The Supreme Court of the State of New York, New York County recently granted a title insurance company's motion to dismiss its policy-issuing agent's counterclaim, finding that the title insurer had no obligation to inform the agent of a title claim arising from a policy the agent issued, nor did the insurer have to seek the agent's consent before settling. See Fidelity National Title Insurance Co. v. Rockwell Abstract, et al., 652588-2021 (N.Y. Sup. Ct. Sept. 1, 2021). In 2006, the non-party property owner ("Ada") executed a mortgage on her property. The lender obtained a title insurance policy underwritten by plaintiff and that was issued by defendant, plaintiff's policy-issuing agent. In 2015, the children of the Ada's deceased husband, who had passed away in 2001, brought a lawsuit claiming they were 50% owners of the property and that Ada did not have the right to mortgage the property in 2006. The lender submitted a claim to plaintiff, who eventually settled the case. Plaintiff then brought this indemnification action against defendant, claiming defendant failed to properly identify the children's interest in the property. Defendant filed a counterclaim that plaintiff breached the duty of good faith and fair dealing because plaintiff did not inform defendant of the claim or seek defendant's consent to settle. Plaintiff moved to dismiss the counterclaim.
The Court granted plaintiff's motion to dismiss the good faith and fair dealing counterclaim. Under the parties' agency agreement, "Agent agrees that Company shall be fully authorized and empowered, in its absolute discretion, to control, defend, prosecute, settle, compromise, and/or dispose of any claim, litigation or proceeding for which: (i) Company may be liable; and/or (ii) an insured under a Title Assurance may be liable." Based on this provision, the Court found that the agent "contracted away [its] right to have input in a potential settlement" and that "plaintiff was entitled to settle the title litigation 'in its absolute discretion' and did not need to inform defendant." Accordingly, the Court dismissed the agent's counterclaim.
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