Chi. Title Ins. Co. v. Jen, No. 2015, 2021 Md. App. LEXIS 46 (January 28, 2021), Opinion by Berger, J.
This action arises from a neighborly dispute in Parkton, Maryland, involving the use of a shared driveway. Chi. Title Ins. Co. v. Jen, No. 2015, 2021 Md. App. LEXIS 46 at *2. Allynnore Jen and Charles Shuler (“Jen-Shulers”) appealed a Maryland Insurance Administration (“MIA”) decision, relating to the denial of coverage under a title insurance policy provided by the insurer, Chicago Title Insurance Company (“Chicago Title”). Id. The Jen-Shulers previously sought coverage and litigation expenses under the insurance policy provision relating to a “lack of a right to access,” due to a dispute with their neighbors, Dennis and Teresa Bull (“Bulls”) over the use of a shared driveway. Id. at *2-3. The Jen-Shulers and the Bulls disputed whether the Jen-Shulers could access the Bulls’ paved portion of the driveway to drive to their home. Id. at *3.
This long and antiquated litigation began in 2013, when the Jen-Shulers filed suit against the Bulls, seeking an injunction that would allow them to use the Bulls’ portion of the driveway. Id. at *6. On January 28, 2014, the Jen-Shulers made a claim under the title insurance policy, asserting that the denial of access to the Bulls’ portion of the driveway due to the Bulls’ building a fence, denied them access to their own property. Id. Chicago Title denied coverage on February 7, 2014. Id. at *6-7.
On June 12, 2014, the Bulls filed a counterclaim, asserting unjust enrichment, alleging that the Jen-Shulers used the Bulls’ portion of the driveway without their permission and that numerous expenses were incurred relating to maintenance and snow removal. Id. at *7. The Bulls also alleged defamation per se, claiming the Jen-Shulers defamed Mr. Bull by claiming that he had committed bankruptcy fraud. Id. The Jen-Shulers informed Chicago Title of the counterclaim in their request for reconsideration, however, Chicago Title investigated and denied coverage. Id.
On July 1, 2015, the Jen-Shulers filed a complaint against Chicago Title with the MIA. Id. at *8. An MIA Enforcement Officer issued a letter on March 23, 2017, directing Chicago Title to treat the Jen-Shulers as protected for the claim under the title insurance policy and to issue payment of the benefits owed. Id. Chicago Title requested a hearing that was held on August 15, 2017, wherein a written decision was issued on September 28, 2017. Id. The Insurance Commissioner issued a Memorandum and Final Order, finding that Chicago Title had not violated Sections 4-113 and 27-216 of the Insurance Article of the Maryland Annotated Code. Id. at *8-9. The Commissioner relied on testimony from John Neilson, MIA’s expert witness, who testified that “right of access” did not include vehicular access or equate to vehicular access. Id. at *9.
However, the Commissioner found that Chicago Title had violated Section 27-303 of the Insurance Article and directed Chicago Title to pay defense costs from a counterclaim directed at the Jen-Shulers. Id. at *3. The Commissioner concluded that because there was a possibility the Jen-Shulers could face a challenge to their access to their own land, Chicago Title had a duty to defend the Jen-Shulers against the counterclaim. Id. at *9.
Both Chicago Title and the Jen-Shulers filed for judicial review in the Circuit Court for Baltimore County. Id. at *10. The Circuit Court reversed the Insurance Commissioner’s decision and remanded the case to the MIA to reinstate the findings of the March 23, 2017 letter, which had found in favor of the Jen-Shulers on all three issues, with this appeal following shortly thereafter. Id. at *10-11.
The Court of Special Appeals (“COSA”) addresses several issues dealing with the determination of Chicago Title denying the Jen-Shulers’ claims under the title insurance policy. Id. at *11-12. Notably, COSA concluded that the Insurance Commissioner’s determination that Chicago Title violated Md. Code Ann., Ins. § 27-303(2) was legally correct and supported by substantial evidence. Id. at *21. Section 27-303(2) states: “it is an unfair claim settlement practice and a violation of this subtitle for an insurer . . . to refuse to pay a claim for an arbitrary or capricious reason based on all available information.” Id. at 21-22. It is well settled in Maryland that an insurer owes a duty to the insured to defend if there is a potentiality that a claim could be covered under the policy. Brohawn v. Transamerica Ins. Co., 276 Md. 396, 407-408 (1975). The mere potentiality that a pleading may be covered can trigger the duty to defend an insured. Laws. Title Ins. Corp. v. Knopf, 109 Md. App. 134, 144 (1996). The duty to defend is broader than the duty to indemnify, and further, “[i]f there is any doubt as to whether there is a duty to defend, it is resolved in favor of the insured.” Walk v. Hartford Cas. Ins. Co., 382 Md. 1, 15 (2004).
COSA ultimately found that although Chicago Title had reviewed and denied the Jen-Shulers’ request for legal fees in the original lawsuit, once the Bulls’ counterclaim was filed, the insurer had a duty to further review the counterclaim. Chi. Title Ins. Co., 2021 Md. App. LEXIS 46, at *23. The potentiality that the claim could be covered by the policy would create a duty to defend the Jen-Shulers. Id. The Bulls’ counterclaim referenced the entire driveway, with the potential to interfere with the Jen-Shulers’ ability to use their own property and as such, there was substantial evidence to find that the failure to provide a defense was arbitrary and capricious, in violation of Ins. § 27-303(2). Id. at *24. The judgment of the Circuit Court for Baltimore County was reversed, and the Insurance Commissioner’s decision reinstated. Id.
This decision makes the Court’s stance clear that if there is the potential of a claim being covered under an insurance policy, an insurer has a duty to defend the insured.
-Kelsey Lear, Law Clerk