Defendant title insurer appealed the judgment of the Superior Court of Orange County (California) that awarded plaintiff insured buyers damages for bad faith and negligent infliction of emotional distress in connection with defendant's failure to disclose a neighbor's recorded easement in its report and its refusal to take legal action to eliminate the easement and clear the title to the property after plaintiffs had purchased it.
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Plaintiffs ordered a preliminary title report from defendant for certain property. The report failed to disclose a recorded easement on the property. Plaintiffs bought the property and defendant issued a policy of title insurance, which failed to list any easements as being excluded from coverage. When plaintiffs learned of the undisclosed easement, they asked defendant to initiate a legal action to clear the title, but defendant refused. Plaintiffs then sued the neighbor to quiet title and sued defendant for breach of contract and negligence. Later, they filed a supplemental complaint seeking damages for, inter alia, bad faith and negligent infliction of emotional distress. The lower court entered a judgment for plaintiffs and awarded them damages. Defendant appealed. In affirming, the court ruled that emotional distress damages were recoverable since sufficient evidence showed a distress resulted from the harm to plaintiffs' property interest that was caused by defendant's bad faith failure to accurately abstract the title and to quiet title. Also, the jury was properly instructed, evidence was properly admitted, and the award was reasonable.
The court affirmed the lower court's judgment.