[177 NJSuper Page 118] Plaintiff Joseph Sylvania claims a right-of-way over property of defendant Harry Stein. Title to the premises was insured by Commonwealth Land Title Insurance Company, through its predecessor, South Jersey Title and Insurance Company. Stein,
claiming to be protected by the policy, demands that Commonwealth defend the action, a demand which it resists. Stein and Commonwealth have filed cross-motions for summary judgment on the question of Stein's coverage under the policy. The essential facts are not disputed and the motions therefore permit a final disposition of the question raised. R. 4:46.
The title policy was issued to William Stein, who then owned the property, on April 8, 1939. William Stein died. His will devised the premises to his widow, Yetta Stein, who transferred the premises to Anne Mann in 1942. Mann and her husband conveyed the property to defendant Harris B. Stein a few months later. All of these transferees, except Yetta Stein, acquired their rights in the property by deeds containing covenants of general warranty. Neither Commonwealth nor its predecessor received any notice of any conveyance after its policy was issued; it did not consent to any assignment of its policy of insurance and did not agree to insure any title holder other than William Stein.
The title policy contains the following condition:
All interest in this Policy (saving that for damages accrued) shall cease by the transfer of the Policy, or of the title insured; except where the transfer of the Policy is authorized by its conditions, and transferred and approved. Partial transfers of title shall reduce the insurance in the proportion of the value of the estate transferred to that retained. Such transfers shall not affect the interest of a holder of this Policy transferred with the consent of the Company endorsed, as collateral security.
It also lists three circumstances which permit the policy to be transferred. None applies in the present case.
Title insurance policies, being contracts of adhesion, are construed most favorably to the insured; if policy language is subject to different readings, the one most favorable to the insured should be employed. Ohio Cas. Ins. Co. v. Flanagin , 44 N.J. 504, 513 (1965); Keown v. West Jersey Title and Guar. Co. , 147 N.J. Super. 427, 440 (Law Div.1977), rev'd 161 N.J. Super. 19 (App.Div.1978). Stein couples this rule with his doubtful claim that an insurance policy will remain in force, notwithstanding a transfer of the property insured, when there has been no increase
in risk, citing Sandler v. N.J. Realty Title Ins. Co. , 36 N.J. 471 (1962). This case held that
Stein, arguing that no increase in risk has occurred here as a result of any title transfer, claims that the provisions of the insurance policy which eliminate coverage in the event of such transfer should be construed to require that elimination only when there has been an increase in risk. His argument not only overlooks the plain language of the policy, but also ignores Sandler's basic holding. That case involved the transfer of property to the insured's wholly owned corporation and a later transfer back to him. The court made it clear that the insurance was not in force during the period when the insured did not have title, saying (at 482): "The reconveyance to him served merely to re-establish the status which existed at the inception of the insurance contract. The policy was, at most, only suspended during the time that Sandler Realty Co. held title and was revived upon reconveyance to him."
The Stein argument also fails to meet the following rule set forth in Sandler:
Although there is no unanimity in other jurisdictions as to whether an insured must have an insurable interest both at the time of making the insurance contract involving indemnity against damage to property as well as at the time of actual loss, our courts have held that the parties are free to contract for indemnity if the interest existed ...