Economic lack of marketability relates to physical conditions affecting the use of the property, while title marketability relates to defects affecting legally recognized rights and incidents of ownership. The presence of hazardous material may affect the market value of land, but where no lien has been recorded, it does not affect the title to the land.
Plaintiff apartment buildings and plaintiff development company filed an action against defendant title insurance companies to recover for the costs of removing hazardous substances. The trial court held that title insurance policies issued by defendants did not provide coverage for the costs of removing hazardous substances from plaintiffs' property. Thus, the trial court dismissed the action without leave to amend. Insisting that the damage was insurable under coverage for the property's physical condition under the clause of the title insurance policies, the plaintiff's appealed the case.
Were the plaintiffs entitled to recover the costs of removing hazardous substances?
Denial of coverage under title insurance policies was affirmed because the language of the insuring clauses of the policies unambiguously provided coverage to plaintiffs only for defects relating to title, and made no reference to the physical condition of the land. The court on appeal rejected plaintiffs' contentions that since the presence of hazardous substances on the property impaired its marketability, defendants were obliged to pay cleanup costs, as they amounted to a lien upon the property. The court found a distinction between marketability of title and the market value of the land itself. Therefore, the court held that plaintiffs could not claim coverage for the property's physical condition under the clause of the title insurance policies.