## Facts

- Two married couples purchased California real property for commercial development and obtained a preliminary title report and title insurance from a title company that also handled escrow.
- The title company discovered two recorded easements during its search but omitted one (a recorded ingress/egress easement over a 20-foot strip) from the preliminary report and made no reference to it in the issued policy.
- After closing, adjacent owners asserted and used the recorded easement as a roadway across the 20-foot strip.
- The purchasers demanded that the title company eliminate the encumbrance or defend their title; the company refused, asserting (incorrectly) that the easement was excluded from coverage.
- The purchasers sued the adjacent owners to quiet title and sued the title company for breach of contract and negligence; after a bench trial, title was quieted and the purchasers recovered economic damages, largely attorney’s fees and a small amount for loss of use.
- The purchasers then pursued supplemental tort claims against the title company (including bad faith and related theories); a jury awarded compensatory damages for emotional distress and punitive damages based on the company’s conduct.
- The title company appealed, challenging emotional-distress damages absent physical injury and the punitive-damages award.

## Issues

1. Whether emotional-distress damages are recoverable against a title insurer for negligent and wrongful handling of a title defect and coverage dispute when no physical injury is shown.
2. Whether a title insurer’s refusal to acknowledge coverage and defend insureds, after omitting a known recorded easement from its title work, can support tort liability for bad faith.
3. Whether the evidence permitted punitive damages based on oppression, fraud, or malice (including conscious disregard of insureds’ rights).

## Decision

- The Court of Appeal affirmed the judgment for the purchasers.
- The court upheld compensatory damages for emotional distress despite the absence of physical injury.
- The court sustained tort liability based on the insurer’s wrongful handling of the title defect and refusal to defend/acknowledge its obligations.
- The court upheld punitive damages, concluding the jury could find malice in fact or conscious disregard of the purchasers’ rights.

## Legal Principles

- Emotional-distress damages may be recoverable without physical injury when the nature of the transaction and relationship makes serious emotional disturbance a particularly likely and foreseeable result of the defendant’s wrongful conduct.
- A title insurer may owe duties sounding in tort when it mishandles title information and then, in bad faith, refuses to defend or honor policy obligations, forcing insureds into protracted and stressful litigation.
- Punitive damages may be awarded when the defendant’s conduct supports a finding of malice, oppression, or fraud, including conscious disregard of the plaintiff’s rights; knowledge of the problem coupled with misleading omissions and an unjustified refusal to perform can satisfy that standard.

## Conclusion

The court affirmed liability against the title insurer beyond contract damages, holding that the insurer’s omission of a recorded easement and bad-faith refusal to defend supported tort recovery for emotional distress without physical injury and justified punitive damages.


Jarchow v. Transamerica Title Ins. Co., 48 Cal. App. 3d 917, 122 Cal. Rptr. 470 (Cal. Ct. App. 1975)