Park v. First American Title Insurance Company
Filing
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MEMORANDUM DECISION granting 9 Motion to Dismiss for Failure to State a Claim. Defendants Motion to Dismiss is GRANTED and this case is dismissed for containing time-barred claims. Signed by Judge Dale A. Kimball on 7/12/2017. (jwt)
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH
Kang Sik Park, M.D.
Plaintiff,
MEMORANDUM DECISION
AND ORDER
v.
First American Title Insurance Company
Case No. 2:17-CV-280-DAK
Defendant.
This matter comes before the court on Defendant First American Title Insurance
Company’s (“First American”) Motion to Dismiss claims brought by Plaintiff Kang Sik Park,
M.D. (“Park”) for being time barred, for prior material breach, and for failure to state a claim on
which relief can be granted.
The court held a hearing on the motions on July 6, 2017. At the hearing, Robert
Mansfield and Christopher Feuz represented Park; Mark Morris represented First American. The
court took the motion under advisement. Having carefully considered the law and facts relevant
to the pending motion, the court issues the following Memorandum Decision and Order.
BACKGROUND
First American is a Nebraska corporation doing business in Salt Lake County. It issued a
title insurance policy (“the Policy”) to Park, an individual residing in Salt Lake County, after
Park provided Peter and Virginia Lamb with a private loan. The Lambs secured the loan by
naming Park as the beneficiary of a deed of trust to their ownership interest in two different
parcels of land. Park purchased the Policy through First American to insure his interest in the
parcels. In August 2010, Park and the Lambs were named, among others, as defendants in a
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Quiet Title Action challenging their interest in one of the parcels. Park answered the Quiet Title
Action in February 2011 and otherwise handled the case pro se.
Park met with First American in December 2013 to discuss the litigation. At that time,
the individual he met with initiated a claim (“the Claim”) under Park’s policy. First American
did not respond to the Claim.
In October 2015, the Third Judicial District Court, Salt Lake County, held a hearing on
the Quiet Title Action. In December 2015, Judge Bernards-Goodman concluded that the Lambs’,
and thus Park’s, interest in the property was invalid. At some unspecified point in the factual
history of this case, the Lambs defaulted on the loan. Because he had received no response from
First American regarding his claim, Park filed the Complaint that initiated this litigation.
Park’s Complaint alleges four causes of action: (1) breach of contract; (2) breach of the
implied covenant of good faith and fair dealing; (3) an alternative claim for breach of implied-infact contract; and (4) an alternative claim for unjust enrichment, quasi contract, and/or contract
implied in law.
First American’s Motion to Dismiss asserts that all of Park’s claims are time barred. Next
it argues that Park breached his contractual duties under the Policy first, which released First
American of its obligations under the first breach doctrine. Finally, First American argues that
Park’s claims fail as a matter of law.
DISCUSSION
Ample case law states that if an insurance contract fails to provide a choice of law
provision, a federal court sitting in diversity will apply the law of the forum state. Salt Lake
Tribune Publ'g Co., LLC v. Mgmt. Planning, Inc., 390 F.3d 684, 687 (10th Cir. 2004). The court
therefore allows Utah law to govern this dispute.
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First American asks the court to dismiss all of Park’s claims for being time barred. It cites
to Utah Code § 31A-21-313(1)(a), which states that actions against insurers regarding an
insurance policy must be brought within three years after the “inception of the loss.” Utah Code
Ann. § 31A-21-313 (West).
Park argues that he suffered no loss until December 2015 when he lost the Quiet Title
Action. He points to § 8 of the Policy, which states that, in the event of litigation, First American
has no liability until a court of competent jurisdiction has issued a final judgement. According to
Park, § 8 tolled the statute of limitations until the time for appeal in the Quiet Title Action had
passed. Therefore, Park concludes that his “inception of loss” did not occur until January 2016,
which was the deadline to appeal the Quiet Title Action’s final judgement. The court disagrees.
Inception of Loss
The “inception of loss” language used in the Utah Code has not been precisely defined
through case law in the context of title insurance. The various cases cited by both Park and First
American all agree that the inception of loss arises the moment the loss is first incurred or begins
to accrue, but differ in identifying what event counts as a loss.
First American relies heavily on Canadian Indem. Co. v. K & T, Inc., which defines the
“inception of loss” as beginning from “the first moment that the loss was incurred, not from the
moment of the alleged notification to the insured that the insurer would not comply with the
terms of the contract.” 745 F. Supp. 661, 664 (D. Utah 1990), aff'd, 953 F.2d 1391 (10th Cir.
1992). The plaintiff in Canadian Indemnity sued its insurance company for failure to defend
litigation in which the plaintiffs had previously been named as defendants. Id. The court held that
the loss occurred when the plaintiff first accrued defense costs in that litigation. Id.
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In Anderson v. Beneficial Fire & Casualty Co., the plaintiff sued his insurance agency for
failing to pay his claim after plaintiff’s property was stolen. 21 Utah 2d 173, 174 (1968). The
Utah Supreme Court affirmed the lower court’s ruling that the inception of the loss occurred
when the property was stolen. Id.
Conversely, in Tucker v. State Farm Mut. Auto. Ins. Co., plaintiffs sued their automobile
insurance agency for breach of contract when the agency denied a second claim to recover
additional personal injury protection benefits related to a previous claim the insurance company
had paid. 2002 UT 54, ¶ 15. The Utah Supreme Court affirmed the lower court’s ruling that that
the limitations period began when the insurer denied the insured’s claim. Id.
Canadian Indemnity and Anderson are easily consistent: in Canadian Indemnity, the
cause of action was a breach of the failure to defend, and the inception of loss occurred when the
plaintiff accrued defense costs; in Anderson, the cause of action was a failure to pay a property
claim, and the inception of the loss occurred when the property was discovered to be stolen.
Tucker seems to directly contradict Canadian Indemnity because the Tucker court ruled
that the inception of loss occurred when the insurance company denied the Tucker plaintiffs’
claim. However, the key difference is that the Canadian Indemnity case involved one insurance
claim while the Tucker case involved two claims.
The original claim the Tucker plaintiffs made on their automobile insurance policy arose
out of an automobile accident. The accident was likely the inception of loss for that initial
insurance claim. When the plaintiffs filed another claim to procure additional personal injury
benefits, they did not suffer the loss for that additional claim until the claim was actually denied.
Once the insurance company denied the additional claim, the plaintiffs suffered a new loss
separate from the loss that occurred when they were involved in the automobile accident. Thus,
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the limitations period for a lawsuit based on that second claim started to run the day the
insurance company denied it.
Park is suing First American because it failed to pay Park’s Claim for the loss of his title.
Title insurance is unique from automobile or property insurance in that it protects the insured’s
interest in, not only a valid title, but also in a clean title. Once the insured gets named in a quiet
title action, the title is no longer clean. So Park suffered a loss the moment he was served with
the Quiet Title Action: the loss of his clean title. Because the Quiet Tile Action was the inception
of his loss, the limitations period began to run as soon as Park became aware of the pending
action. Therefore, the very latest he could have filed suit against First American was February
2014—three years after Park answered the Quiet Title Action.
Policy § 8 and Tolling
The court agrees with First American that § 8 of the Policy does not define a loss. Under
the Policy, First American has two options if the insured faces litigation: it can either pay out the
policy (Dkt. 14 at Ex. A, Policy § 6) or take over the insured’s defense (Dkt. 14 at Ex. A, Policy
§ 4). If First American chooses to defend the insured in the event of litigation, rather than also
having to pay out the Policy if the insured makes a claim during that litigation, § 8 allows First
American to wait until the litigation is completely over before having to answer the claim.
Section 8 does not attempt to exclude litigation from the definition of a loss; rather it
allows First American to be able to work all the way through litigation and attempt to receive a
favorable outcome before it is required to pay out the Policy. Thus, § 8 does not preclude the
interpretation that the inception of Park’s loss occurred when he was served with the Quiet Title
Action.
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The court concludes that Park’s claims are time barred. The issue of the timeliness of
Park’s claims is dispositive to First American’s Motion to Dismiss and renders unnecessary the
analysis of any remaining arguments.
CONCLUSION
Defendant’s Motion to Dismiss is GRANTED and this case is dismissed for containing
time-barred claims.
DATED this 12th day of July, 2017
______________________________
DALE A. KIMBALL
United States District Judge
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