## Facts

- Chicago Title Insurance Company issued title insurance policies to owners of adjoining parcels, including Theodore and Selma Laabs and the McKenzies.
- The parcels were described by metes and bounds, and the descriptions overlapped, creating a dispute over a strip of land.
- The legal description in the Laabs’ deed and policy was defective because it omitted reference to one government lot, which affected indexing in the tract index.
- The Laabs filed a quiet title action claiming ownership of the disputed strip; the McKenzies answered and counterclaimed, asserting title.
- The Laabs tendered defense of the counterclaim to Chicago Title under the policy; the insurer refused, relying on policy exclusions.
- The quiet title court ultimately ruled the disputed strip belonged to the McKenzies.
- The Laabs then sued Chicago Title for coverage; the trial court awarded the reasonable value of the disputed property and the Laabs’ reasonable attorney’s fees and costs incurred defending the counterclaim.
- Chicago Title appealed the coverage and liability determination (not the amount of damages).

## Issues

1. Whether the Laabs’ loss (loss of the disputed strip and related litigation expenses) fell within the title policy’s coverage or was barred by exclusions for pre-existing defects or matters known to the insured but not disclosed.
2. Whether exclusions for defects “created, suffered, assumed, or agreed to” by the insured applied on the theory that the Laabs created or caused the adverse claim.
3. Whether a compensable “loss” existed under the policy when a court determined the Laabs did not own the disputed strip.
4. Whether Chicago Title’s refusal to defend made it liable for the Laabs’ reasonable attorney’s fees and costs in the underlying title litigation.

## Decision

- The Supreme Court of Wisconsin affirmed the judgment imposing liability on Chicago Title.
- The court upheld the trial court’s finding, supported by credible evidence, that the Laabs lacked knowledge of the adverse claim at the time the policy was issued; exclusions based on the insured’s knowledge did not apply.
- The court rejected the argument that the insured “created” the adverse claim; the overlap and indexing problems were not attributable to conduct intended to generate the defect or claim.
- The court held the insured sustained a covered loss when the policy failed to secure the title interest as insured and the disputed portion was adjudicated to belong to another.
- The court affirmed Chicago Title’s liability for the reasonable value of the disputed property and for the insureds’ reasonable attorney’s fees and costs incurred defending the counterclaim after the insurer refused to defend.

## Legal Principles

- Title insurance covers unknown defects in title existing as of the policy date unless a clear, applicable exclusion bars coverage.
- Exclusions for defects or claims “known to the insured” require proof of the insured’s knowledge; trial-court factual findings on knowledge supported by credible evidence control on appeal.
- Exclusions for matters “created, suffered, assumed, or agreed to” by the insured do not apply absent insured conduct that actually brings about or accepts the defect or adverse claim.
- A compensable loss occurs when the insured title interest fails to conform to what was insured and the insured is deprived of the insured property interest by an adverse adjudication.
- When a title insurer wrongfully refuses to defend against a covered adverse claim, it may be liable for the insured’s reasonable defense costs incurred in that litigation.

## Conclusion

The court held that the insureds’ loss from an overlapping and improperly indexed legal description was within title policy coverage because the insureds neither knew of nor created the adverse claim, and the insurer that refused to defend was responsible for both the property loss and the insureds’ reasonable litigation expenses.


Laabs v. Chi. Title Ins. Co., 72 Wis. 2d 503, 241 N.W.2d 434 (Wis. 1976)