Title Industry Assurance Co., R.R.G. v. First American Title Ins. Co.

Dist. Ct. did not err in granting defendants’ motion for summary judgment in plaintiff-insurance company’s action seeking declaration that its policy did not cover allegations made in two state-court actions against its insured-title insurance company that concerned insured’s misuse of escrow funds when facilitating real estate “flip” transactions. Record showed that plaintiff had initially refused to defend both state-court actions, which then required that insured defend itself, where plaintiff asserted that two exclusions precluded coverage where allegations against insured pertained to either fraud or failure to pay escrow funds. However, plaintiff had duty to defend both state-court actions, since most allegations in one state-court action had no obvious relationship to fraud claim, especially with respect to breach of contract claim that could have arisen from mere negligent conduct. Moreover, second state-court lawsuit that concerned alleged co-mingling of money belonging in escrow fund could have occurred through innocent mistake. Fact that some allegations in state-court complaints concerned fraudulent conduct did not excuse plaintiff from defending either action. Moreover, Plaintiff’s breach of duty to defend estopped plaintiff from asserting any policy exclusion in insured’s indemnity claim.