GMAC MORTGAGE, LLC vs. FIRST AMERICAN TITLE INSURANCE COMPANY., 464 Mass. 733

Summary

The wife's husband intended for the lender's mortgage to be recorded before a deed creating a tenancy by the entirety. However, the deed was mistakenly recorded before the mortgage. When the husband died, record title to the property vested solely in the wife, to the exclusion of the lender. The title insurer brought suit on behalf of the lender in a land court, seeking to reform the deed to the wife's property or to equitably subrogate the wife's interest in the property behind the lender's mortgage. The wife then initiated suit in a superior court against the lender, which was removed to a federal court. Following a bench trial, the federal court determined that the title insurer had no obligation under its policy to pay the lender's defense costs. However, the court stayed the proceedings pending response to its certified questions. The Supreme Judicial Court found, inter alia that the title insurer was only obliged to defend the insured on the covered claims. With the possible ...