Bad Faith

Bartel v. Chicago Title Insurance Company
Cal.App. 6th Dist. (H052083) 5/12/25 (Cert. for Pub. 5/30/25)

Plaintiff purchased a rural property in Santa Cruz County, which was accessed via a private road crossing his neighbor's property. A dispute arose when the neighbor claimed an easement over the road, leading to increased traffic due to marijuana cultivation. The neighbor filed two lawsuits asserting an easement, both of which were dismissed without prejudice. Plaintiff then sued to quiet title, and the neighbor cross-complained, asserting an easement based on a 1971 deed. The trial court ruled in favor of the neighbor, finding an express easement, a decision affirmed on appeal.

Plaintiff funded his defense using retirement savings after Chicago Title Insurance Company, his title insurer, denied his tender for defense, citing policy exclusions. Plaintiff sued Chicago Title for breach of contract and bad faith. The trial court found Chicago Title had a duty to defend from the initial tender but rejected Plaintiff's bad faith claim and request for punitive damages. The court awarded damages for the diminution in property value but denied damages for periods outside the litigation.

On appeal, the California Court of Appeal, Sixth Appellate District, found that Chicago Title acted in bad faith by failing to defend Plaintiff despite the potential for coverage indicated by the 1971 deed. The court reversed the trial court's judgment on the bad faith claim and remanded for a determination of damages resulting from the breach of the implied covenant of good faith and fair dealing. The court affirmed the trial court's denial of punitive damages and its award of prejudgment interest on the additional diminution in value. The case was remanded for further proceedings consistent with the appellate court's findings.

Docket