Pike v. Conestoga Title Insurance Co. (IN)

Summary: A notice provision in a title insurance policy that requires the insured to promptly notify the title insurance company about any contested issues to title must be honored in order to continue to receive coverage under the policy.

Pike v. Conestoga Title Ins. Co., 44 N.E.3d 787 (Ind. Ct. App. 2001).

Facts: On December 31, 2003, Michael and Chassidy Pike (the “Pikes”) purchased a home for $82,000 through a loan with First Franklin Financial Corporation (“First Franklin”). Conestoga Title Insurance (“Conestoga”) issued a title insurance policy to the Pikes on January 13, 2004. A provision within the policy provided that the Pikes would promptly provide in writing to Conestoga when they had knowledge of any claim of title or interest which is adverse to the title of the estate. If notice was not promptly given, the contested issue would be terminated from protection under the plan. The plan defined knowledge, “as actual knowledge, not constructive knowledge or notice which may be imputed to an insured by reason of public records . . . .”

First Franklin sold and assigned the mortgage to Wells Fargo Bank, who failed to record the assignment in the Decatur County Recorder’s Office.  HomeEq Servicing would service the mortgage and manage the escrow account from which taxes on the property were to be paid.

In June of 2006, Shammah Investments, LLC, provided a legal notice to the Pikes and First Franklin that they had purchased the Pikes’ property for $233.40 through a tax sale in October of 2005. The Pikes contacted HomeEq Servicing about the alleged tax sale issue. HomeEq Servicing stated that the taxes on the property were up to date and the Pikes could ignore the notice. The Pikes did not notify Conestoga. In November of 2006, the Pikes received a second notice of the tax sale that Windgate intended to seek a tax deed on their property. The notice also advised them that they had thirty days to file a written objection with the court.

On November 29, 2006, a circuit court ordered the County Auditor to execute and deliver a tax deed on the Pikes' home to Windgate Properties. In February of 2007, the Pikes were notified that they were deeded out of the property and no longer owned it.

The Pikes obtained legal counsel and found that in 2003 a special assessment had remained unpaid and led to sale of their home for a tax delinquency. The Pikes subsequently filed a complaint against Conestoga for failing to include in its title search the special assessment that was recorded in May 2003. Because of this failure, the Pikes lost their home. Conestoga countered that the Pikes nullified their title insurance policy by failing to report the tax sale. The trial court granted summary judgment for Conestoga concluding that the Pikes failure to disclose voided the title insurance policy and Conestoga did not act in bad faith in denying the Pikes' claim. The Pikes appealed.

 Holding: Affirmed. The crux of the court’s review on appeal centered on the notice provision of the title insurance policy. The court concluded that based on the notice provision, the Pikes should have notified Conestoga in writing about the legal notices they had received in 2006 about the tax sale. Because the Pikes failed to provide this information to Conestoga and had actual knowledge of the issues, the insurance policy was voided. Conestoga did not have a duty to insure the Pikes in this regard.

Opinion Year: 
By: ATG Underwriting Department | Posted on: Wed, 10/05/2016 - 3:14pm