Opinion
NOT TO BE PUBLISHED
Marin County Super. Ct. No. CIV 085388
Reardon, J.
Appellants Daniel E. Cohn and Annette C. Goggio own property within a subdivision that partially adjoins lands owned by the Roman Catholic Archbishop of San Francisco (Archbishop); these lands fall outside the subdivision. After the Archbishop asserted easement rights burdening appellants’ property, appellants tendered the claim to respondent First American Title Insurance Company (First American or the company) and, following denial of the tender, they initiated a quiet title action against the Archbishop; the Archbishop countersued. Appellants’ subsequent suit against the title company on alleged duties to defend and indemnify the Archbishop Action resulted in judgment for the company, with the trial court interpreting and applying a policy exception to exclude coverage. We conclude the exception in question does not exclude coverage for the Archbishop Action and appellants’ suit was not time-barred. Accordingly, we reverse the judgment and remand for further proceedings.
We refer to the suit and countersuit as the Archbishop Action.
I. BACKGROUND
A. The Properties
Appellants purchased their home at 150 Rock Hill, Tiburon, in June 2000. Their property is identified as Lot 7 on the Pilgrim Heights Subdivision Map, recorded October 3, 1962. The map shows a 40-foot wide “Access and Utilities Easement” burdening Lot 7 and attaching directly to Lots 8 and 9 within the subdivision. The easement is improved by a narrow concrete strip, which the three lot owners use as a shared driveway.
The access and utilities easement runs along the southern boundary of 150 Rock Hill and ends on the eastern boundary abutting undeveloped property owned by the Archbishop, which is not part of the subdivision. The driveway continues several feet onto the Archbishop’s land.
The subdivision map includes an owners’ certificate which states in part: “We dedicate the areas designated as Access and Utilities Easement, Public Utilities Easement, [] Drainage Easements, [] and Anchor Easements, [], as shown on said map within said Subdivision, said easements to be kept open and free from building and structures of any kind. We also offer to the County of Marin access rights along ‘Rock Hill Road, ’ the frontage thereon of Lots 8 and 9. We also offer for dedication to the County of Marin our easement rights over Parcels ‘A’ and ‘B’ as said parcels are shown upon this map.” The Marin County Board of Supervisors accepted the offer of dedication of Rock Hill Road, the access rights along it and the frontage, as well as the easements over parcels A and B, and rejected “the offer of dedication of all other easements.”
B. The Policy
First American issued a title insurance policy to appellants ensuring them “against actual loss, including any costs, attorneys’ fees and expenses provided under this Policy, resulting from the Covered Risks....” Covered Risks included the following: “Someone else has an easement on the Land”; and “Someone else has a right to limit Your use of the Land.” These risks were covered even if they arose after the policy date. The policy defined the term “easement” as “the right of someone else to use the Land for a special purpose.”
The policy also enumerated a schedule of exceptions which provided: “In addition to the Exclusions, You are not insured against loss, costs, attorneys’ fees, and expenses resulting from:... [¶]... [¶] 5. EASEMENTS: Fifteen Foot Radial Anchor Easement, located in the Westerly portion of the herein described property and Access and Utilities Easement, 40 feet in width, over the Southerly portion of the herein described property, as shown upon the filed map (11 MAPS 42) referred to herein. [¶] Conditions affecting the above easements as imposed in the Owner’s Certificate shown upon the filed map referred to herein, whereby such easements shall be kept open and free from buildings and structures of any kind.” (Hereafter, Exception Five).
Also excepted from coverage were two easements conveyed by recorded grant deed, each, “40 feet in width for access and utility purposes.” One refers by recorded serial number to a 1998 conveyance, with the explanation: “Said easement the same as shown upon the filed map (11 RM 42).” The actual deed recites that the easement for access and utilities “is shown upon Lot 7” on the Pilgrim Heights Subdivision Map, and is “for the benefit of and appurtenant to Lot 8 as shown upon” that map. The other describes an easement “over the Southerly portion” of Lot 7. The actual deed also recites that the easement for access and utilities “is shown upon Lot 7” of the Pilgrim Heights Subdivision Map, and is “for the benefit of and appurtenant to Lot 9 as shown upon” that map.
C. The Archbishop Presses for Access Rights
According to testimony of Daniel Cohn, in 2001, representatives of the Archbishop expressed an interest in developing a portion of the property and acquiring “the rights to use [the 40 foot access and utilities easement] to access and construct a new home.” Appellants indicated they were not inclined to grant access over the driveway, and suggested an alternative access route. Appellants and two neighbors recorded a restrictive covenant/declaration of restriction (Restrictions) in November 2004, pursuant to which they covenanted not to grant the Archbishop access over any of their properties.
The Archbishop countered that the covenant was not enforceable and asserted “claim to an easement, ” which it wanted “formally acknowledged.” Specifically, the Archbishop laid claim to an “easement by necessity” that was created when the two parcels were divided. A draft complaint followed on July 29, 2005, seeking a judicial decree quieting title to an access easement under theories of easement by necessity and easement by implication. The cause of action for easement by implication was based on the subdivision map, with allegations that the October 3, 1962 recorded subdivision map showed “the Access Easement as serving Plaintiff’s Property. Plaintiff is informed and believes... that the recordation of the map was intended by the person recording it to recognize, acknowledge or create an easement for access to Plaintiff’s Property.”
D. Tender of Claim; Denial of Coverage; Litigation
Meanwhile, by correspondence of July 2005, appellants provided First American with a copy of a letter from the Archbishop’s attorney outlining the basis of its claim for an access easement over appellants’ property, followed by a September 20, 2005 letter enclosing a copy of the draft complaint and explaining that “[t]he Archbishop claims an access easement over the Cohn/Goggio property on the basis of the recorded Subdivision Map, Map of Pilgrim Heights, recorded October 3, 1962....” Appellants asked First American to authorize them to pursue a quiet title action.
On November 8, 2005, First American informed appellants that it “denied the title policy claim, ” but indicated it would “hold the file open to allow us to respond to any new circumstances that you believe might trigger coverage.” The company explained that the Archbishop was claiming “a right to use an access easement over our insureds’ land. The easement is shown as an access and utilities easement on the subdivision map pertaining to our insureds’ lot, but the claimant’s land does not lie within the subdivision. The County rejected the subdividers’ offer of dedication of the easement in 1962. The claimant... alleges rights under equitable theories of necessity and implication (the latter based upon the subdivision map) and seeks declaratory relief.” First American concluded that the easement referred to in Exception Five to the policy was the easement claimed by the Archbishop, and hence the exception operated “to preclude coverage for loss arising out of the existence of the easement, irrespective of the cause of the loss.”
Appellants sued the Archbishop on November 16, 2005, asserting causes of action for quiet title and declaratory relief. Alleging that the Archbishop was claiming that “the 40 foot wide access and utility easement” benefited its property, they sought to quiet title on the basis that it had “no legal right, title, or interest in the 40 foot access and right-of-way easement encumbering Plaintiffs’ Property.” In its answer and countersuit, the Archbishop reasserted an interest in appellants’ property in the nature of an easement by implication and/or necessity and propounded the illegality of the Restrictions.
In its tentative ruling, the trial court found that the parties’ properties were once part of a larger parcel owned by a common grantor. An easement by implication and by necessity was created on October 17, 1958, when the common grantor conveyed a portion of his lands to another, leaving what is now the Archbishop’s property landlocked. The decision noted that appellants’ property was burdened with a recorded access and utilities easement benefitting two nonparty residences. The court concluded that the Archbishop had the right of access over the existing “Cohn easement.”
By a letter dated November 7, 2007, appellants notified First American that the Archbishop had prevailed at trial on the theory of entitlement to an easement by necessity, and, since that easement was not disclosed in the title report, the company was responsible for the claim. They asked that First American reconsider its prior denial. First American declined, explaining that notwithstanding that the court found the easement arose by necessity, Exception Five was “not limited by the manner in which the easement was created. The exception is the same easement to which the Archbishop asserted a claim throughout the litigation and the same easement the court found to exist by reason of necessity.” First American reaffirmed denial of coverage after considering appellants’ subsequent request for reconsideration which followed issuance of the final judgment.
Although appellants initially appealed, ultimately the parties settled, mutually agreeing to a driveway expansion plan and related items.
In the statement of decision and judgment entered February 2008, the trial court noted that prior to the 1958 conveyance, the property now belonging to the Archbishop enjoyed access to a public way over the property “conveyed away” in 1958. There was also photographic evidence suggesting a graded drive from the public way to a point at or near the boundary of the Archbishop’s land that existed at least as of the 1960’s, prior to any residential development. Further, the court indicated that an August 1961 Marin County planning staff report referenced an illegal subdivision several years prior that was “now coming home to roost in the form of arbitrary lot lines and a 40-foot roadway easement to adjoining acreage” (i.e., the Archbishop’s property). That report suggested that the roadway easement, although not formally recorded, might have been a consequence of the 1958 conveyance. The court concluded: “The unrecorded 40-foot wide roadway easement referenced in the Planning Staff report appears to be congruent with the later-recorded 40-foot easement that now burdens plaintiffs’ property in favor of the two adjacent properties.” The judgment granted the Archbishop an easement for access by necessity and by implication, identifying the dominant estate as the Archbishop’s property, the servient estate as Lot 7 on the Pilgrim Heights Subdivision Map, and limiting the easement to “an access easement no greater than that described in” the exhibit describing the access and utilities easement reflected on the map.
Suing First American on November 3, 2008, with a complaint for declaratory relief, breach of contract, and breach of the implied covenant of good faith and fair dealing, appellants sought a declaration of their rights under the policy in connection with the Archbishop Action, as well as compensatory and punitive damages. Denying appellant’s motion for summary adjudication, the court ruled that the plain language of Exception Five excluded from coverage “any third-party’s claim of legal right or interest to use the 40-foot access easement that burdens plaintiffs’ property as shown on the 1962 subdivision map. The exception contains no language limiting the scope of the exclusion to a particular neighbor/claimant, legal theory, or allegation of how the claimed lien was created.” The court rejected First American’s statute of limitations and related defenses. This appeal followed the parties’ stipulation to entry of judgment in favor of First American.
II. DISCUSSION
A. The Policy Covers the Archbishop’s Claim
1. Standard of Review; Interpretation Principles
We review de novo the trial court’s decision on summary adjudication. (California School of Culinary Arts v. Lujan (2003) 112 Cal.App.4th 16, 22.) As pertinent here, we undertake de novo review of the lower court’s interpretation of the insurance policy language under our familiar rules of contract interpretation. (E.M.M.I. Inc. v. Zurich American Ins. Co. (2004) 32 Cal.4th 465, 470 (E.M.M.I.).)
The overarching aim of contract interpretation is to give effect to the parties’ mutual intentions at the time of contracting. (Civ. Code, § 1636.) When policy language is clear and explicit and does not lead to an absurd end, we ascertain this intent from the written provisions and go no further. (Id., §§ 1638, 1639; AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 822.) We will understand the words of a policy in their ordinary and popular sense unless the parties use them in a technical sense or “a special meaning is given to them by usage.” (Civ. Code, § 1644.)
A policy provision is ambiguous if it is susceptible to more than one reasonable construction. (Helfand v. National Union Fire Ins. Co. (1992) 10 Cal.App.4th 869, 880.) But, we will not strain the language to create an ambiguity, or label a provision ambiguous simply by isolating phrases and regarding them in the abstract. (Ibid.) Rather, courts will construe the provision in relation to the whole of the instrument, and may explain the policy by reference to the circumstances of its making, and the matter to which it pertains. (Civ. Code, §§ 1641, 1647; E.M.M.I., supra, 32 Cal.4th at p. 470.) We resolve any ambiguity by interpreting the policy provision in question in the sense in which the insurer believed the insured understood it at the time of formation. (Civ. Code, § 1649.) If resort to this rule does not eliminate the uncertainty, then we construe the pertinent language against the insurer, the drafter who created the uncertain language in the first place, thereby protecting the insureds’ reasonable expectations. (Id., § 1654; E.M.M.I., supra, 32 Cal.4th at pp. 470-471.)
Finally, we strictly construe policy exclusions. It is the insurer’s responsibility to phrase exceptions and exclusions in unmistakable, clear language, in order to apprise the insured of their effect. (E.M.M.I., supra, 32 Cal.4th at p. 471.)
2. Legal Framework
An easement is an incorporeal interest in the land of another which bestows on the holder of the easement “ ‘the privilege of doing a certain act on, or to the detriment of, another’s property.’ ” (Mehdizadeh v. Mincer (1996) 46 Cal.App.4th 1296, 1306.) It is an intangible property right that does not relate to physical objects, but rather is imposed on the servient land to benefit the dominant tenement. (Kazi v. State Farm Fire & Casualty Co. (2001) 24 Cal.4th 871, 881; see Civ. Code, § 803.) As an intangible legal right, an easement “is limited to the intangible benefit of access to the easement holder’s property.” (Kazi, supra, 24 Cal.4th at p. 881.) In other words, an easement gives the holder a nonpossessory, restricted right to a specific use or activity on another’s property, and that right is less than ownership. (Mehdizadeh v. Mincer, supra, 46 Cal.App.4that p. 1306.) Although an easement is an interest in land, “it is not itself either land or an estate in land.” (City of Hayward v. Mohr (1958) 160 Cal.App.2d 427, 432.)
The dominant tenement is the land to which an easement is attached; the land upon which a burden or servitude is laid is referred to as the servient tenement. (Civ. Code, § 803.)
Our Civil Code defines appurtenant easements as specified “land burdens, or servitudes upon land, ” which “may be attached to other land as incidents or appurtenances.” (Civ. Code, § 801.) These burdens or servitudes include that of “right-of-way.” (Id., subd. (4).)
As an interest in land, easements may be created by express or implied grant or reservation. (Elliott v. McCombs (1941) 17 Cal.2d 23, 30-31.) One who grants another an easement must have a vested interest in the servient tenement. (Civ. Code, § 804.) Implied easements serve the purpose of giving effect to the actual intent of the parties as demonstrated by all facts and circumstances, and will not be found absent clear evidence of intention. (Tusher v. Gabrielsen (1998) 68 Cal.App.4th 131, 141-142.) Courts will imply creation of an easement only under limited conditions when (1) there is common ownership of a parcel and transfer or conveyance of one parcel, or a portion thereof, to another; (2) prior to division of title, there was “ ‘an existing obvious, and apparently permanent, use of the quasi-easement by the common owner’ ”; and (3) “ ‘[t]he easement must be reasonably necessary to the use and benefit of the quasi-dominant tenement.’ ” (Moores v. Walsh (1995) 38 Cal.App.4th 1046, 1049.) Public policy also allows creation of easements by necessity when (1) the servient and dominant tenements were in common ownership at some point and, (2) due to conveyance by the common owner, one parcel becomes completely landlocked. (Ibid.)
3. Analysis
To recap, in cases such as the instant appeal involving an appurtenant easement, the attributes of such an easement are: (1) there is a dominant tenement to which rights under the easement attaches, and a servient tenement upon which the obligation rests; (2) the easement is attached to the land of the holder of the easement; (3) the easement is a nonpossessory interest in the land of the servient tenement, it is not the land itself; (4) the party granting the easement must have a vested estate in the servient tenement, and the same holds true where the easement is created by implied grant or by necessity.
In the Archbishop Action, the Archbishop asserted, and the trial court found, an easement by implication and necessity benefitting the Archbishop’s and burdening appellants’ property. That easement arose by operation of law in 1958 when the original common grantor conveyed a portion of his lands, leaving landlocked what is now the Archbishop’s property. That easement, referenced in a 1961 planning staff report, was unrecorded. The dominant tenement is the land now owned by the Archbishop. Although the court found that the location of that easement appeared to be congruent “with the later-recorded 40-foot easement that now burdens plaintiffs’ property in favor of the two adjacent properties, ” the two easements are not the same.
The latter reference undoubtedly is to the two recorded easements conveyed by grant deed in favor of Lots 8 and 9, which grants in turn reference depiction of the access and utilities easement on the Pilgrim Heights Subdivision Map, and appear as enumerated exceptions to the policy. However, notwithstanding these actual recorded conveyances, long ago our Supreme Court explained that “[w]hen a lot conveyed by a deed is described by reference to a map, such map becomes a part of the deed. If the map exhibits streets and alleys it necessarily implies or expresses a design that such passageway shall be used in connection with the lots and for the convenience of the owners in going from each lot to any and all the other lots in the tract so laid off. The making and filing of such a plat duly signed and acknowledged by the owner... is equivalent to a declaration that such right is attached to each lot as an appurtenance. A subsequent deed for one of the lots, referring to the map for the description, carries such appurtenance as incident to the lot.” (Danielson v. Sykes (1910) 157 Cal. 686, 690 (Danielson); Mikels v. Rager (1991) 232 Cal.App.3d 334, 354.) Purchasers of lots so conveyed retain a private easement not only in the streets appurtenant to their lots, but also in other passages or streets within the subdivision which are of material benefit to the purchased lots. (Havstad v. Fidelity National Title Ins. Co. (1997) 58 Cal.App.4th 654, 659 .) It therefore goes without saying that when easement rights are created by reference to a subdivision map, both the purported dominant tenement and the right-of-way must be part of the same subdivision.
Construing Exception Five broadly under the theory that it contained “no language limiting the scope of the exclusion to a particular neighbor/claimant, legal theory, or allegation of how the claimed lien was created, ” the trial court ignored vital information forthcoming from the Pilgrim Heights Subdivision Map recited in the exception, as well as the surrounding circumstances and the pertinent law. On appeal, First American adopts the trial court’s misguided reasoning, arguing that Exception Five is not limited as appellants posit because it says nothing about the manner of the easements’ creation or the dominant tenements benefitted by the easement.
Exception Five specifies an easement as shown upon the recorded Pilgrim Heights Subdivision Map. It covers and applies to the “Access and Utilities Easement, 40 feet in width, over the Southerly portion of the herein described property, as shown upon the filed map (11 Maps 42) referred to herein.” (Italics added.) That map was filed October 3, 1962, several years after the easement by implication and necessity was found to exist in favor of the Archbishop. As reflected in the owners’ certificate displayed on the map, the owners of the land intended at that time to dedicate the access and utilities easement to Marin County, but the board of supervisors rejected the offer of dedication. Notwithstanding the refusal of public dedication, the map was recorded with the easement displayed and intact. This very display “necessarily implies or expresses a design that such passageway shall be used in connection with the lots and for the convenience of the owners in going from each lot any and all the other lots in the tract so laid off.” (Danielson, supra, 157 Cal. at p. 690.) And, Exception Five itself goes on to incorporate language from the owners’ certificate, concerning conditions imposed by that certificate “whereby such easements shall be kept open and free from buildings and structures of any kind.”
First American goes to lengths to underscore the board of supervisors’ rejection of the owners’ offer of dedication of the access and utilities easement. We are not sure of the import of this point. Dedication is purely a matter between the owner and the public; there is no such creature as dedication between an owner and private individuals. The public is a party to every dedication. (Biagini v. Beckham (2008) 163 Cal.App.4th 1000, 1012.) Thus the board’s rejection of the offer of dedication has no impact on our analysis.
Moreover, while we agree with First American that the map itself does not create easement rights, we are also cognizant that no appurtenant easement can exist without a dominant tenement. The crucial fact is that under the Danielson doctrine of conveyance of easementby reference to a map, the easement so conveyed is for the benefit of lots laid out within the subdivision, and no property outside the subdivision can benefit from the easement shown on the map. Thus the only possible dominant tenement to which the easement displayed on the map could attach is a lot within the subdivision. When lots within the subdivision are conveyed by reference to the Pilgrim Heights Subdivision Map, the grantees acquire easement rights over the access and utilities easement, which burdens appellants’ property. The easement so conveyed is a private easement, benefitting owners of lots within the subdivision. It is claims arising out of these very specific easement rights, which by definition do not extend to outside lots, which are excluded from coverage under Exception Five. According to the plain policy language, the map and the surrounding circumstances, Exception Five covers only the particular access and utilities easement shown on the Pilgrim Heights Subdivision Map, an easement which can only serve property within—not without—the subdivision. The Archbishop’s property, lying outside the subdivision, could never be a dominant tenement of the easement, and Exception Five does not except his claim. Simply put, the Archbishop has no rights based on the Pilgrim Heights Subdivision Map.
In the instant action, the trial court confused the location of the Archbishop’s easement with the easement itself, ignoring the incorporeal nature of easements. The intangible access rights to traverse the 40-foot strip of land, in the hands of the Archbishop, comprise lesser and different rights than those in the hands of the owners of the lots depicted on the Pilgrim Heights Subdivision Map who acquire such rights by conveyance of deed with reference to the recorded map. Those owners would benefit from an easement for access as well as utility purposes, per the map description.
The purpose of title insurance is to protect against the possibility that encumbrances and other items not located in a title search nonetheless may exist. (Radian Guaranty, Inc. v. Garamendi (2005) 127 Cal.App.4th 1280, 1289.) “A title insurer issues title insurance on the basis of, and in reliance on, the quality of its own investigation into instruments which, when recorded, impart constructive notice.” (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 41.) Thus, title companies insure against losses stemming from differences between the actual title and the record title, as of the date title is insured. (Ibid.) In the case at hand, First American’s title search would have revealed the recorded Pilgrim Heights Subdivision Map. Having scrutinized the easements reflected on that map, the company would have excepted from coverage those burdening appellants’ property, namely the radial anchor easement and the 40-foot access and utilities easement documented in Exception Five, which, we reiterate, contains language mirroring that of the owners’ certificate. The intent was to exclude from coverage these known encumbrances, not an unknown, unrecorded easement by necessity which might benefit properties outside the subdivision and is not portrayed on the map. On the other hand, the covered risks include “Someone else has an easement on the Land”; and “Someone else has a right to limit Your use of the Land”—the very risks at issue in the Archbishop Action.
4. First American’s Arguments Are Not Persuasive
We are not persuaded by First American’s counter arguments.
First, the company counters that the Archbishop’s claim was excepted from coverage under Exception Five because the claim “was, at all times” of a “right to access” its property “across the Access and Utilities Easement over Appellants’ Property.” We are not quite clear about the meaning of this characterization of the Archbishop’s claim. Nevertheless, we are clear that although the Archbishop originally advanced two legal theories—one being that recordation of the subdivision map was intended to create an easement in favor of its property—the theory upon which the Archbishop prevailed was that of easement by necessity, a theory not based on the subdivision map cited in Exception Five.
Next, First American contends appellants “expressly acknowledged” that the Archbishop was claiming rights to the access and utilities easement shown on the subdivision map. The company points to their September 20, 2005 cover letter forwarding the Archbishop’s draft complaint. Regardless of how appellants characterized the claim, the letter is no admission that the claim comes within the scope of Exception Five. Rather, it is a letter tendering the Archbishop’s claim to the title company for coverage. Indeed, appellants explained that the Archbishop’s property was not part of the subdivided lands described in the map, and that the easement in question as set forth on the map benefited two adjoining parcels. More to the point, the determination of coverage turns on the Archbishop’s pleadings, not the cover letter transporting those pleadings. (Westoil Terminals Co., Inc. v. Industrial Indemnity Co. (2003) 110 Cal.App.4th 139, 153.) To repeat, although the draft complaint alleged a cause of action based on the map, that pleading, as well as the subsequent answer and cross-complaint, all alleged an easement by necessity as well; those allegations do come within the purview of Exception Five. An insurer’s duty to defend kicks in if factual allegations give rise to a possibility of coverage. (Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295.) Likewise, an insurer “has a duty to defend the ‘mixed’ action in its entirety, i.e., as to both the claims that are at least potentially covered and also those that are not.” (Buss v. Superior Court (1997) 16 Cal.4th 35, 58-59.)
Specifically, appellants reported: “The Archbishop claims an access easement over the Cohn/Goggio property on the basis of the recorded Subdivision Map, Map of Pilgrim Heights....”
Similarly, First American advocates a broad and expansive reading of Exception Five, suggesting there are no limitations on the dominant tenements that could be benefitted by the exclusion. Under this reasoning, the exclusion would pertain to any and all claimed rights of access over the physical strip of land identified as the “Access and Utilities Easement” on the subdivision map. This interpretation is against law because it confuses the physical location of an easement with the easement itself, thereby ignoring the intangible nature of the right in the hands of a dominant tenement which, under Danielson, supra, 157 Cal. 686, and Mikels v. Rager, supra, 232 Cal.App.3d 334, would never reside outside the subdivision when conveyed by deed with reference to the map. As well, this interpretation runs afoul of the principle that it is the insurer’s obligation to phrase exceptions in clear and unmistakable language, and thus we strictly construe any nonconforming policy exclusions against the insurer. If First American had intended the exception to carry the freight it now contends the exception covers, it would have crafted the language to carry this meaning.
On a related note, the company reasons that since exceptions six and seven expressly except recorded easements benefitting neighboring Lots 8 and 9 to the South, the more narrow interpretation of Exception Five advanced by appellants would render the former exceptions superfluous. This argument fails. The easement in question can benefit any of the other lots in the subdivision, provided that the lot is conveyed by reference to the map and the easement is of material benefit to the lot. (Danielson, supra, 157 Cal. at p. 690; Havstad v. Fidelity National Title Ins. Co., supra, 58 Cal.App.4th at p. 659.) Indeed, Daniel Cohn testified in deposition that the owners of Lots 6 and 8 frequently cross the easement to visit one another, and the Lot 6 owners have built a stairway to accommodate this traversing. In any event, given that easements can be abandoned, extinguished and altered, First American would have been remiss in doing anything less than spelling out as exceptions every recorded instrument affecting appellants’ title, notwithstanding the possibility of some overlap.
5. Conclusion
The trial court’s interpretation of Exception Five fails under the law and the facts. Exception Five does not clearly and unmistakably exclude coverage for claims subsumed within the Archbishop Action. Those claims come within the “covered risks, ” and First American has a duty to indemnify appellants for their “actual loss” resulting from them.
B. Appellants’ Complaint Was Not Time-barred
Alternatively, First American contends that appellants’ complaint is time-barred because (1) appellants were on notice of the Archbishop’s easement from the time of purchase; and (2) they failed to file their claim within two years of First American’s denial of coverage. The trial court correctly rejected these defenses.
1. Actual Notice Is Required
Stating that appellants were on notice of the Archbishop’s claim since 2000 when they purchased the property, First American points to the trial court’s decision in the Archbishop Action, and in particular the following: “They purchased their property without being specifically aware of the Archbishop’s claim to an easement, but they were at least on inquiry [notice] of that claim, in light of the fact that the driveway that serves their property and the two adjacent properties extends not just up to, but several feet into, the Archbishop’s property, and there was, at the time of their purchase, no other point of access to the Archbishop’s land.” This is not the whole story. The court also found that appellants “had no actual knowledge at the time of [their] purchase what access the Archbishop had to [their] property and had no actual notice of any claim of use of an easement by the Archbishop.”
An action founded on a title insurance policy must be commenced within two years of accrual. Such cause is “not [ ] deemed to have accrued until the discovery of the loss or damage suffered by the aggrieved party thereunder.” (Code Civ. Proc., § 339, subd. (1).) “[T]his provision ‘ “... refers to discovery, not to the date when discovery would have been possible.” ’ ” (65 Butterfield v. Chicago Title Ins. Co. (1999) 70 Cal.App.4th 1047, 1053.) Thus, the statute requires actual, not constructive notice. And, while the insured need not be cognizant that a loss may be covered by the policy before the limitations period begins to run, accrual requires “ ‘ “the occurrence of some... cognizable event....” ’ ” (Id. at pp. 1054-1055.) In other words the statute begins to run when the insured “discovers the potential loss” “ ‘that may be incurred if the title is not as represented’ ” in the policy. (Tabachnick v. Ticor Title Ins. Co. (1994) 24 Cal.App.4th 70, 77 (Tabachnick).)
Although First American discusses 65 Butterfield v. Chicago Title Ins. Co., supra, 70 Cal.App.4th 1047, which is directly pertinent to the proper construction of Code of Civil Procedure section 339, subdivision (1), it also relies on cases involving the statute of limitations for professional negligence (Gutierrez v. Mofid (1985) 39 Cal.3d 892, 897-898) and negligence (McCoy v Gustafson (2009) 180 Cal.App.4th 56, 108-109). These cases involve different, inapposite standards and principles.
Here the lower court correctly found that the decision in the Archbishop Action provided only that appellants “were placed on inquiry, ” and there was no finding that they “should have conducted a further inquiry. [¶] On this record, it cannot be said the trial court [in the Archbishop Action] determined that plaintiffs discovered the Archbishop’s adverse claim” to an access easement at the time they purchased the property, “sufficient to commence the running of the statute.”
2. The Limitations Period Was Tolled
First American also asserts that appellants’ claims are time-barred by the two-year statute. Not so.
Appellants first apprised the company of the Archbishop’s claim on July 7, 2005, followed by tender of its draft complaint on September 20, 2005. First American denied the tender on November 8, 2005. Appellants filed their complaint against the Archbishop November 16, 2005, with judgment entered February 21, 2008, and settlement and dismissal of the appeal entered February 24, and February 27, 2009, respectively. The instant action was commenced November 3, 2008.
The limitation period for an action for failure to defend under a title insurance policy is tolled from the date of accrual until the underlying action is terminated by final judgment. (Lambert v. Commonwealth Land Title Ins. Co. (1991) 53 Cal.3d 1072, 1077, 1079.) “Lambert was a duty to defend case” as contrasted with the present action in which appellants initiated a quiet title action to clear the cloud on their title. Nevertheless, contrary to First American’s contention, the rule of Lambert applies to insured-initiated lawsuits. (Tabachnick, supra, 24 Cal.App.4th at pp. 75, 77.)
In Tabachnick, the insured purchaser of a condominium discovered a recorded instrument granting a 40-year protected tenancy to his tenant. Without submitting a claim to his title insurer, the insured sued the entities involved in the condominium purchase. Almost three years later he tendered a claim to his insurer and, when the company refused the tender, he sued the insurer and lost. On appeal the insured tried to squeeze his situation into the parameters of the Lambert ruling without success. The reviewing court concluded the insured’s action was time barred because he failed to lodge a claim under the policy within two years of learning of the title defect. (Id. at p. 77.) Responding also to the title company’s attempt to distinguish Lambert on the basis that it was a duty to defend case and the instant case was not, the court clarified that such argument was “a distinction without a difference. Every time a title insurer refuses to defend a case, or, when an attack on title has arisen but has not ripened into a lawsuit, declines to choose among the alternative policy methods of responding to the adverse claim which includes instituting legal action, it is necessarily refusing coverage under the policy. It is the refusal of coverage which precipitates the insured’s lawsuit against the title insurer.” (Tabachnick, supra, 24 Cal.App.4th at p. 75.) Additionally, the court made it clear that “[i]n order to avail himself of the holding in Lambert, Tabachnick was required to demand benefits under the Policy within the two-year statutory period. If he had made demand within that period and then had to prosecute a suit to protect his title, Lambert would apply to toll the statute of limitations until that lawsuit was concluded.” (Tabachnick, supra, at p. 77, italics added.)
Title insurance policies like the one in question give the insurer the option of defending a third party adverse claim to the insured’s title or interest; suing to quiet title to such adverse claim; or paying the value of the interest insured against. (Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2009) ¶¶ 6:2665, p. 6H-26.) In particular the policy here stated First American’s choices included “(3) Bring or defend a legal action related to the claim.”
The situation contemplated by the Tabachnick court mirrors the present situation. Appellants demanded benefits under the policy well within the two-year statutory period, and thereafter upon denial of the tender prosecuted a suit to protect their title. During the pendency of the Archbishop’s Action, the statute was tolled. Appellants’ suit was timely.
III. DISPOSITION
We reverse the judgment in First American’s favor and remand for further proceedings in accord with our decision. Parties to bear their own costs on appeal.
We concur: Ruvolo, P.J. Sepulveda, J.