HIDDEN IN-GROUND POOL
CONSTITUTED TITLE DEFECT
In April of 1999, the plaintiff purchased a residence located in Levittown, New York from the defendant-seller. Plaintiff stated that in May of 2000 she installed an above-ground pool in the backyard of the property and that approximately two years later, the pool collapsed into a previously undisclosed and hidden in-ground pool on the premises. It was plaintiff’s assertion that the in-ground pool was negligently filled, covered and hidden in violation of the town housing code and regulations. Plaintiff commenced the action against the former owner, the construction corporation that filled in the pool, the town and its employees, the abstract company that inspected the town records and issued a title report and First American Title Insurance Company, the underwriter that ensured title and the real estate brokers engaged by the sellers to sell the property. The various parties moved for summary judgment requesting that the Court dismiss the action against them for failure to state a cause of action.
The abstract company and the underwriter, First American Title, claimed that the liability of a title insurance company and its agent is prescribed by the terms and conditions of the contract of insurance which ensures only against title defects and not for subsurface conditions such as a hidden in-ground pool which is not a title defect. In opposition, the plaintiff-purchaser stated that after the collapse of the pool, she reviewed the records of the town’s building department and discovered an application for a building permit to build an in-ground pool on the subject property as well as a building permit issued in 1960. Plaintiff further stated that none of these documents or their existence were revealed in the title report and that she was injured in her reliance upon the report. It appeared that no certificate of completion was ever filed with respect to the building of the in-ground pool and when an inspection of the premises was made, the building permit was marked “void” as no pool was found.
As acknowledged by the plaintiff, a careful search of the public records of the town revealed a cancelled building permit for an in-ground pool. A hidden in-ground pool and the improper filling of same is not the type of thing that would be uncovered in an exhaustive search of the town records and as a result, the abstract company could not be held liable under any theory of law. However, First American Title Insurance Company had insured against the “unmarketability of the title” and it was the Court’s view that given the circumstances in this case, there may be a cloud on title because there now exists an illegal in-ground structure for which the building permit has been cancelled. A policy of title insurance insures against loss by reason of defective titles and encumbrances, and insures the correctness of searches for all instruments, liens or charges affecting title to such property. The liability of the title insurer is based upon contract law and not negligence; it is governed by the provisions of the title insurance policy. As a result, it is no defense to a title insurer to assert that the matter which caused the loss to its insured could not have been uncovered by a comprehensive search of the land records. The title insurer will be liable for even hidden defects and all matters affecting title within the policy coverage and not excluded or specifically excepted from coverage. The motion for summary judgment by First American Title Insurance Company was deemed by the Court and it was directed to proceed to trial.
As to the allegation that the town and its employees were negligent in inspecting the property pertaining to the construction, such allegations are merely conclusory and they are not supported by evidentiary fact sufficient to raise a triable issue of fact. The statute of limitations expired prior to service of the summons and complaint and the plaintiff failed to establish some “special relationship” creating a duty to exercise care for the benefit of the plaintiff. Liability may not be imposed on the municipality for failure to enforce a statute or regulation absent a “special relationship”. The elements of a “special relationship” have been defined as including the following: (1) an assumption by the municipality, through promises or actions, of an affirmative duty to act on behalf of the party who was injured; (2) knowledge on the part of the municipality’s agents that an action could lead to harm; (3) some form of direct contact between the municipality’s agents and the injured party; and (4) that party’s justifiable reliance on the municipality’s affirmative undertaking. Such relationship cannot be established without proof that the injured party had direct contact with the municipality’s agents and justifiably relied to his or her detriment on the municipality’s assurances that it would act on the party’s behalf. The allegations pleaded in the complaint were insufficient to obtain liability over the town and its employees under any reading of the complaint and no triable issue of fact existed. As a result, the causes of action against the town and its employees were dismissed.
The real estate brokerage firm did not submit a motion for summary judgment and as a result, as of the date of this decision, the real estate brokerage firm and First American Title Insurance Company remain in the case.
Sabbagh v. Pizzuro , Supreme Court, Nassau County (NYLJ 9/1/2004)
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