## Facts

- A real estate partnership purchased property and obtained a title guarantee/insurance policy insuring the named insured against loss from title defects, liens, or encumbrances.
- The policy did not list, as an exception, a previously recorded easement granted to a gas company for a gas line.
- After discovering the easement, the partnership demanded payment for an alleged covered loss; the insurer denied coverage.
- The plaintiff sued for breach of contract and alleged bad faith, seeking compensatory and punitive damages.
- The insurer asserted that the policy insured an earlier partnership with the same business name but different partners, and that the earlier partnership dissolved when two of three partners transferred their full partnership interests (including management rights), forming a new partnership.
- The plaintiff argued the enterprise continued under the same name and venture and should be treated as the same insured for coverage purposes.
- Both parties moved for summary judgment.

## Issues

1. Whether the plaintiff was the same “insured” entity named in the title policy despite changes in partnership membership.
2. Whether, under Ohio’s Uniform Partnership Act principles, the transfer of full partnership interests dissolved the original partnership and terminated any policy rights in a newly constituted partnership.

## Decision

- Plaintiff’s motion for summary judgment was denied.
- Defendant’s motion for summary judgment was granted.
- The court held that the original partnership dissolved upon the change in partners and the plaintiff was a distinct partnership not named as an insured.
- Because the plaintiff lacked standing to enforce the policy, the court did not reach whether the easement was a covered defect/encumbrance or whether the insurer acted in bad faith.

## Legal Principles

- Under Ohio partnership law applying an aggregate conception of partnership, a change in the identity of partners generally causes dissolution of the existing partnership and creation of a new partnership.
- Transfers of full partnership interests that include management and control rights are not treated as mere assignments that preserve the partnership’s continuity.
- Insurance rights under a policy issued to a named insured partnership do not automatically pass to a later-formed partnership with different members absent a contractual provision extending coverage.
- A plaintiff that is not the named insured (or otherwise entitled under the policy) lacks standing to sue for breach of the insurance contract.

## Conclusion

The court concluded that partner changes dissolved the originally insured partnership under Ohio law, making the plaintiff a separate, uninsured partnership without standing to recover under the title policy, and entered summary judgment for the insurer.


Fairway Dev. Co. v. Title Ins. Co. of Minn., 621 F. Supp. 120 (N.D. Ohio 1985)