Stonewalled: Insurance Denied for Massachusetts Homeowners’ Boundary Land

The Massachusetts courts recently said something deed holders should know. The case could impact other states in addition to Massachusetts, depending on how their laws appear on the books.

Last month, the Massachusetts Appeals Court ruled that Old Republic Title Insurance Company could legally deny coverage for land the policy holders owned if the land fell outside the boundaries described in their title insurance policy.

Yes. The owners owned the land—yet the title insurance policy wouldn’t cover it.

Neighbor Sues—Because They’re Repairing an Old Stone Wall?

Douglas Lester and John Mandeville own a home in Bristol County, Massachusetts. This case began because Lester and Mandeville decided it was time to repair the old wall near the roadway abutting their property.

In 2019, Lester and Mandeville were summoned to appear in Superior Court. The neighbors had taken issue with the restoration work.

Lester and Mandeville then asked Old Republic to defend them against their neighbor’s lawsuit.

But Old Republic said the land under the stone wall was not covered. The wall existed outside the metes and bounds of the land, as stated in the property’s legal description on the deed and on the policy. 

Lester and Mandeville sued Old Republic in March 2022 in civil court. They claimed the company breached its contract and violated state provisions that protect insurance customers. They claimed that they were entitled to coverage, and to recover their legal fees.

Is a neighbor unwilling to respect your boundaries? Check out our guide to neighbor encroachment issues.

Court Says: No Breach, No Bad Faith, No Consumer Protection Violation.

A Superior Court judge, and then the Appeals Court, held for Old Republic.

The first court found that Lester and Mandeville owned the land under the stone wall. A Massachusetts law (known to lawyers as the derelict fee statute) says the deed holder to land that’s “abutting a way”—that is, next to a passage or road—also owns the land up to the middle of that road.

So far, so good.

But the court also specified that the derelict fee statute applies to deeds—and not to insurance contracts. Specifically, say the Massachusetts courts, it’s the legal description written into the title insurance policy—not the deed holder’s complete ownership under state law—that tells us what the policy covers. In Massachusetts (and wherever laws are similar) the difference is now an obvious title coverage gap for the deed holder.

So Lester and Mandeville owned the land that the neighbors wanted them to leave alone. But they did not have the insurance to cover the court action needed to defend their ownership rights. Old Republic, said the Massachusetts courts, was within its rights to deny coverage. No breach of contract, no legal unfairness, no violation of consumer insurance laws.

Wait, What? A Title Insurer Declares What It Will Cover—And That Can Be Less Than All the Land Belonging to the Deed Holders?

The position of the title company is focused purely on the legal description of the Lester property. The land under the stone wall exists outside the boundaries of the property, as they’re described in the owner’s title policy. That strip of land, the courts agreed, is “unambiguously nowhere to be found in the policy’s coverage.” There’s a legal rule that “unambiguous” contract language must be taken at its “plain meaning.” 

The company used language that came straight from the Lester and Mandeville property deed. And so the policy described the land which the policy agreed to cover. In that technical sense, the company didn’t shortchange the deed holders.

But to the extent that the legal description didn’t articulate the correct boundaries of the land as Massachusetts law clearly designated them—including the land under the border wall—the title company skipped an important point that it could have informed the policy holders about. And Lester’s counsel did argue this point.

After all, isn’t a title company in the best position to know how much land the owners hold? Isn’t the point of a title policy to protect a deed holder from a gotcha like this? Justice Wood on the Appeals Court thought so. And Wood’s concurring opinion was pretty clear about it.

An Appellate Justice Has Urged Lawmakers to Deal With This Matter.

Justice Wood agreed with the court’s majority. The title company, Wood acknowledged, hadn’t violated its contract with Lester. It hadn’t acted against the provisions of the title policy. It hadn’t violated state consumer-protection laws. It hadn’t withheld funds that it should have paid out.

And yet, a nagging reality persisted. Under Massachusetts law, Lester and Mandeville owned the land under the wall. Justice Wood pointed out that the title insurer ought to know that. So, deed holders could reasonably assume their title insurer would cover it.

Justice Wood then suggested that Massachusetts lawmakers or the state’s insurance regulators ought to update the rules on how insurers deal with this scenario. California law already does. In California, title insurance is understood to cover legal interests in lands connected with the policy holder’s covered property. Why wouldn’t Massachusetts enact the same policy? After all, the derelict fee statute, passed into law in 1971, has kept lawyers busy for decades. Disputes over the ownership and control of boundary strips, railways, roads, cul-de-sacs and border walls come up often. Mismatches between the state law and the legal descriptions on individual deeds aren’t rare.

This gap could be cured if the deed were to invoke the state law or state an exception to the law’s application. But in this kind of title-policy dispute, the courts focused on the recorded deed and policy language rather than outside evidence. As we can see, this mismatch can and does pose expensive problems for deed holders. It’s bound to be tested in courts until the state resolves the gap that’s lingering in Massachusetts property law.   

Justice Wood invoked public policy. Wood urged decision makers to understand that homeowners who live next to roadways “should not be discouraged from improving that property by fear of the costs of defending against spurious challenges to their title by neighbors.”

Justice Wood’s call to action “may prove to be the most closely watched part of the decision,” writes Tez Romero for Insurance Business Magazine Online. “If Massachusetts lawmakers take up the suggestion, title insurers operating in the state could face broader coverage obligations—a development worth monitoring.”

And we will.