(Failure to Consider Extrinsic Information in Support of Repeated Tenders of Defense of Quiet Title Actions Supported Claim for Bad Faith)
(September 2025) - In a long running dispute involving repeated tenders of defense of actions to quiet title for an easement running across Chicago Title Insurance Company's ("Chicago") insured, Richard Bartel's ("Bartel") property, the Court of Appeal in Bartel v. Chicago Title Ins. Co., 111 Cal.App.5th 655 (May 30, 2025) affirmed the trial court's holding that Chicago had acted in bad faith in refusing to defend Bartel against such actions. However, the Court of Appeal affirmed the trial court's decision that Chicago's conduct did not support an award of punitive damages.
The parties' dispute related to whether a title policy purchased by Bartel in 1998 afforded a defense against three different actions for quiet title of an easement for a road running across Bartel's property brought by an adjoining landowner. The Chicago policy excluded certain coverage as follows:
The title insurance policy included a "schedule B," titled "Exceptions from Coverage." (Some capitalization & boldface omitted.) In relevant part, schedule B stated, "This policy does not insure against loss or damage (and the Company will not pay costs, attorney's fees or expenses) which arise by reason of: [¶] . . . '[E]asements, liens or encumbrances, or claims thereof, which are not shown by the public record[]' [and] 'a road maintenance agreement'" (capitalization & italics omitted) recorded on September 2, 1970 (and subsequent amendments).
Plaintiffs seeking to quiet title of an easement across Bartel's property, Rod Composti and Patrice Edwards (collectively, "Composti") filed an action in 2010 against Bartel ("Composti I lawsuit"). The complaint did not expressly refer to a deeded easement, but did include as an exhibit, the "Boyd-Sluter deed" providing for a 40 foot right-of- way over an existing road which is described as the "Entire Lower Road" and lists property owners, "Bartel,Stok." On March 18, 2011, Bartel tendered the defense of the Composti I lawsuit to Chicago. Subsequently, the lawsuit was dismissed. Thereafter, on July 8, 2011, Composti filed a second lawsuit against Bartel alleging the same claim for an easement across Bartel's property (the "Composti II lawsuit"). The complaint also included as an exhibit the Boyd-Sluter deed. On July 27, 2011 Chicago denied the defense of the first and second lawsuits. Chicago explained that the "Lower Road" identified in the second complaint is one of the roads affected by the 1970 agreement and thus excepted from coverage (Exception 5). Bartel's counsel argued that the complaint's obvious mistake in identifying Lower Road as Fern Flat Road (which does not cross Bartel's property) did not entitle Chicago to deny coverage of the action.
At that point, Composti dismissed the second complaint on October 16, 2012. Subsequently, on September 10, 2013, Bartel filed an action to quiet title to his property free of any easement. In response, Composti filed a cross-complaint ("Composti III action") seeking to quiet title of an easement across Bartel's property. On September 5, 2014, Bartel tendered the defense of the Composti III action to Chicago. On October 28, 2014 Chicago denied coverage of Bartel's tender of the Composti III action based on the conclusion that cross-complaint involved an easement created under the 1970 agreement that was excepted from coverage.
In January 2015, Bartel provided Chicago with a copy of a motion for summary adjudication filed by Composti arguing that aside from easement rights created by the 1970 agreement, early conveyances contained reservations or grants of rights of way over Pax Place (Bartel's property). The motion cited the 1971 Boyd-Sluyter deed, noting that the grant deed of property including parcel 6 to Vern Sluyter reserved a right of way 40 feet in width over an existing road that describes the current location of Pax Place Court. Chicago again declined coverage of the Composti III action. In a request for reconsideration made on January 19, 2015, Bartel's counsel argued that the road passing through parcel 6 was "Middle Road or Pax Place Court and was not mentioned in the 1970 agreement."
Based on the possibility that the 40-foot right of way for the road passing through parcel 6 was Pax Place Court, which was not mentioned in the 1970 agreement, Chicago agreed to defend Bartel against the Composti III action. The Court of Appeal referred to Chicago's explanation to accept Bartel's tender of defense as follows:
Chicago Title explained that the motion for summary adjudication was "the first time in the litigation that an additional and independent basis for [Composti's] alleged easement across Pax Place Court" had been asserted based on the Boyd-Sluyter deed and reasoned that because it "alleges a potentially covered matter—an easement by virtue of the Boyd Deed—the [c]ompany accepts the [t]ender as of . . . the date the nsured tendered this matter."
Bartel's counsel contested Chicago's basis for accepting the defense of the Composti III action and pointed out that the Boyd-Sluyter deed had been raised in the earlier Composti I and II lawsuits.
Several months later the trial court in the underlying Composti III action ruled in favor of Composti and found that an express easement and right of access was provided to Composti based on the 1971 Boyd-Sluyter deed. The trial court confirmed the existence of a 40-foot wide easement appurtenant to parcel No. 9 for ingress and egress over Pax Place. After a further request to expand its acceptance of defense, Chicago agreed to accept Bartel's tender as of September 5, 2014, rather than January 19, 2015.
On October 27, 2016, while the Composti III action was pending, Bartel filed an action for breach of contract and bad faith against Chicago, which encompassed the period of Bartel's first tender of defense of March 18, 2011 to January 19, 2015. The trial court agreed with Bartel and found that a duty to defend was owed from the initial tender of defense of the Composti I and II lawsuits as both included as an exhibit the Boyd-Sluyter deed. As such, defense costs were owed by Chicago for the period of March 18, 2011 to October 16, 2012 (the date the Composti II lawsuit dismissed) and defense costs for the period of September 5, 2014 to the present.
In part two of the Bartel action, the trial court found that Chicago had acted in bad faith, but denied Bartel's request for the imposition of punitive damages. In addition, the trial court agreed with Chicago that it had no duty to defend Bartel during the period of October 16, 2012 to September 5, 2014 as there was no litigation pending against Bartel. The trial court also rejected Chicago's defense that the statute of limitations barred Bartel's action. Rather, the statute was tolled pending a final determination of the underlying Composti III action.
The Court of Appeal affirmed the trial court's findings regarding Chicago's duty to defend as follows:
The trial court's ruling on Chicago Title's duty to defend, based on the presence of the Boyd-Sluyter deed in the materials accompanying Bartel's first tender of defense, is consistent with this case authority. It confirms only that an insurer's duty to defend is based on the information known to the insurer at the time of the third party lawsuit, as distinguished from issues not litigated in that action (such as the construction of the policy language). (See, e.g., Schaefer/Karpf Productions v. CNA Ins. Co. (1998) 64 Cal.App.4th 1306, 1312, 76 Cal. Rptr. 2d 42.) Because the court's determination of Chicago Title's duty to defend was properly based on the matter litigated in Composti III and on the undisputed fact that Chicago Title was aware of the grant deed attached to the Composti I and Composti II complaints, Chicago Title's challenge on that ground is misplaced. We conclude the trial court did not err in finding a duty to defend Composti I and Composti II "'as of the date of Bartel's first tender'" in March 2011.
The Court of Appeal also affirmed the trial court's decision that Chicago did not have a duty to defend Bartel for the period between the dismissal of the Composti II lawsuit and tender of the Composti III action. The Court of Appeal reasoned as follows:
Bartel maintains that he was not required to renew tender after Chicago Title wrongfully refused to defend him in the first two underlying actions. The cases cited by Bartel for this point are factually distinguishable in that they involve a single underlying action, in which the insurer denied coverage, and the insured was "thereby relieved of his obligation to notify the insurance company of the progress of the action against him." (Samson, supra, 30 Cal.3d at p. 238.) The cases cited by Bartel that absolve an insured of the need to renotify the insurer after the wrongful denial of a tender for defense do not address circumstances in which the alleged liability for the insured's attorney fees and expenses extends to preparations for a separate action from that in which the insurer had notice. (See, e.g., Samson, at pp. 238-239; Stalberg, supra, 230 Cal.App.3d at p. 1233 [holding that when insurer refused plaintiffs' tender of their appeal in the underlying action, it "gave up the right to control the litigation and could not insist that plaintiffs use" a specific law firm to cover the attorney's fees on appeal]; Moe, supra, 21 Cal.App.3d at p. 302 [declining to enforce notice clause in insurance contract absent a showing of prejudice to the insurer due to the delayed notice and where insurer was aware of the pending claim].)
Because cases are not authority for propositions not considered (Howard Jarvis Taxpayers Assn. v. Newsom (2019) 39 Cal.App.5th 158, 169, 252 Cal. Rptr. 3d 106), we decline to construe these cases as imposing a general rule of liability for defense expenses incurred in a separate or subsequent action from the action in which the insurer wrongfully rejected the insured's defense.
We conclude that the trial court did not err in denying Bartel's claim for damages under a breach of contract (title insurance policy) theory for the "'donut hole'" period between Composti II and III.
The Court of Appeal reasoned that Chicago acted in bad faith in connection with its refusal to defend the Composti I and Composti II lawsuits as follows:
The reasonableness of Chicago Title's position must also be viewed in context of the timeline of the underlying litigation. (Pulte Home Corp. v. American Safety Indemnity Co. (2017) 14 Cal.App.5th 1086, 1119, 223 Cal. Rptr. 3d 47 (Pulte) ["The determination of the reasonableness of an insurer's contractual position takes into account not only the rules of contract interpretation (e.g., construing ambiguity in favor of insured), but also the given factual context in which the dispute arises."].) Chicago Title's failure to construe the facts presented by the Composti complaint as requiring it to accept the tender of defense was not an isolated miscalculation but the result of the insurer's persistent but misguided belief that it (1) needed only to ascertain whether the allegations in the complaint could result in a judgment that it would be obligated to pay, and (2) had deciphered the location of the unnamed roads referenced in the 1970 agreement to confirm the source of the alleged easement.
In sum, the undisputed facts establish that Chicago Title repeatedly disregarded the California standard applicable to the duty to defend. (See Howard, supra, 187 Cal.App.4th at p. 531 [insurer's refusal to defend insured in third-party suit "was founded on an unfair and selective reading of" the facts as falling outside the coverage period]; Pulte, supra, 14 Cal.App.5th at pp. 1121-1122 [insurer's claims handling process disregarded known case authority in interpreting its policy].) We conclude that Chicago Title not only violated its contractual duty to defend Bartel but its implied covenant to fairly and in good faith assess the possibility of coverage based on the available facts.
Lastly, the Court of Appeal affirmed the trial court's calculation pre-judgment owed to Bartel and rejected his claim for punitive damages.
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