Sunday, March 22, 2015

Your adverse possession claim didn't die in your neighbors Estate.

For us property law geeks, the February 27,2015 Nimro v. Holden decision by the Maryland Court of Special Appeals is a fun and important decision. It marks a very important intersection between the law of adverse possession and the claim process in probate matters.

First, some background on the probate process:

  • When somebody dies an estate is created to administer all their "things."  This includes property rights, contract rights, ownership and debts.
  • The rules require that any claims against an estate must be made within a six-month limitation, or the claim is lost forever.
  • The six-month restriction on claims allows for the orderly and prompt administration of estates, and lets heirs inherit in a reasonable time.  Our country is built on the ability to efficiently move property and things from one generation to the next.
Next, some background on adverse possession:

  • It is a claim that takes ownership away from the title owner.
  • Among the requirements, the claimant must demonstrate adverse use for a 20 year period.
  • A court order must declare the transfer of ownership, if all the elements have been proven.
  • This involuntary transfer of ownership is meant to keep land in productive use.
This lawsuit highlighted an apparent gap in the law- what happens when someone dies, and an adverse possession claim has not yet been made against his land?  Is that claim lost if not raised in the probate proceedings within six months?

Mr. Nimro owned several lots overlooking the water. He claimed adverse use of the lots owned by the dead person's estate as an extended front yard that gave him unobstructed water views and beach access.  He did not make a claim in the estate, electing instead to sue in the Circuit Court for Anne Arundel County.

The Circuit Court judge sided with the estate, and ruled that the failure to make the adverse possession claim within the six-month limitation of the probate process extinguished the claim.  Mr. Nimro's claim was dismissed without a trial.

In this decision, the Maryland Court of Special Appeals got it right, and reversed the Circuit Court decision. In summary, the property rights created by the elements of an adverse possession action cannot be extinguished by the passing of the six-month probate limitation period (yes, that is a long sentence).

In the language of real property lawyers (and my inner property geek is now on full display), Maryland does not favor the creation of determinable and defeasible estates (fancy words that simply mean that an ownership interest can change based on future events). And to adopt the reasoning of the lower court would mean that a fully formed adverse possession claim would be subject to defeat if not brought prior to the death of the current legal title owner.  In essence, the court confirms what we practitioners have believed to be the better practice for years- an adverse possession claim need not be filed in a probate case.

This is consistent with other areas of established law, like the statute protecting mortgages and other recorded liens- a secured creditor does not lose a recorded lien if it doesn't file a probate claim within six months.

Well, that was fun. 

Saturday, March 21, 2015

Boat sunk? Don't let the insurer blame you!

You buy insurance for your boat in case of an accident.  If a casualty sinks your boat at the dock, you expect to get paid, right? Well, not if the insurance company can help it!

The case of Miele v. Certain Underwriters at Lloyd's of London is a good example of the tension between you and your insurance carrier in even the most ordinary of claims. It is not enough that you have made all your premium payments. The insurer will look for the quickest and easiest way to deny your claim. And unfortunately, many boat owners make it easy on the insurer by failing to keep up with basic maintenance.

Mr. Miele's 32' Luhrs sank while docked. Mr. Miele made claim on his policy, which insured the hull up to $92,000. And as is the custom, the insurer had the vessel examined by a marine surveyor. The surveyor's report to the insurance company concluded that water entered the boat through a rotten and degraded air conditioning cable.  Based on his report, the claim was denied because of this very common insurance policy language:

This insurance does not cover losses and or damages arising (whether incurred directly or indirectly) from . . .:
C. The cost of repairs or replacing any part of Your Boat by reason of wear and tear, gradual deterioration, osmosis, wet or dry rot, corrosion, weathering, marring, scratching, denting, vermin, pets or marine life, or electrolytic or galvanic action;

In the eyes of the insurance company, Miele had failed to properly maintain his boat. It concluded the sinking was caused by "reason of wear and tear." Miele was left with no boat, and no money. And so he sued in the federal court, alleging a breach of the insurance contract.

The insurer hired another expert to give additional opinions about why the vessel sank. And his reported opinion is a very good example of how far your insurer will go to deny your claim:
The [insurance company expert's] report contained a section labeled, "Conclusions," which discussed how the air conditioning hose had cracks and a fracture that had developed over a period of time. In that section, Wills wrote that his "inspections and testing . . . revealed a stepped, jagged profile where the fracture surface and the hose exterior intersect" and that "[t]his pattern [was] present as a result of numerous small parallel surface cracks in the hose cover joining together over some period of time to form a lengthy fracture front." Wills noted that he "did not determine the age of the hose," but that "[t]he surface cracks" in the hose "suggest the hose has been in service for a significant time and has reached the end of its service life."
The federal court concluded, without a trial, that the insurer had correctly denied the claim. And so Mr. Miele remained without a boat, and without any money.

It is important to carry insurance, but it is a complete waste of your money if you don't take care of your boat! When insurers are looking for any reason to deny your claim, including examination of "numerous small parallel surface cracks" in a rubber hose, you must head them off and perform regular maintenance.

Our office recently reviewed an insurance claim for rain water intrusion into the engine compartment of a trawler. The basis for the insurer's initial denial of coverage was the surveyor's observation that leaves and dirt appeared to obstruct the rain scuppers around a deck hatch. It did not matter to the insurance adjuster that weather data demonstrated extraordinary and torrential rains as the result of a storm just days before the intrusion.

If you regularly maintain and inspect your boat, you take away the insurer's easy denial. But even then, you may not receive a fair offer that pays all that the policy promises, and you will have to fight.