raleigh, North Carolina. Id. 217 S.E.2d at 553. Because of the high traffic flow, the Raleigh City Council adopted a policy to *282deny all driveway permit applications within 200 feet of the bridge. Id. The policy was not embodied in an ordinance and therefore was not recorded at the county courthouse. When the plaintiff subsequently sought to subdivide the tract, which required separate driveways for each new lot, the permit request was denied because of the Raleigh City Council’s policy. Id. at 554. Marriott brought suit against the title insurance carrier contending that the loss in the value of the property caused by the government-created restriction on access was a covered risk under the title insurance policy issued to the plaintiff. The policy issued to the plaintiff insured against, among other things, losses due to “the lack of a right of access to and from land.” Id. at 564.
The North Carolina Court of Appeals held that the policy provisions insuring against the lack of access applied only when the landowner had no right of access to and from the land. Id. at 565. According to the North Carolina Court of Appeals, even pedestrian access to the property was sufficient to preclude coverage under the title insurance policy. Id.
On appeal, the North Carolina Supreme Court rejected the North Carolina Court of Appeals’- view that the presence of pedestrian access was sufficient to preclude coverage. Id. Instead, the North Carolina Supreme Court adopted a reasonable insured approach. The North Carolina Supreme Court held “that when an insurer contracts to insure against lack of access to property, it must be deemed to have insured against the absence of access which, given the nature and location of the property, is reasonable access under the circumstances.” Id.
Applying this reasonable insured approach, the North Carolina Supreme Court found coverage. Id. In reaching this conclusion, the North Carolina Supreme Court stated that “it would strain credulity beyond reasonable limits to hold that the parties to this [insurance] contract understood that the insurance as to access could be satisfied by pedestrian access.” Id. The North Carolina Supreme Court reasoned that the “insured must have contemplated insurance protection against lack of vehicular access.” Id.
Marriott instructs us to ask, given the circumstances surrounding the insurance contract at issue, whether Haw River contemplated that the “unmarketability of the title” provision would cover losses arising from a zoning ordinance filed in the Register of Deeds Office which rendered the timber economically unmarketable. If we answer this question in the affirmative then coverage attaches.
In this case, an insured in the same position as Haw River would have understood the ALTA policy to cover losses due to a zoning ordinance filed in the Register of Deeds Office that rendered the timber economically unmarketable. People acquire title to timber to market the harvested timber. Such is the nature of a timber deed. A timber deed holder cannot build on the property or otherwise use it in a recreational sense. In essence, the insured enjoys no use or enjoyment of the timber other than the ability to market it. Because the sole purpose behind the acquisition of a timber deed is to harvest and sell the timber, it follows that a reasonable insured would understand, “unmarketability of the title” as insuring against the risk of loss due to the existence of a recorded local ordinance which rendered the timber economically unmarketable.
II
The ALTA policy contains a general exclusion for, inter alia, zoning ordinances relating to environmental protection. There is, however, an exception to the zoning ordinance exclusion. The exception applies when “notice of the enforcement [of the ordinance] ... has been recorded in the public records.” Although the term “notice of enforcement” is not defined in the ALTA policy, the term “public records” is defined. That term is defined as “records established under state statutes ... for the purpose' of imparting constructive notice of matters relating to real property to purchasers for value and without knowledge.” In this case, the public records is the Register of Deeds of Wake County.
The majority concludes that the exclusion applies, but the exception does not. Although I agree the exclusion applies, as the *283ordinances at issue are zoning ordinances relating to environmental protection, the exception to the exclusion applies as well. In this case, the provision “notice of enforcement” is ambiguous. The term could be construed as applying when a violation of an ordinance is recorded in the public records. Alternatively, the term could be construed as applying when the ordinance is recorded in the public records.
Under North Carolina law, if an insurance contract term is capable of one or more interpretations, the one most favorable to the insured applies. See Mills v. State Life & Health Ins. Co., 261 N.C. 546, 135 S.E.2d 586, 590 (1964). Here, the interpretation most favorable to the insured is that the notice of enforcement provision applies when the zoning ordinance is recorded in the public records. It follows that because the zoning ordinances at issue were filed in the Register of Deeds of Wake County on the date the policy was issued to Haw River, the exception to the exclusion applies.
Ill
In summary, Haw River suffered a loss covered by the ALTA policy and the exception to the zoning ordinance exclusion applies. Therefore, I respectfully dissent.