November 20, 2013 South Carolina Supreme Court published opinion

Preservation Capital Consultants, LLC v First American Title Insurance Company

Preservation sued First American claiming against a title insurance policy. The circuit court granted summary judgment to Preservation ruling that but for a defect in title it would have recover additional funds by foreclosing on a property listed in the policy. First American appealed and the Court certified the appeal pursuant to Appellate Rule 204(b). The Court, 4-1, affirmed.  The majority held that the plain language of the policy unambiguously provides coverage as title to the property in question was not in the entity listed in the policy, the policy covers defects of title including title being held by a person or entity not listed in the policy, Preservation obtained one of the three parcels listed through foreclosure and the policy thus remained in effect and there remained an unpaid balance after the foreclosure of that parcel. Thus, Preservation was entitled to benefits, but, was capped to value of the lost recovery which could have been obtained by foreclosing on the property which had the title defect. The majority rejected first American’s argument that another provision which reduces coverage as the underlying debt is paid off controls as that provision both does not apply in foreclosure settings and would also allow the insurer to escape all liability in the fortuitous event of a debt larger than the initial coverage amount. The majority also rejected arguments based on an endorsement not added to the contract as contrary the prohibition of extrinsic evidence and the integration clause of the policy. The dissent argued that by foreclosing on one of the three listed parcels, Preservation converted the policy to an owner’s title insurance policy. As it obtained more than the insured amount through a credit bid on the property, Preservation suffered no loss. Thus, the dissent would reverse based on a lack of damages.

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