## Facts

- George M. Sonnett, Jr. and Wendy Z. Burgers Sonnett bought property in Sublette County, Wyoming, intending to develop it, and obtained a title insurance policy issued by First American.
- A prior owner’s development “Master Plan” had been adopted by the county planning and zoning authority as part of a 1970 zoning resolution.
- The policy listed various easements and restrictions but did not specifically list the Master Plan.
- The policy excluded loss or damage arising from governmental regulations or ordinances and expressly excluded coverage for the 1970 zoning resolution.
- After closing, the county enforced the Master Plan limitations in a manner that allegedly impaired development and reduced the property’s value.
- The Sonnetts submitted a claim asserting the Master Plan operated as restrictive covenants affecting title; First American denied the claim as excluded governmental regulation.
- The Sonnetts sued for breach of contract, insurer bad faith, and negligence related to the title examination and policy issuance.
- The district court granted summary judgment for First American on all claims and made related evidentiary/procedural rulings; the Sonnetts appealed.

## Issues

1. Whether the Master Plan and 1970 zoning resolution were covered title restrictions (restrictive covenants) or excluded governmental regulations under the policy.
2. Whether First American lacked a reasonable basis for denying coverage, supporting a bad faith claim.
3. Whether First American owed and breached a tort duty in its title search/issuance process by not identifying the Master Plan as a covered title matter.
4. Whether the district court committed reversible procedural or evidentiary error by considering a prior decision letter, striking affidavit portions, or granting summary judgment after ordering mediation.

## Decision

- The Wyoming Supreme Court affirmed summary judgment for First American on all claims.
- The court held the Master Plan restrictions arose from governmental zoning action and fell within the policy’s governmental-regulation exclusion, including the express exclusion for the 1970 zoning resolution; therefore, there was no breach of contract.
- The court held the denial of coverage was reasonable as a matter of law given the clear exclusions; therefore, no insurer bad faith.
- The court held the negligence claims failed because the insurer had no duty to insure against or treat as a covered defect a public, governmental land-use restriction expressly excluded by the policy.
- The court found no abuse of discretion in the district court’s challenged evidentiary and procedural rulings, including reliance on the prior decision letter, striking affidavit portions, and granting summary judgment notwithstanding a mediation order.

## Legal Principles

- Title insurance coverage is governed by the policy’s terms; exclusions for governmental regulations and zoning ordinances bar coverage for losses attributable to such public-law restrictions.
- A county-adopted master plan implemented through zoning authority is treated as a governmental land-use regulation, not a private restrictive covenant, for purposes of title-policy coverage analysis.
- An insurer does not act in bad faith when it denies a claim based on a reasonable reading of clear, applicable policy exclusions.
- A negligence theory cannot be used to impose liability for an expressly excluded risk by reframing the claim as a failure to search for or disclose that excluded governmental restriction.
- A court may grant summary judgment despite a mediation order when no genuine dispute of material fact exists, and evidentiary rulings on affidavits and judicial notice-type materials are reviewed for abuse of discretion.

## Conclusion

The court held that the development limitations flowed from a governmental zoning resolution and were expressly excluded from the title policy, so First American had no contractual liability, no bad faith exposure for denying coverage, and no tort liability based on alleged failure to treat the excluded regulation as a covered title defect.


Sonnett v. First Am. Title Ins. Co., 309 P.3d 799 (Wyo. 2013)