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Vincent J. Gallo, "And the Survey Says..."

posted Apr 20, 2015, 5:04 AM by Pete Weinman   [ updated Apr 20, 2015, 5:08 AM ]
For the story, click HERE.

April 19, 2015

And the survey says………………..

A. Gugliotta v. First American Title, 2013 NY Slip Op (112 AD3d 559) (December 4, 2013)

First American issued a Title Insurance Policy (“Policy”) to the Purchaser. Among other things, 

the Policy contained an exception referencing a survey reading, which, in turn, contained a 

notation regarding a trail running across the property. Purchaser thereupon attempted to sell the 

property, but the prospective Purchaser withdrew from the deal based on the existence of the trail 

which prompted the Purchaser to file a notice of claim with First American that the trail 

"encroaches over and upon the premises," asserting that the property "cannot be subdivided 

without preserving the trail," and that the property cannot be conveyed "without removing the 

trail." First American Title denied the claim, stating that the Policy excepts the trail from 

coverage. 

The Purchaser sued for breach of the Policy, alleging that the trail is an insured encumbrance or 

defect on the property because it prevents the property from being subdivided or conveyed.  The 

Court held that a policy of title insurance is a contract by which a title insurer agrees to 

indemnify its insured for loss occasioned by a defect in title and that liability is governed and 

limited by the agreements, terms, conditions, and provisions contained in the title insurance 

policy. The Court went on to say that a Title Insurer would be liable for hidden defects and all 

matters affecting title within the policy coverage and not excluded or specifically excepted from 

said coverage, and that an exclusion from coverage must be specific and clear in order to be 

enforced. 

Here the Court ruled that First American established that the Policy specifically excepted the trail 

from coverage, without ambiguity as to interpretation, thereby denying coverage to the Purchaser 

under the Policy, further holding that the Policy need not be more specific in its exception to 

more precise by specifying the rights of third parties which may arise from the trail.

This decision, however, should be a wakeup call to attorneys representing Purchasers that a Title 

Report and Survey, which is read into the Title Report, is not meant to simply be placed in the 

file, pending closing.  It should be thoroughly examined and considered as to the potential 

consequences to the Purchaser of what the survey reveals and discloses and what type of 

protection the attorney could exact from the Title Insurer for the Purchaser as it relates to the 

Survey.

In the instant case, there is no mention as to whether the Purchaser, after losing against the Title 

Insurer, went on to “Plan B”, and then directed his or her attention towards his or her attorney for 

a possible claim of legal malpractice.  This is something that attorneys should seriously consider, 

as well as the degree of attention that attorneys need to dedicate towards each real estate file.
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