## Facts

- Somerset Savings Bank financed acquisition and construction of a 72-unit condominium project in Revere, Massachusetts, secured by a $9.5 million mortgage.
- The Bank retained a law firm to search the record, certify title matters to the Bank, and obtain title insurance; the firm also acted as Chicago Title’s authorized issuing agent.
- Chicago Title issued a loan title insurance policy insuring against loss from defects, liens, encumbrances, and unmarketability of title, while expressly excluding coverage for laws or governmental regulations restricting land use or occupancy.
- After construction began and the Bank had disbursed more than $5 million, state officials asserted that the property had been used as a railroad right of way and that Mass. Gen. Laws ch. 40, § 54A required written state consent before a building permit could issue.
- The City of Revere issued a cease-and-desist order halting construction due to the absence of the required state consent.
- Chicago Title denied coverage on the ground that the problem was a statutory restriction on use, not a title defect.
- The Bank sued for breach of contract and for negligence/negligent misrepresentation based on an alleged failure to search title and disclose recorded matters, citing marketing statements suggesting Chicago Title’s familiarity with local laws and practices.

## Issues

1. Whether a loan title insurance policy covering defects and unmarketability of title, but excluding governmental use restrictions, covers losses caused by a statute requiring state consent to build on former railroad land.
2. Whether, apart from the policy, the insurer could face tort liability if it (through its conduct, marketing, or agent) voluntarily undertook to search title and disclose matters of record to the insured and performed that undertaking negligently.

## Decision

- The Supreme Judicial Court held that the policy did not provide coverage for losses resulting from the statutory build-consent requirement because it was a governmental use restriction excluded by the policy and did not render title unmarketable.
- The court affirmed summary judgment for Chicago Title on the breach of contract claims, including the contention that the policy imposed a contractual duty to examine, analyze, or report on title status.
- The court vacated summary judgment on the negligence and negligent misrepresentation claims, holding that there was a triable factual dispute whether Chicago Title voluntarily assumed extra-contractual duties to search title and disclose matters of record.
- The case was remanded for further proceedings on the tort theories.

## Legal Principles

- “Unmarketability of title” concerns the legal quality of title and the ability to convey it, not the economic desirability of property or restrictions on how land may be used.
- Legal or regulatory limits on land use generally do not make title unmarketable; they affect use and value rather than the owner’s ability to convey a valid interest.
- A title insurance policy is a contract to indemnify against specified risks; absent policy language to the contrary, it is not a representation of title condition and does not, by itself, create a contractual duty to search, analyze, or report on title.
- Even where coverage is excluded, an insurer (including through an issuing agent) may incur tort liability if it voluntarily undertakes to provide title-search or advisory services to the insured and fails to exercise reasonable care in performing that undertaking.

## Conclusion

The court held that a title policy excluding governmental use restrictions did not cover losses caused by a statutory requirement for state consent to build, but allowed negligence-based claims to proceed because evidence could support a finding that the insurer assumed extra-contractual duties to search title and disclose material recorded matters.


Somerset Sav. Bank v. Chi. Title Ins. Co., 420 Mass. 422, 649 N.E.2d 1123 (1995)