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Nationwide Life Insurance Company v. Commonwealth Land Title Insurance Company

July 24, 2012

NATIONWIDE LIFE INSURANCE COMPANY
v.
COMMONWEALTH LAND TITLE INSURANCE COMPANY, APPELLANT



On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2-05-cv-00281) District Judge: Honorable Ronald L. Buckwalter

The opinion of the court was delivered by: Sloviter, Circuit Judge.

PRECEDENTIAL

Argued June 25, 2012

Before: SLOVITER, CHAGARES, and JORDAN, Circuit Judges

OPINION OF THE COURT

This interlocutory appeal requires interpretation of a title insurance policy that contains a widely-used endorsement known as the American Land Title Association 9 Endorsement ("the ALTA 9 Endorsement"). Specifically, this court must decide whether the scope of coverage under ¶ 1(b)(2) of the ALTA 9 Endorsement encompasses losses resulting from entire instruments, or whether the coverage is limited to losses caused by the particular types of encumbrances listed in that paragraph.

I. Background

Commonwealth Land Title Insurance Co. ("Commonwealth") issued the title insurance policy at issue in this case to Nationwide Life Insurance Co. ("Nationwide") in connection with real property in the Franklin Mills Mall in Philadelphia County, Pennsylvania ("the Property"). The Franklin Mills Mall is a large shopping center specializing in retail stores. The Property was owned by Liberty Mills Limited Partnership ("Liberty Mills") when Liberty Mills entered into a Master Declaration and Agreement of Easements, Covenants, Conditions and Restrictions (the "Master Declaration") with Liberty Mills Residual Limited Partnership in 1988, which governs all stores in the Mall. Later that year, PMI Associates ("PMI") purchased the Property from Liberty Mills, at which time PMI and Liberty Mills also entered into a Declaration of Restrictions. The Declaration of Restrictions vested Liberty Mills with, inter alia, the right to prior approval of future purchasers of the Property and an express option to purchase.

PMI borrowed $3.5 million from Nationwide in 2001, using the Property as collateral. Nationwide purchased a title insurance policy ("the Policy") from Commonwealth to insure its lender‟s interest in the Property. The Policy contains a specific endorsement that is known as the ALTA 9 Endorsement, which states (in relevant part):

The Company [Commonwealth] insures the owner of the indebtedness secured by the insured mortgage [Nationwide] against loss or damage sustained by reason of:

1. The existence at Date of Policy of any of the following:

(b) Unless expressly excepted in Schedule B ...

(2) Any instrument referred to in Schedule B as containing covenants, conditions or restrictions on the land which, in addition, (i) establishes an easement on the land; (ii) provides a lien for liquidated damages; (iii) provides for a private charge or assessment; (iv) provides for an option to purchase, a right of first refusal or the prior approval of a future purchaser or occupant J.A. at 317.*fn1 Among the documents listed in Schedule B Part I were the Declaration of ...


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