First American Title Insurance Company, a California Corporation, Plaintiff/appellee v. Johnson Bank, a Wisconsin…

Summary

The court held that the lender's title insurance policy was ambiguous about the date for measuring diminution in value when undisclosed restrictive covenants prevented the property's intended use and allegedly caused the borrower's default. In those circumstances, the policy-issuance date may be used, but only if the lender proves that the title defect caused the default and foreclosure; otherwise, the foreclosure date applies. The court vacated the appellate decision, reversed the superior court's judgment, and remanded for further proceedings. Bales, C.J., dissenting, would have required use of the foreclosure date because the policy and Arizona's statutory framework did not impose a duty to discover and disclose title defects before the loan was made.