Loeb Secures Arizona Supreme Court Victory for Commonwealth Land Title Insurance Company in 14-Year Title Insurance Coverage Dispute

Loeb & Loeb secured a significant victory for Commonwealth Land Title Insurance Company in a landmark decision from the Arizona Supreme Court, bringing to a close 14 years of litigation involving title insurance coverage tied to a condominium construction and development known as Centerpoint in Tempe, Arizona. Notably, the ruling marks the first time the Arizona Supreme Court has addressed the issue of whether an insured lender has suffered any “loss” under a lender’s policy of title insurance where the lender is fully repaid its loans via the sale of the secured properties and other collateral, notwithstanding the lender’s claim of diminution in value.

The dispute began in 2011 following the bankruptcy of Mortgages Ltd., the construction lender for the Centerpoint condominium project. When the project stalled and more than $30 million in mechanics’ liens were recorded against the property, subsequent lenders—Universal-SCP 1 and VR CP Funding (VRCP)—sought coverage under title insurance policies issued by Commonwealth. After an initial failed sale and a court-approved Morris agreement, Centerpoint Mechanic Lien Claims, LLC (CMLC) was formed to pursue breach of contract and bad faith claims against Commonwealth.

In 2015, the trial court granted summary judgment to Commonwealth on the breach of contract claim, finding the insured loans had been fully repaid and that no covered loss existed. The case proceeded to trial on the bad faith claim, resulting in a $5 million jury verdict in favor of CMLC, along with an award of attorneys’ fees.

On appeal, the Arizona Court of Appeals vacated the summary judgment ruling and directed entry of judgment in favor of CMLC on the breach of contract claim, while also affirming the jury’s verdict finding of bad faith.

On June 10, 2025, the Arizona Supreme Court issued a unanimous decision reversing the Arizona Court of Appeals’ order. The Arizona Supreme Court held that because the insured loans had been fully repaid—Universal through the sale of the secured property and other collateralized properties, and VRCP in the guise of the sale of limited liability company membership interests that exactly matched and satisfied the debt—no covered loss therefore existed under the title insurance policies. In so holding, the Arizona Supreme Court rejected the insureds’ argument that a loss purportedly occurred because the secured properties suffered a diminution in value due to the mechanics’ liens. The Arizona Supreme Court affirmed that the collateral source rule did not apply to preclude consideration of the funds received, as the repayments were contemplated by and integral to the underlying loan transactions and the title insurance related thereto. Separately, the Arizona Supreme Court reversed and dismissed the finding of bad faith and the corresponding jury award, finding that while Commonwealth had defended the insureds under a reservation of rights, the insureds had not suffered any actual damages to support a bad faith claim.

The court clarified that lender’s title insurance covers only actual, unpaid indebtedness and does not extend to losses based on diminished property value where the insured’s loan has been repaid. As a consequence of that holding, the Arizona Supreme Court reinstated summary judgment in favor of Commonwealth on the breach of contract claim and dismissed the bad faith claim. The court also vacated the award of attorneys’ fees and costs to CMLC, ruling that it was not the prevailing party, and remanded the case to the trial court to award attorneys’ fees to Commonwealth as the prevailing party.

Loeb & Loeb represented Commonwealth throughout the litigation and before the Arizona Supreme Court. The team included David M. Satnick, chair of the firm’s Insurance and Real Estate Litigation practice, and Litigation partner John Piskora.