Case Law Update: Guadalupe Puente v. Fidelity National Title, et al
On May 9, 2014, the Indiana Court of Appeals upheld a title insurer’s subrogation rights under the title policy, issuing its opinion in Puente v. Beneficial Indiana, Fidelity National Title Insurance, et al., Case No. 45A03-1304-PL-159. The Court of Appeals held that the insurer’s contractual subrogation rights could not be defeated by equitable defenses or negligence. Prior to the Puente decision, title insurers were frequently subjected to equitable defenses of insureds and the targets of subrogation recovery efforts. Usually those defenses focus on the title insurer’s culpability in the loss through a faulty title search or some other alleged negligence. The Puente case confirms that the right of subrogation is controlled by the insurance contract, not equity.
Several existing cases, notably Ticor Title Insurance v. Graham, 576 N.E.2d 1332 (Ind. Ct. App. 1991) and Lawyers Title Insurance v. Capp, 369 N.E.2d 672 (1978), stated that subrogation-related rights may be equitable, even when they are part of a written insurance contract. As a result, the title insurers in Lawyers and Ticor were denied subrogation rights.
In Puente, the insured lost his property at a tax sale in 2002. His title insurer, Fidelity, retained counsel to defend Puente and his lender, PNC, but the defense failed after approximately seven years of litigation. As part of the underlying judgment, Beneficial Indiana (Puente’s seller) was found liable to Puente for breach of its Warranty Deed, which did not disclose or take exception to the tax sale. Following a judgment for the tax sale purchaser, Fidelity paid PNC in full, satisfying its title claim and Puente’s debt to PNC. Fidelity offered Puente the difference, indicating that upon satisfaction of his claim, Fidelity would pursue recovery from Beneficial as Puente’s subrogee.
Puente rejected the claim payment and sued Fidelity for bad faith, fraud, intentional infliction of emotional distress, misrepresentation, and various other claims. Puente also sued Meridian Title (the issuing agent), PNC (Puente’s lender), and Beneficial (the seller) for similar claims. Puente also sued the lawyer Fidelity retained to represent him for malpractice. The Court of Appeals held that the insurer’s contractual subrogation rights could not be defeated by equitable defenses or negligence. In doing so, the Court of Appeals rejected the notion that subrogation, when part of a contract, depends on equity.
For more information or questions about this opinion, contact Kurt V. Laker.