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Insurance Coverage for Damage Caused by Encroachments

Boundary Dispute, Neighbor Issues, and Real Estate Law by Simon Offord, Esq.

A very common dispute that we see on a regular basis are encroachments on neighbor’s land.  These encroachments can be anything from a driveway, a portion of a home or balcony, or oftentimes fences or landscaping.  In many situations, the offending party did not intend or even know they were encroaching, and the affected party purchased the property with the encroachment in place.

As a result, the first issue that often must be considered is whether the title insurance policy provides coverage.  As it oftentimes is in the law, the answer is, “it depends.”

Coverage under the title policy?

As part of the purchase of your home, the title company generally provides certain coverage regarding the property.  This coverage includes the status of the title of the property, whether any liens exist, and the lot description among, other things.  Whether encroachments are covered depends on the type of policy.

The standard form title insurance policy in California is issued by the California Land Title Association (CLTA).  The CLTA policy specifically excludes coverage for encroachments by improvements on the insured property onto the adjacent land or for encroachments by a neighbor’s improvements on the insured land.  However, coverage may be provided by the purchase of special endorsements to the policy.  Thus, it would be necessary for the purchaser to specifically seek out an endorsement to cover potential encroachments (and pay the extra fee!).

On the other hand, there is coverage for both types of encroachments under the American Land Title Association (ALTA) policy.  The ALTA policy is less common, and more expensive.  So, you must first look at the policy you received when you purchased, and whether you may have coverage thereunder.

What about General Homeowner’s Policy Coverage?

If you do not have coverage, or sufficient coverage under the title policy, some individuals have looked to their homeowner’s policy to see if they have coverage.  A recent case examined whether this was a possibility.

In the recent case of Fire Ins. Exchange v. Superior Court (2010) 181 Cal. App. 4th 388 the court looked at whether a homeowner’s policy provided coverage for encroachments.  The court held that a neighbor’s encroachment did not create a potential for coverage under the subject homeowner’s insurance policy.

The court looked at the language in the policy, which covered an “occurrence.”   Occurrence was defined as “an accident resulting in property damage.”  The court concluded that building a structure that encroaches onto another’s property is not an “accident” even if the owners acted in the good faith but mistaken belief that they were legally entitled to build where they did (and created the resulting encroachment), so no duty to defend was triggered.

Although this case applied to the specific policy at hand there, it is generally true that a homeowner’s policy will not provide coverage.  However, before making that determination the language of the policy must be examined.

If you have questions about an encroachment, or if you have any other questions about real estate legal issues, contact the Law Offices of Peter N. Brewer at (650) 327-2900, or on the web at www.BrewerFirm.com.

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