A Florida state appeals court has partially overturned a lower court's ruling, determining that Old Republic National Title Insurance Co. must defend two insureds in an ongoing lawsuit. The case involves a rescission claim stemming from allegations of a conspiracy with a property seller, which the appeals court found did not trigger an exclusion in the insurer’s policy.

On Wednesday, a three-judge panel of the Third District Court of Appeal ruled that Old Republic had a duty to defend Jose Fernandez and Olga Palma against a rescission claim. The lawsuit sought to cancel the deed transferring a property from the seller to the insureds, as Langley, the original buyer, contended that his contract was superior and had been interfered with by the insureds. The panel found that the rescission claim, as pleaded, only contained generalized allegations, and thus, the exclusion cited by the insurer did not apply.

The court reversed the lower court’s decision and remanded the case for further proceedings. The dispute began in 2019 when Benton William Langley entered into a contract to buy a 20-acre parcel of property in the Florida Keys for $1.2 million. A backup contract was later signed by Fernandez and Palma for a slightly higher price. When Langley’s contract failed to close on the scheduled date, the insureds completed the purchase the following day.

Langley filed a lawsuit, claiming that he had a valid agreement with the seller and accused the insureds of conspiring with the seller’s representative to undermine his rights and purchase the property. The lawsuit included claims of tortious interference, civil conspiracy, and a request to rescind the insureds' deed.

Old Republic denied coverage under the title insurance policy, asserting that the tortious interference and conspiracy claims were not covered by the policy. Additionally, it invoked an exclusion (3)(a) in the policy, which bars coverage for losses arising from defects, liens, or claims created or agreed upon by the insureds. The insurer argued that the lawsuit alleged the insureds acted in concert with the seller to interfere with Langley’s contract rights, triggering the exclusion.

In 2021, Fernandez and Palma filed a lawsuit against Old Republic for failing to defend them in the underlying action, asserting that the insurer breached its contractual duty. Although the trial court sided with Old Republic, ruling that it had no duty to defend, the appeals panel disagreed, particularly with respect to the rescission claim. The panel concluded that the allegations in the Langley lawsuit did not include specific facts showing that the insureds engaged in misconduct. The court emphasized that the exclusion could only apply if there were detailed allegations of wrongful conduct.

Representatives for both parties did not immediately comment on the ruling. The case is Fernandez et al. v. Old Republic National Title Insurance Co., case number 3D23-1088, in the Third District Court of Appeal of Florida.