Somerset Savings Bank v. Chicago Title Ins. Co.

Facts

In 1986, Somerset Savings Bank (Plaintiff) agreed to finance a construction project in Revere, Massachusetts. To protect its investment, Plaintiff purchased title insurance from Chicago Title Insurance Company (Defendant). The contract insured against loss or damage resulting from defects in title or unmarketability of title. The contract expressly excluded from coverage any restrictions on the use of the land resulting from a law or governmental regulation. At the time the contract was executed, Defendant advertised that it was familiar with local laws and practices. In 1988, after construction had begun, the city ordered construction halted because the state had not consented to the issuance of a building permit. State law required consent because the property had once been owned by a railroad company. Defendant claimed that Plaintiff’ losses were not covered by its insurance policy. Plaintiff filed suit, claiming breach of contract and negligence. The trial court granted summary judgment on all claims to Defendant, and the intermediate appellate court affirmed. Plaintiff appealed to the state supreme court.