Somerset Savings Bank v. Chicago Title Insurance Co.

649 N.E.2d 1123 (1995)

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Nature of the Case

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Facts

Somerset Savings Bank (P) agreed to finance a construction project. P became the holder of a note for $9.5 million secured by a mortgage on the land and any improvements. P hired a law firm to close the transaction, and they were to search the record to ensure that the mortgage was interest-free from defects and to certify to P with respect to that matter. P wanted the firm to obtain title insurance. The firm issued P a loan policy from Chicago Title Insurance (D) for $9.5 million. The city issued a permit in 1987 to begin construction, but the Attorney General requested that the city halt construction because the Executive Office of Transportation has not consented to the issuance of the building permit as required by law under G.L. c.40 Section 54A. The city issued the order. All or part of the property in question was owned by the Boston and Maine Railroad in 1926, and this was readily apparent on the record at the registry of deeds. P noticed D of its claims and D denied coverage as the Section 54A risk was not a risk covered under the policy. P sued for breach of contract, negligence and negligent misrepresentation. D moved for summary judgment on all claims. The trial court held that in general all building and zoning laws are not treated as encumbrances and even if the 54A restriction was an encumbrance or renders the title unmarketable, there was no coverage as the exclusions to the policy apply. This appeal resulted.