1st Circuit: Bank’s Claim Under Maine’s Unfair Claims Settlement Practices Act Not Time-Barred

The U.S. Court of Appeals for the First Circuit affirmed the district court’s judgment dismissing a bank-trustee’s claims against a closing agent and title insurer for negligently misidentifying a parcel of land secured by a mortgage because it was time-barred by Maine’s general statute of limitations, but found that the bank’s claim against the title insurer under Maine’s Unfair Claims Settlement Practices Act (USCPA) was timely.

The bank took ownership of a mortgage that incorrectly identified a parcel of unimproved land rather than the correct parcel of improved land that encompassed the property owner’s residence.  After the property owners defaulted on their mortgage, the bank filed an insurance claim with the title insurer, who also supplied the legal property description for the mortgage.  The title insurance claim was denied because “the policy did not cover the improved parcel, and insured only the parcel actually identified by the mortgage.”  The bank filed a complaint alleging negligence against the closing agent, and negligence, unilateral mistake, and violation of the USCPA against the title insurer.  The district court dismissed the complaint, declining to apply Maine’s twenty-year statute of limitations for personal actions on certain types of contracts and financial instruments, and further concluded that Maine’s six-year limitations period for civil actions barred the bank’s claims.

On appeal, the bank agreed that its claims against the closing agent were time-barred under Maine’s six-year statute of limitations.  As to the bank’s allegations against the title insurer, the court of appeals reasoned that the bank’s unilateral mistake and negligence claims were also time-barred because the bank “could have discovered” the title insurer’s alleged mistaken and negligent mortgage property description no later than March 17, 2010, when the mortgagors’ filed their adversary complaint to limit the bank’s mortgage lien to the unimproved parcel—which was more than six years before the bank filed suit, on August 9, 2016.  By contrast, the court of appeals concluded that the bank’s UCSPA cause of action accrued on May 13, 2016, when the title insurer denied the bank’s claim seeking indemnification for the established loss.  Because that date is within the statute of limitations, the court vacated the dismissal of the bank’s UCSPA claim and remanded for further proceedings.

Notably, the panel’s original April 25, 2018 opinion was withdrawn and vacated after the court granted the title insurer’s petition for panel rehearing.  The title insurer’s petition challenged the court’s holding specific to the bank’s USPCA claim.  The court’s new decision was issued on March 18, 2019, and came to the same conclusion as the previous decision, which WBK covered last year, in an update available here.