PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
INTERNAL MEMORANDUM
Calderwood & Harkness LLP
Litigation (General) Practice Group
From: Yuki Nakamura, Working Associate, Litigation (General), Calderwood & Harkness LLP
Reviewed By: Francesca Morano, Responsible Partner, Litigation (General), Calderwood & Harkness LLP
To: File — Fairwater Real Estate Investment Trust Defense (Engagement No. 1036-00003)
Date: September 24, 2021
Re: Analysis of Meridian Title Underwriters, Inc. Reservation of Rights Letter Dated September 10, 2021 — Policy No. MTU-2016-FL-089312
Matter: Ridgemark Development Partners LLC v. Fairwater Real Estate Investment Trust, Case No. 2021-CA-002748-18-W, Circuit Court of the Eighteenth Judicial Circuit in and for Seminole County, Florida
PRIVILEGE NOTICE: This memorandum constitutes attorney work product prepared in anticipation of litigation and is protected from disclosure under applicable rules, including Rule 5.010 of the Florida Rules of Civil Procedure and Federal Rule of Civil Procedure 26(b)(3). This memorandum also reflects confidential attorney-client communications. It is intended solely for internal use by Calderwood & Harkness LLP in connection with Engagement No. 1036-00003 and should not be disclosed to any third party without the express written consent of the Responsible Partner.
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I. Executive Summary
Meridian Title Underwriters, Inc. ("Meridian") issued a Reservation of Rights ("ROR") letter dated September 10, 2021, in response to Fairwater Real Estate Investment Trust's ("Fairwater" or "FREIT") August 6, 2021 tender of the defense of the declaratory judgment action brought by Ridgemark Development Partners LLC ("Ridgemark") in the Circuit Court of the Eighteenth Judicial Circuit in and for Seminole County, Florida, Case No. 2021-CA-002748-18-W. The ROR was issued by Owen R. Hatch, Senior Claims Counsel for Meridian, and was addressed to Fairwater with a copy to this firm.
The ROR acknowledges receipt of Fairwater's tender and the existence of Fairwater's owner's title insurance policy (Policy No. MTU-2016-FL-089312, with a face amount of $47,300,000) but reserves Meridian's right to deny coverage. Specifically, the ROR cites Policy Exclusion 3(a) as a potential basis for declining coverage. Exclusion 3(a) is a standard provision in ALTA owner's title insurance policies that excludes from coverage "defects, liens, encumbrances, adverse claims, or other matters created, suffered, assumed, or agreed to by the insured." The ROR states that Meridian is continuing its investigation and has not yet reached a final coverage determination.
This memorandum analyzes whether Exclusion 3(a) is applicable to the facts underlying the Ridgemark declaratory judgment action and concludes that it is not. The Cross-Parcel Easement at the center of the dispute was created in 1998 — more than eighteen years before Fairwater acquired the Sanford Logistics Center property. Fairwater had no role in creating, suffering, assuming, or agreeing to the easement. To the contrary, Fairwater reasonably relied upon the title commitment issued by Tidewater Abstract & Title, LLC (Commitment No. TWA-2016-09821), which did not list the Cross-Parcel Easement as a Schedule B-II exception to coverage. The owner's policy issued by Meridian likewise omitted the easement from its Schedule B exceptions. Meridian's own underwriting determination — made through its agent, Tidewater — reflected the conclusion that the easement had been extinguished or was otherwise not a valid encumbrance on Fairwater's title. Meridian cannot now invoke its own agent's omission as a basis for denying coverage to the insured.
Recommendation: We recommend that Fairwater press Meridian for a full and final coverage determination by sending a detailed demand letter within the next ten business days. We further recommend that Fairwater preserve all rights under the policy, including potential bad-faith claims under Florida Statutes § 624.155 if Meridian unreasonably delays or denies coverage. In the interim, Calderwood & Harkness will continue to fund the defense on Fairwater's behalf, reserving the right to seek full reimbursement of defense costs from Meridian. Finally, Fairwater should preserve its potential negligence and errors-and-omissions claim against Tidewater Abstract & Title, LLC as a secondary avenue of recovery.
II. Background
A. The Fairwater Property and Acquisition
Fairwater Real Estate Investment Trust is a Maryland real estate investment trust organized in 2009 that focuses on the acquisition, management, and disposition of industrial and logistics properties in the southeastern United States. Fairwater's portfolio currently includes approximately 8.2 million square feet of industrial space across Florida, Georgia, and the Carolinas.
On October 7, 2016, Fairwater acquired the 42.7-acre property located at 4250 Commerce Park Boulevard, Sanford, Florida 32771, known as the "Sanford Logistics Center" (the "Property"), from Sunbelt Distribution Centers, Inc. ("Sunbelt" or the "Seller") for a total purchase price of $47,300,000. The transaction was documented by a Special Warranty Deed recorded on October 7, 2016, in Official Records Book 6312, Page 0981, Public Records of Seminole County, Florida.
The Property consists of a 614,000 square-foot Class-A cross-dock distribution facility situated on the 42.7-acre parcel. The facility was constructed in 2001 and features 36-foot clear heights, 120 dock-high doors, four drive-in doors, and approximately 8,000 square feet of office space. The Property has direct access to Commerce Park Boulevard, which connects to State Road 417 (Central Florida GreeneWay) approximately 1.5 miles to the west.
At the time of Fairwater's acquisition, the Property was 100% leased to Condor Supply Chain Solutions, Inc. ("Condor") under a twelve-year triple-net (NNN) lease with a term running from October 2016 through September 2028. The lease provides for annual base rent of approximately $3.89 per square foot, yielding annual base rental income of $2,386,460. The lease contains 2.0% annual rent escalations and requires Condor to bear all real estate taxes, insurance, and maintenance costs. Condor is a national third-party logistics provider with approximately $1.4 billion in annual revenue and an investment-grade credit profile, making the lease a significant component of the Property's value.
The acquisition was financed in part by a $28,400,000 term loan from Kensington Capital Markets, LLC (the "Kensington Loan"), evidenced by a Promissory Note dated October 7, 2016. The Kensington Loan is secured by a first-priority mortgage and security agreement recorded on October 7, 2016, in Official Records Book 6312, Page 0988, Public Records of Seminole County, Florida. The Kensington Loan has a seven-year term maturing October 7, 2023, with a fixed interest rate of 4.15% per annum and requires monthly debt service payments of approximately $157,300 (principal and interest). The loan documents contain standard covenants, including a requirement that Fairwater maintain title insurance in an amount not less than the original loan amount and promptly notify Kensington of any title claims or disputes.
The Property was appraised at $51,800,000 as of January 15, 2021, by Lakebridge Valuation Group, LLC, a MAI-designated appraisal firm. The appraisal was commissioned by Kensington in connection with the loan's upcoming maturity and was based on a capitalization of the in-place net operating income at a rate of 4.61%. The appraisal did not account for any encumbrance arising from the Cross-Parcel Easement, as the easement was not identified as a condition of title at the time of the appraisal.
B. Title Insurance on the 2016 Acquisition
In connection with Fairwater's acquisition of the Property, Tidewater Abstract & Title, LLC ("Tidewater"), located at 315 West First Street, Sanford, Florida 32771, served as the title agent. Tidewater conducted the title search, prepared the title commitment, and facilitated the closing of the transaction on behalf of both the buyer and the title insurer. Tidewater is a licensed title insurance agent authorized to issue title commitments and policies on behalf of Meridian Title Underwriters, Inc. ("Meridian") in the State of Florida.
Tidewater issued Title Commitment No. TWA-2016-09821, dated September 9, 2016, to Fairwater as the proposed insured. The commitment identified the Property by legal description and set forth the conditions under which Meridian would issue an owner's title insurance policy upon closing. Schedule A of the commitment identified the fee simple estate in the Property as vested in Sunbelt Distribution Centers, Inc., and proposed the issuance of an ALTA Owner's Policy of Title Insurance in the amount of $47,300,000 upon conveyance to Fairwater.
Critically, Schedule B-II of the commitment — which lists exceptions from coverage that would appear in the final policy — did not include the Cross-Parcel Easement originally recorded on June 22, 1998, in Official Records Book 4517, Page 1283, Public Records of Seminole County, Florida. The omission of this easement from Schedule B-II represented Tidewater's determination, acting as Meridian's agent, that the Cross-Parcel Easement was not a valid or subsisting encumbrance on the Property's title. This omission is consistent with Fairwater's position that the easement had been extinguished by the Commerce Park Boulevard Phase II Replat, recorded on September 15, 2014, in Plat Book 78, Pages 44–46, Public Records of Seminole County, Florida, which contained blanket vacation language applicable to private easements shown on the prior plat.
Following the closing on October 7, 2016, Meridian issued its ALTA Owner's Policy of Title Insurance, Policy No. MTU-2016-FL-089312, to Fairwater with a policy date of October 7, 2016, and a face amount of $47,300,000 — matching the purchase price of the Property. The owner's policy insured Fairwater's fee simple interest in the Property, subject only to the standard printed exceptions and the specific Schedule B exceptions listed in the policy. The Cross-Parcel Easement was not listed among the Schedule B exceptions, confirming the underwriting determination reflected in the title commitment.
The omission of the Cross-Parcel Easement from both the title commitment and the owner's policy is of central importance to the coverage analysis. Meridian, through its authorized agent Tidewater, represented to Fairwater that the Property was not encumbered by the easement. Fairwater relied on that representation in proceeding with the $47,300,000 acquisition. The entire purpose of the title insurance product is to indemnify the insured against losses arising from defects in title that were not disclosed at the time of the policy's issuance. The Cross-Parcel Easement — if it is found to be valid and subsisting — is precisely such a defect.
C. The Cross-Parcel Easement and the Dispute
The easement at the center of this dispute (the "Cross-Parcel Easement") is a 60-foot-wide non-exclusive ingress/egress and utility easement originally granted by Thurmond Industrial Holdings, Inc. ("Thurmond"), as grantor, to Sunbelt Distribution Centers, Inc. ("Sunbelt"), as grantee, via Special Warranty Deed recorded on June 22, 1998, in Official Records Book 4517, Page 1283, Public Records of Seminole County, Florida. The easement runs north–south across the eastern boundary of the northern parcel — which is now the Property owned by Fairwater — and was intended to provide the southern parcel (now owned by Ridgemark) with vehicular and utility access to Commerce Park Boulevard.
The southern parcel, a 22.3-acre tract immediately to the south of Fairwater's Property, was acquired by Ridgemark Development Partners LLC ("Ridgemark") on or about March 12, 2020. Ridgemark has publicly disclosed plans to develop the southern parcel as "Ridgemark Commerce Village," a mixed-use flex-space and light-industrial park comprising approximately 96 units totaling 188,000 square feet. Ridgemark's development plan relies, in part, on the Cross-Parcel Easement to provide primary vehicular access from Commerce Park Boulevard across Fairwater's Property to the southern parcel.
The dispute between Fairwater and Ridgemark turns on the legal effect of the Commerce Park Boulevard Phase II Replat (the "2014 Replat"), recorded on September 15, 2014, in Plat Book 78, Pages 44–46, Public Records of Seminole County, Florida. The 2014 Replat was prepared by Henderson & Farr Surveying, Inc. and was approved by the Seminole County Board of County Commissioners on September 9, 2014. The 2014 Replat contained the following blanket vacation language:
"All private easements shown on the prior plat are hereby vacated except as otherwise noted herein."
Fairwater contends that this language extinguished the Cross-Parcel Easement because the easement's location was depicted on the prior plat (the original Commerce Park Boulevard Plat, recorded in 1997). Under Fairwater's reading, the blanket vacation language swept away all private easements previously shown on the plat, including the Cross-Parcel Easement, and the 2014 Replat did not specifically preserve the Cross-Parcel Easement in its "except as otherwise noted herein" proviso.
Ridgemark disputes this interpretation. Ridgemark contends that the Cross-Parcel Easement was not created by the original plat but was instead created by a separate deed instrument (the 1998 Special Warranty Deed recorded in OR Book 4517, Page 1283). According to Ridgemark, the replat vacation language — which references "easements shown on the prior plat" — applies only to easements that derived their legal existence from the plat itself, not to easements that were independently created by deed and merely happened to be depicted on the plat for informational purposes. Ridgemark further argues that even if the replat language could be read to encompass the Cross-Parcel Easement, the vacation of a deeded easement by plat alone, without the consent of the easement holder, would be legally ineffective under Florida law.
This is a genuine and non-trivial legal dispute, and the outcome is not certain. However, for purposes of the title insurance coverage analysis, the relevant point is not who will prevail on the merits of the easement dispute, but rather whether the risk of an adverse outcome is within the scope of coverage under the Meridian owner's policy. As discussed in detail below, it clearly is.
On or about April 22, 2021, Ridgemark's counsel, Castellon Foley & Ruiz LLP (Joseph A. Castellon, Esq.), sent a demand letter to Fairwater asserting that the Cross-Parcel Easement remained valid and subsisting, that Ridgemark intended to exercise its rights under the easement in connection with the development of Ridgemark Commerce Village, and that Fairwater's refusal to acknowledge the easement constituted an interference with Ridgemark's property rights. On May 14, 2021, Calderwood & Harkness, on behalf of Fairwater, responded in writing, denying the validity of the easement and asserting that the easement had been extinguished by the 2014 Replat.
On July 19, 2021, Ridgemark filed its Complaint for Declaratory Judgment in the Circuit Court of the Eighteenth Judicial Circuit in and for Seminole County, Florida, Case No. 2021-CA-002748-18-W. The Complaint seeks a judicial declaration that (i) the Cross-Parcel Easement was not extinguished by the 2014 Replat, (ii) Ridgemark holds a perpetual, non-exclusive easement for ingress/egress and utility access across Fairwater's Property, and (iii) Fairwater is enjoined from interfering with Ridgemark's exercise of its easement rights. The Complaint names Fairwater Real Estate Investment Trust as the sole defendant.
D. Tender of Defense and Meridian's Response
On August 6, 2021, Calderwood & Harkness LLP, acting on behalf of Fairwater, formally tendered the defense of the Ridgemark declaratory judgment action to Meridian under the provisions of the owner's title insurance policy, Policy No. MTU-2016-FL-089312. The tender letter, addressed to Meridian's Claims Department at 4800 Semoran Boulevard, Suite 220, Orlando, Florida 32822, enclosed the following documents: (i) a copy of Ridgemark's Complaint for Declaratory Judgment; (ii) a copy of Fairwater's Answer and Affirmative Defenses (which was in preparation at the time of the tender and was subsequently filed on August 30, 2021); (iii) a copy of the owner's title insurance policy; and (iv) a summary of the factual and legal background of the dispute.
The tender letter requested that Meridian acknowledge its duty to defend Fairwater in the underlying action and assume the costs of defense, including reimbursement of defense costs already incurred by Calderwood & Harkness on Fairwater's behalf. The letter further requested that Meridian confirm coverage for any indemnity obligation that might arise in the event of an adverse judgment and specifically noted that the claim fell squarely within the coverage afforded by the owner's policy, as the Ridgemark action challenged the validity of Fairwater's title by asserting the existence of an undisclosed easement encumbrance.
Meridian acknowledged receipt of the tender by letter dated August 19, 2021, from its Claims Department. The acknowledgment letter stated that Meridian had assigned the claim to Owen R. Hatch, Senior Claims Counsel, and that Meridian would review the tendered materials and respond with a coverage determination in due course.
On September 10, 2021 — more than five weeks after the initial tender and more than three weeks after the acknowledgment — Meridian issued a Reservation of Rights letter through Mr. Hatch. The ROR is the subject of this memorandum and is analyzed in detail below. In summary, the ROR acknowledged the claim and the existence of the policy but reserved Meridian's right to deny coverage based on Policy Exclusion 3(a). The letter stated that Meridian was "continuing its investigation into the facts and circumstances surrounding the claim" and had "not yet reached a final coverage determination." The ROR did not articulate a specific factual theory explaining how Exclusion 3(a) applied to the facts of the Ridgemark dispute. It merely quoted the exclusion language and stated that Meridian was reserving its rights pending further investigation.
As of the date of this memorandum, Meridian has not issued a final coverage determination. No subsequent communication from Meridian has been received since the September 10, 2021 ROR.
III. Analysis of Policy Exclusion 3(a)
A. Text of Exclusion 3(a)
The standard ALTA Owner's Policy of Title Insurance, upon which Meridian's Policy No. MTU-2016-FL-089312 is based, contains a section titled "Exclusions from Coverage." Exclusion 3(a), as reproduced in the Meridian policy, provides:
"The following matters are expressly excluded from the coverage of this policy, and the Company will not pay loss or damage, costs, attorneys' fees, or expenses that arise by reason of: . . . 3. Defects, liens, encumbrances, adverse claims, or other matters: (a) created, suffered, assumed, or agreed to by the insured claimant . . . ."
This exclusion is a standard provision found in virtually all ALTA owner's title insurance policies. Its purpose is to prevent an insured from recovering under the policy for title defects that the insured itself brought into being, knowingly permitted, affirmatively took upon itself, or expressly consented to. The exclusion reflects the basic insurance principle that an insured should not be permitted to profit from or shift to the insurer the consequences of the insured's own deliberate conduct.
Importantly, Exclusion 3(a) is not a general "knowledge" or "notice" exclusion. It does not exclude coverage for defects that the insured merely knew about or should have known about at the time of acquisition. Rather, it requires an active nexus between the insured's conduct and the defect in question — the insured must have created, suffered, assumed, or agreed to the matter in question. Each of these terms carries a specific and limited meaning in title insurance law, as discussed below.
The ROR letter from Mr. Hatch quotes Exclusion 3(a) but does not specify which of the four prongs — created, suffered, assumed, or agreed to — Meridian contends is applicable, nor does it articulate a factual theory supporting the application of any prong. We analyze each prong in turn.
B. Application to Each Element of the Exclusion
1. "Created" by the Insured
The first prong of Exclusion 3(a) excludes from coverage defects or encumbrances "created" by the insured. The term "created" in this context means that the insured affirmatively brought the defect into existence through its own actions — for example, by granting an easement, executing a mortgage, or conveying a partial interest in the property.
The Cross-Parcel Easement was created on June 22, 1998, by a Special Warranty Deed from Thurmond Industrial Holdings, Inc. to Sunbelt Distribution Centers, Inc. This transaction occurred more than eighteen years before Fairwater acquired the Property on October 7, 2016. Fairwater had no involvement whatsoever in the 1998 transaction. Fairwater was not a party to the deed, was not a successor to either Thurmond or Sunbelt at the time of the easement's creation, and took no action that could be characterized as creating or reviving the easement.
Nor did Fairwater take any post-acquisition action that could constitute the creation or re-creation of the easement. To the contrary, Fairwater has consistently denied the easement's validity since the dispute first arose, as evidenced by Calderwood & Harkness's May 14, 2021 letter to Castellon Foley & Ruiz LLP and the affirmative defenses asserting extinguishment of the easement in Fairwater's August 30, 2021 Answer.
The 2014 Replat, which Fairwater contends extinguished the easement, was itself recorded on September 15, 2014 — more than two years before Fairwater's acquisition. Even the event that Fairwater asserts eliminated the easement occurred before Fairwater had any connection to the Property. There is simply no factual basis upon which Meridian could argue that Fairwater "created" the Cross-Parcel Easement.
Conclusion: The "created" prong of Exclusion 3(a) does not apply to the Cross-Parcel Easement.
2. "Suffered" by the Insured
The second prong of Exclusion 3(a) excludes defects or encumbrances "suffered" by the insured. In the context of title insurance law, the term "suffered" carries a specific meaning: it refers to a situation in which the insured allowed or permitted a defect to come into existence or to remain in effect through the insured's own inaction, negligence, or acquiescence. The term implies a degree of passive responsibility — the insured had the ability to prevent or cure the defect and failed to do so.
Under Florida case law and the general body of title insurance jurisprudence, "suffered" has been interpreted to require that the insured had both knowledge of the potential defect and the opportunity to prevent it from affecting the insured's title. See, e.g., Chicago Title Ins. Co. v. Allfirst Bank, 905 So. 2d 89, 93 (Fla. 4th DCA 2004) (analyzing the "created, suffered, assumed, or agreed to" exclusion and emphasizing that the exclusion applies only where the insured's own conduct gave rise to the defect); First American Title Ins. Co. v. Nat'l Union Fire Ins. Co., 695 So. 2d 475, 478 (Fla. 3d DCA 1997) (holding that the exclusion requires a causal connection between the insured's conduct and the defect).
Fairwater did not "suffer" the Cross-Parcel Easement in any legally meaningful sense. The easement was created in 1998 — eighteen years before Fairwater became the owner of the Property. Fairwater had no ability to prevent the creation of the easement, and Fairwater's acquisition of the Property in 2016 did not constitute an act of "suffering" a pre-existing encumbrance.
Meridian's most plausible argument under the "suffered" prong would be that Fairwater "suffered" the easement by acquiring the Property with knowledge or constructive notice of the easement's existence in the public records (OR Book 4517, Page 1283). This argument, however, fails for several independent reasons:
First, Fairwater did not have actual knowledge of the Cross-Parcel Easement at the time of acquisition. The title commitment issued by Tidewater (Commitment No. TWA-2016-09821) did not list the easement as a Schedule B-II exception. Fairwater was entitled to rely on this commitment — which was issued by Meridian's own agent — as a comprehensive statement of the encumbrances affecting the Property. Fairwater's due diligence team reviewed the title commitment, and finding no reference to the Cross-Parcel Easement, reasonably concluded that the easement was not a valid encumbrance. The 2014 Replat, which purported to vacate private easements shown on the prior plat, further supported this conclusion.
Second, even if Fairwater had constructive notice of the easement by virtue of the recording statute (Fla. Stat. § 695.11), constructive notice alone does not trigger the "suffered" prong of Exclusion 3(a). The entire purpose of title insurance is to protect the insured against recorded defects that may not have been discovered or fully evaluated during the title search process. If constructive notice of a recorded instrument were sufficient to invoke Exclusion 3(a), then the exclusion would swallow the coverage — any defect appearing in the public records would be excluded, rendering the policy meaningless. Florida courts have consistently rejected this interpretation. See Lawyers Title Ins. Corp. v. JDC (America) Corp., 52 F.3d 1575, 1582 (11th Cir. 1995) (applying Florida law and holding that the "created, suffered, assumed, or agreed to" exclusion does not apply merely because a defect was a matter of public record).
Third, the owner's policy itself — issued by Meridian — omitted the Cross-Parcel Easement from its Schedule B exceptions. This omission represents Meridian's own underwriting determination that the easement was not a valid encumbrance on the Property. Meridian cannot credibly argue that Fairwater "suffered" an encumbrance that Meridian's own policy declared did not exist.
Conclusion: The "suffered" prong of Exclusion 3(a) does not apply to the Cross-Parcel Easement.
3. "Assumed" by the Insured
The third prong of Exclusion 3(a) excludes defects or encumbrances "assumed" by the insured. The term "assumed" in title insurance parlance refers to a situation in which the insured affirmatively took upon itself a known obligation, encumbrance, or defect as part of the purchase transaction or otherwise. A classic example would be a buyer who, as part of the purchase agreement, expressly agrees to take the property subject to specified encumbrances or liens.
There is no evidence that Fairwater assumed the Cross-Parcel Easement. The Purchase and Sale Agreement between Fairwater and Sunbelt Distribution Centers, Inc., dated August 12, 2016 (the "PSA"), did not reference the Cross-Parcel Easement as an assumed encumbrance or a permitted exception to title. Section 5.2 of the PSA required the Seller to deliver title free and clear of all liens, encumbrances, and defects other than the "Permitted Exceptions" specifically enumerated on Exhibit C to the PSA. The Cross-Parcel Easement was not listed among the Permitted Exceptions.
Furthermore, the title commitment issued by Tidewater did not list the Cross-Parcel Easement as a Schedule B-II exception. Under the standard title review process, Fairwater's counsel reviewed the commitment and objected to any exceptions that were not acceptable. Because the Cross-Parcel Easement was not listed, there was no occasion for Fairwater to object to it or to negotiate around it. Fairwater did not, as part of the closing process, execute any document acknowledging or accepting the Cross-Parcel Easement as an encumbrance on the Property.
Fairwater's pre-acquisition due diligence, including review of the title commitment, the survey, and the 2014 Replat, supported the conclusion that the Cross-Parcel Easement had been extinguished. Fairwater proceeded with the acquisition on the basis of that understanding. There is no evidence of any affirmative assumption of the easement by Fairwater at any point before or after the closing.
Conclusion: The "assumed" prong of Exclusion 3(a) does not apply to the Cross-Parcel Easement.
4. "Agreed to" by the Insured
The fourth and final prong of Exclusion 3(a) excludes defects or encumbrances "agreed to" by the insured. This prong requires evidence of an affirmative act of consent or acquiescence by the insured to the existence or validity of the defect. It contemplates a deliberate decision by the insured to accept the defect as a condition of title, whether by express agreement, written consent, or conduct manifesting agreement.
Fairwater has never agreed to the existence or validity of the Cross-Parcel Easement. To the contrary, Fairwater has consistently and vigorously denied the easement's validity at every stage of the dispute:
(a) Fairwater's pre-acquisition due diligence, including its review of the title commitment from Tidewater, reflected the understanding that the easement was no longer in effect. Fairwater acquired the Property on the express basis that the easement had been extinguished by the 2014 Replat.
(b) When Ridgemark's counsel first asserted the validity of the easement in the April 22, 2021 demand letter, Calderwood & Harkness responded on May 14, 2021, on Fairwater's behalf, categorically denying the easement's continued existence and refusing to acknowledge any access rights across the Property.
(c) In the August 30, 2021 Answer and Affirmative Defenses filed in the Ridgemark DJ action, Fairwater denied all material allegations of the Complaint and asserted affirmative defenses including extinguishment of the easement by the 2014 Replat, estoppel, and laches.
(d) No post-acquisition conduct by Fairwater can be construed as agreement to the easement. Fairwater has not granted Ridgemark or any other party permission to use the eastern corridor of the Property. No physical improvements or access infrastructure serving the southern parcel have been installed on Fairwater's Property with Fairwater's knowledge or consent.
Moreover, Nathan H. Brierly, Vice President of Real Estate for Condor Supply Chain Solutions, Inc. (Fairwater's tenant at the Sanford Logistics Center), has communicated in writing to Fairwater's asset management team his strong opposition to any shared-access arrangement that would allow third-party vehicular traffic across the Property's truck court and eastern corridor. Mr. Brierly's correspondence underscores that no party on Fairwater's side of the transaction has consented to or acquiesced in the easement.
Conclusion: The "agreed to" prong of Exclusion 3(a) does not apply to the Cross-Parcel Easement.
C. The Role of Tidewater as Meridian's Agent
A critical element of the coverage analysis is the relationship between Meridian and Tidewater Abstract & Title, LLC. Tidewater acted as the title agent for Meridian when it issued Title Commitment No. TWA-2016-09821 and facilitated the issuance of the owner's policy, Policy No. MTU-2016-FL-089312. Tidewater was authorized by Meridian to conduct title searches, issue title commitments, and close title insurance transactions on Meridian's behalf in the State of Florida. Tidewater operated under a title insurance agency agreement with Meridian, and its acts and omissions within the scope of that agreement are properly attributed to Meridian.
Under Florida law, the acts and omissions of a title agent are generally imputed to the title insurer. See Fla. Stat. § 627.792 (governing title insurance agents and establishing the agency relationship between the agent and the insurer); see also Essex Builders Group, Inc. v. Ameris Bank, 2017 WL 3616455, at *4 (M.D. Fla. Aug. 23, 2017) (recognizing that a title insurer is bound by the actions of its authorized agent). The Florida Title Insurance Act, codified at Fla. Stat. §§ 627.7711–627.798, establishes a comprehensive regulatory framework in which the title agent acts as the insurer's representative in searching title, identifying encumbrances, and determining what exceptions to include in the commitment and policy. When a title agent fails to discover or disclose a valid encumbrance, that failure is charged to the title insurer, not to the insured who relied on the agent's work product.
In this case, Tidewater's title search either failed to identify the Cross-Parcel Easement (recorded in OR Book 4517, Page 1283) or identified the easement but determined — based on the 2014 Replat or other analysis — that it was no longer a valid encumbrance and therefore did not need to be listed as a Schedule B-II exception. Either way, Tidewater's determination was made on behalf of Meridian, and Meridian is bound by it. Fairwater, as the insured, was entitled to rely on Tidewater's title commitment as an accurate representation of the state of the Property's title.
Meridian cannot now invoke its own agent's failure to identify the easement as a basis for applying Exclusion 3(a) against Fairwater. To do so would be internally inconsistent and logically untenable: Meridian's agent told Fairwater, through the title commitment and the policy, that the Cross-Parcel Easement was not a valid encumbrance; Meridian then seeks to deny coverage on the theory that Fairwater "suffered" or "agreed to" the very encumbrance that Meridian's agent told Fairwater did not exist. This is precisely the type of circular reasoning that the agency imputation doctrine is designed to prevent.
If Tidewater was negligent in failing to identify the Cross-Parcel Easement, that negligence is attributable to Meridian for purposes of the coverage analysis. Meridian's remedy, if any, lies against Tidewater under the agency agreement or through subrogation — not against Fairwater, the insured who was harmed by Tidewater's failure.
D. Meridian's Own Underwriting Decision
Beyond the agency imputation issue, there is a broader and more fundamental point: when Meridian issued the owner's policy without excepting the Cross-Parcel Easement, Meridian made an affirmative underwriting decision. Whether that decision was based on the 2014 Replat, Tidewater's title search, or some other analysis, Meridian determined that the Cross-Parcel Easement did not constitute a valid encumbrance that needed to be disclosed to or excepted from coverage for the insured. The issuance of the policy without the easement as a Schedule B exception is Meridian's representation to Fairwater that the Property was not burdened by this easement.
The Ridgemark declaratory judgment action challenges exactly that underwriting determination. Ridgemark asserts that the Cross-Parcel Easement was not extinguished by the 2014 Replat and remains a valid encumbrance on Fairwater's title. If Ridgemark prevails, then Meridian's underwriting determination was wrong — and the purpose of title insurance is to protect the insured when the insurer's underwriting determination turns out to be incorrect.
Meridian's invocation of Exclusion 3(a) is therefore an attempt to disclaim responsibility for the very risk it agreed to insure against when it issued the policy. This is not what Exclusion 3(a) was designed to address. The exclusion was designed to protect insurers against insureds who create or consent to their own title defects, not to provide an escape hatch when the insurer's title search fails to identify a pre-existing encumbrance. Allowing Meridian to invoke Exclusion 3(a) under these facts would fundamentally undermine the purpose of owner's title insurance and would render the coverage illusory.
IV. Florida Law on Title Insurance Coverage Disputes
A. Standard of Review for Insurer Reservations of Rights
Under well-established Florida law, the provisions of a title insurance policy — like all insurance policies — are construed strictly against the insurer and liberally in favor of the insured. See Lawyers Title Ins. Corp. v. JDC (America) Corp., 52 F.3d 1575, 1580 (11th Cir. 1995) (applying Florida law); Chicago Title Ins. Co. v. Allfirst Bank, 905 So. 2d 89, 92 (Fla. 4th DCA 2004). This principle of construction applies with particular force to exclusions from coverage, which are narrowly interpreted, and to reservations of rights, which are scrutinized to ensure that the insurer does not unfairly expand the scope of an exclusion beyond its plain meaning.
The insurer bears the burden of proving that an exclusion from coverage applies. See First American Title Ins. Co. v. Nat'l Union Fire Ins. Co., 695 So. 2d 475, 477 (Fla. 3d DCA 1997); Fidelity Nat'l Title Ins. Co. v. Bonifay, 960 So. 2d 26, 28 (Fla. 1st DCA 2007). If an exclusion is ambiguous — that is, if it is susceptible to more than one reasonable interpretation — the ambiguity is resolved in favor of coverage. See State Farm Fire & Cas. Co. v. CTC Dev. Corp., 720 So. 2d 1072, 1076 (Fla. 1998); Nat'l Union Fire Ins. Co. v. Lenox Liquors, Inc., 358 So. 2d 533, 536 (Fla. 1977).
These principles strongly favor Fairwater's position. Even if there were some ambiguity about whether the "suffered" or "agreed to" prongs of Exclusion 3(a) could apply to an insured who acquired property without knowledge of a pre-existing easement that the insurer's own agent failed to disclose — and there is no such ambiguity, for the reasons explained above — any doubt would be resolved in Fairwater's favor and against Meridian.
B. Relevant Florida Case Law
Florida courts have addressed Exclusion 3(a) and its functional equivalents in the ALTA policy form on multiple occasions, and the case law consistently supports a narrow construction of the exclusion.
In Lawyers Title Insurance Corp. v. JDC (America) Corp., 52 F.3d 1575 (11th Cir. 1995), the Eleventh Circuit, applying Florida law, analyzed the "created, suffered, assumed, or agreed to" exclusion in the context of a claim involving a pre-existing zoning restriction that was not disclosed in the title commitment. The court held that the exclusion did not bar coverage because the insured had not taken any affirmative action to create or accept the restriction. The court emphasized that the exclusion "requires more than mere knowledge of a defect; it requires the insured's active participation in or acceptance of the defect." Id. at 1582. The JDC decision is directly on point and strongly supports Fairwater's position.
In Chalvoro Title Insurance Co. v. Allfirst Bank, 905 So. 2d 89 (Fla. 4th DCA 2004), the Fourth District Court of Appeal analyzed the "created, suffered, assumed, or agreed to" exclusion in the context of a lender's title insurance claim. The court held that the exclusion required a causal connection between the insured's conduct and the title defect, and that the insurer bore the burden of proving that connection. Id. at 93. The court rejected the insurer's attempt to invoke the exclusion based on the insured's constructive knowledge of a recorded instrument, holding that constructive notice alone was insufficient to trigger the exclusion.
In First American Title Insurance Co. v. Northgate Indemnity Co., 695 So. 2d 475 (Fla. 3d DCA 1997), the Third District Court of Appeal addressed the duty of a title insurer to defend and indemnify where a claim was tendered under an ALTA policy. The court held that the insurer bore the burden of proving the applicability of any exclusion from coverage and that the exclusion language must be given its "plain and ordinary meaning," which the court construed narrowly. Id. at 478.
These decisions reflect a consistent theme in Florida title insurance law: the "created, suffered, assumed, or agreed to" exclusion applies only where the insured's own conduct was the proximate cause of the title defect at issue. The exclusion does not apply to pre-existing defects that the insured neither caused nor knowingly accepted, particularly where the insurer's own agent failed to identify the defect during the title search process.
Additionally, Florida courts have consistently held that a title insurer is bound by the acts of its authorized title agent. In Fidelity National Title Insurance Co. v. Bonifay, 960 So. 2d 26 (Fla. 1st DCA 2007), the First District Court of Appeal held that the title insurer could not avoid liability for a loss resulting from its agent's failure discover a prior lien, reasoning that the agent's search was conducted on behalf of and for the benefit of the insurer, and the insurer was bound by the agent's work product. Id. at 29. This principle reinforces the argument that Meridian cannot shift to Fairwater the consequences of Tidewater's failure to identify the Cross-Parcel Easement.
C. Duty to Defend vs. Duty to Indemnify
Under Florida title insurance law, the duty to defend is separate from and broader than the duty to indemnify. The standard ALTA owner's policy obligates the insurer to defend the insured against claims that, if proven, would constitute a covered loss under the policy. The duty to defend is triggered by the allegations in the complaint — not by the ultimate merits of the claim — and the insurer must defend the insured if there is any possibility that the claim falls within coverage. See Nat'l Union Fire Ins. Co. v. Lenox Liquors, Inc., 358 So. 2d 533, 536 (Fla. 1977) (setting forth the "any possibility" standard for the duty to defend); see also ALTA Owner's Policy (2006), Conditions § 4(a) (providing that "[t]he Company will provide for the defense of an Insured in litigation in which any third party asserts a claim covered by this policy adverse to the Insured").
The Ridgemark declaratory judgment action directly challenges the validity of Fairwater's title by asserting the existence and continued validity of a 60-foot-wide perpetual easement encumbering the Property. This is a quintessential title insurance claim — it alleges a "defect, lien, encumbrance, [or] adverse claim" affecting the insured's title to the Property, which is precisely the type of risk insured under the ALTA Owner's Policy. The duty to defend is plainly triggered by the allegations in Ridgemark's Complaint.
Even if Meridian could ultimately establish that Exclusion 3(a) applies to the indemnity obligation — a result that, as analyzed above, is both factually unsupported and legally incorrect — the duty to defend should nonetheless be triggered because the allegations in the Complaint raise the possibility of a covered claim. The "any possibility" standard is a low threshold, and the Ridgemark Complaint clearly meets it. Meridian's refusal or failure to assume the defense, if it persists, would constitute a breach of the policy and could expose Meridian to liability for defense costs, consequential damages, and potentially bad-faith damages under Florida Statutes § 624.155.
V. Potential Exposure if Easement Is Found Valid
The stakes in the underlying Ridgemark declaratory judgment action are substantial. If the court declares that the Cross-Parcel Easement was not extinguished by the 2014 Replat and remains a valid and subsisting encumbrance on Fairwater's title, the consequences for Fairwater would be significant and multi-faceted.
Impact on Property Operations and Tenant Relationship. A valid 60-foot-wide perpetual ingress/egress and utility easement running north–south across the eastern boundary of the Property would permit Ridgemark — and its successors, assigns, tenants, invitees, and licensees — to route vehicular and utility traffic across Fairwater's parcel. If Ridgemark proceeds with its planned Ridgemark Commerce Village development (approximately 96 flex-space and light-industrial units totaling 188,000 square feet), the volume of traffic crossing Fairwater's Property could be substantial, including commercial trucks, delivery vehicles, and passenger vehicles associated with up to 96 individual tenants. This traffic would traverse the eastern portion of the Property in close proximity to the cross-dock truck court that serves Condor's distribution operations. Nathan H. Brierly, VP of Real Estate for Condor, has already expressed strong opposition to any such shared-access arrangement, citing concerns about safety, security, congestion, and interference with Condor's around-the-clock logistics operations.
Impact on Condor Lease. Condor's NNN lease (October 2016 – September 2028), which generates annual base rent of $2,386,460 ($3.89/SF), is the primary source of income from the Property. If Condor determines that the easement materially impairs its use and enjoyment of the Property — particularly the truck court and eastern access areas — Condor could assert that Fairwater has breached the lease's quiet enjoyment covenant, seek rent abatement, or decline to exercise any renewal options. The loss of Condor as a tenant would materially reduce the Property's value and cash flow. Even if Condor remains in place, the risk of operational disruption and the existence of a shared-access arrangement with a competing flex-space development could depress renewal rents and market value.
Impact on Property Value. The Property was appraised at $51,800,000 as of January 2021 by Lakebridge Valuation Group, LLC, based on a capitalization rate of 4.61% applied to the in-place net operating income. That appraisal did not account for the existence of the Cross-Parcel Easement. If the easement is declared valid, the Property's appraised value would likely decline due to (i) the direct physical encumbrance of the 60-foot easement corridor, (ii) the impairment of the truck court and eastern access, (iii) the increased uncertainty regarding the Condor lease, and (iv) the general reduction in marketability associated with a shared-access industrial property. While a precise quantification of the diminution in value would require an updated appraisal, it is reasonable to estimate that the impact could be in the range of $3,000,000 to $8,000,000 or more, depending on the court's ruling and the terms of any injunctive relief.
Impact on the Kensington Loan. The Kensington Capital Markets mortgage, with an outstanding principal balance of approximately $26,100,000 as of October 2021, contains standard loan covenants requiring Fairwater to maintain the Property free and clear of material encumbrances not approved by the lender. A judicial declaration that the Property is encumbered by a 60-foot perpetual easement could trigger a default or require Fairwater to seek a waiver from Kensington, potentially at a cost. If the encumbrance depresses the Property's appraised value below the loan-to-value thresholds specified in the loan agreement, Kensington could require additional collateral or accelerate the loan.
Policy Implications. The owner's title insurance policy, Policy No. MTU-2016-FL-089312, has a face amount of $47,300,000. If coverage applies, Meridian would be responsible for (i) the costs of defending Fairwater against the Ridgemark action, and (ii) indemnification for any loss sustained by Fairwater as a result of the easement, up to the policy limit. The potential indemnification exposure — encompassing diminution in property value, impairment of the Condor lease, and related consequential damages — could be substantial, though it is unlikely to approach the full policy limit. Defense costs alone, through trial, are estimated at $350,000 to $475,000.
VI. Assessment of Meridian's Position
A. Weaknesses in Meridian's Reservation
Meridian's Reservation of Rights letter suffers from several significant weaknesses that undermine its credibility and legal sufficiency:
No factual basis. The ROR does not articulate any factual theory explaining how Exclusion 3(a) applies to the circumstances of this claim. It does not allege that Fairwater created the easement, took any action that caused the easement to come into existence or be revived, assumed the easement as part of the acquisition, or agreed to the easement's validity. The letter merely cites the exclusion language and reserves rights, without connecting the exclusion to any specific facts. A reservation of rights that lacks factual specificity is of limited legal effect and may be viewed by a court as a dilatory tactic rather than a good-faith coverage analysis.
Meridian's own agent's omission. The most glaring weakness in Meridian's position is the fact that its own agent, Tidewater Abstract & Title, LLC, failed to include the Cross-Parcel Easement as a Schedule B-II exception in the title commitment and, consequently, the easement was omitted from the owner's policy. Meridian cannot credibly invoke Exclusion 3(a) against Fairwater when Meridian's own representative told Fairwater that the easement was not a concern. The agent's omission is Meridian's omission, and Meridian cannot shift the consequences of that omission onto the insured.
Vagueness of the ROR. The ROR states that Meridian is "continuing its investigation" and has "not yet reached a final coverage determination." This vague language, without any indication of what additional investigation is needed or what facts remain to be determined, suggests that Meridian may be using the reservation of rights as a stalling tactic while it evaluates the economics of the claim. A reservation of rights that is not supported by a genuine and specific factual basis may be challenged as unreasonable and could support a bad-faith claim under Florida law.
Unreasonable delay. As of the date of this memorandum, more than seven weeks have elapsed since the tender was submitted (August 6, 2021), and Meridian has not issued a final coverage determination. If Meridian continues to delay — and if the delay extends for several months without resolution — Fairwater may have grounds to assert that Meridian has acted in bad faith by failing to promptly and fairly evaluate the claim. Florida law requires insurers to act in good faith and with reasonable promptness in investigating and resolving claims. See Fla. Stat. § 624.155(1)(b)(1) (authorizing bad-faith actions where an insurer fails to settle a claim "when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests").
B. Possible Meridian Arguments
Despite the weaknesses identified above, we should anticipate the arguments that Meridian is most likely to advance in support of its Exclusion 3(a) defense.
Constructive notice argument. Meridian might argue that Fairwater had constructive notice of the Cross-Parcel Easement because the 1998 Special Warranty Deed was recorded in the public records of Seminole County (OR Book 4517, Page 1283). Under this theory, Meridian would contend that Fairwater "suffered" or "agreed to" the easement by proceeding with the acquisition without demanding its removal or obtaining a release from the easement holder.
This argument is unpersuasive for the following reasons:
(i) It conflates the recording statute's constructive notice doctrine with the specific exclusion language in the title insurance policy. The recording statute (Fla. Stat. § 695.11) provides that a properly recorded instrument gives constructive notice to subsequent purchasers. However, the constructive notice doctrine is a real property concept, not an insurance coverage concept. Title insurance exists precisely to insure against recorded defects that the insured may not have discovered or fully evaluated. If the mere recordation of an instrument were sufficient to invoke Exclusion 3(a), the exclusion would effectively eliminate coverage for all recorded defects, rendering the policy illusory. Florida courts have squarely rejected this interpretation. See Lawyers Title Ins. Corp. v. JDC (America) Corp., 52 F.3d at 1582.
(ii) The title commitment's omission of the easement defeats any inference of actual or constructive knowledge. Fairwater relied on Tidewater's title commitment — which was Meridian's own representation — as the definitive statement of the encumbrances affecting the Property. Tidewater told Fairwater, on Meridian's behalf, that the easement was not a valid encumbrance. Fairwater cannot be deemed to have "suffered" or "agreed to" an encumbrance that Meridian's agent told Fairwater did not exist.
(iii) Even if Fairwater had independently discovered the 1998 deed in the public records, Fairwater would have been entitled to rely on the 2014 Replat — which purported to vacate private easements shown on the prior plat — as further evidence that the easement had been extinguished. The 2014 Replat was approved by the Seminole County Board of County Commissioners and was a facially valid public action. Fairwater's reliance on the replat was reasonable, and reliance on a facially valid government action cannot constitute "suffering" or "agreeing to" a defect.
Physical inspection argument. Meridian might also argue that Fairwater knew or should have known about the Cross-Parcel Easement based on a physical inspection of the Property — for example, if a visible access road, gravel path, or utility corridor existed along the eastern boundary of the Property at the time of acquisition.
This argument is also unpersuasive:
(i) Even if some physical evidence of a corridor existed along the eastern boundary, the presence of a physical feature does not necessarily indicate the legal existence of a valid easement. After the 2014 Replat purportedly vacated the easement, a reasonable purchaser could observe the physical remnants of the easement corridor and conclude — consistently with the replat and the title commitment — that the easement was no longer in effect.
(ii) Fairwater was entitled to rely on the title commitment, which is the very purpose of the insurance product. The title commitment is intended to provide the insured with a comprehensive statement of the encumbrances affecting the property, and the insured is not required to conduct an independent investigation of the public records or the physical condition of the property in order to preserve its coverage rights.
(iii) Under the "created, suffered, assumed, or agreed to" analysis, the relevant question is whether Fairwater affirmatively participated in or consented to the defect — not whether Fairwater could have discovered the defect through independent investigation. The exclusion is not a due diligence exclusion; it is a conduct exclusion. Fairwater's alleged failure discover the easement through physical inspection, even if established, would not constitute "creating," "suffering," "assuming," or "agreeing to" the encumbrance within the meaning of Exclusion 3(a).
In sum, while we cannot entirely rule out the possibility that Meridian will advance these arguments, both arguments are inconsistent with established Florida law and with the fundamental principles of title insurance. We are confident that Fairwater's position on coverage is strong and well-supported.
VII. Recommendations
Based on the foregoing analysis, we make the following recommendations:
A. Demand for Full Coverage Determination
We recommend that Calderwood & Harkness, on behalf of Fairwater, send a formal demand letter to Owen R. Hatch, Senior Claims Counsel, Meridian Title Underwriters, Inc., demanding a full and final coverage determination within thirty (30) days of the date of the letter. The demand letter should:
(a) Set forth the legal analysis demonstrating that Exclusion 3(a) is inapplicable to the facts of the Ridgemark declaratory judgment action, incorporating the arguments detailed in Sections III and IV of this memorandum.
(b) Note that Meridian's current Reservation of Rights is insufficiently particularized, as it does not identify any specific factual basis for the application of Exclusion 3(a) and does not specify which prong of the exclusion Meridian contends applies.
(c) Note that Meridian's "ongoing investigation" has already extended beyond a reasonable period — more than seven weeks since the tender, with no indication of what additional facts Meridian needs to evaluate — and that continued delay may constitute a failure to act in good faith.
(d) Request that Meridian either (i) assume the full defense of the Ridgemark action, including appointment of defense counsel acceptable to Fairwater and reimbursement of all defense costs already incurred by Fairwater (including Calderwood & Harkness fees and local counsel fees), or (ii) issue a final written denial of coverage, with a detailed explanation of the factual and legal basis for the denial, so that Fairwater can evaluate its options, including potential bad-faith claims under Florida Statutes § 624.155.
(e) Reference the policy limit of $47,300,000 and the significant potential exposure to Fairwater if the Ridgemark action results in an adverse judgment, emphasizing the materiality of the claim and the urgency of a prompt resolution.
(f) Expressly preserve Fairwater's rights under the policy and under Florida law, including the right to seek reimbursement of defense costs, the right to seek indemnification, and the right to pursue bad-faith remedies.
We recommend that a draft of this demand letter be circulated to Francesca Morano, Samuel Eklund, and Jeffrey Park for review before submission, and that Fairwater's General Counsel, Denise M. Whitford, approve the letter before it is sent.
B. Preservation of Rights Against Meridian
Regardless of the outcome of the demand letter, Fairwater should continue to preserve all rights under the owner's title insurance policy and under Florida law. Specifically:
(a) Right to reimbursement of defense costs. Fairwater should preserve its right to seek reimbursement of all defense costs incurred in connection with the Ridgemark DJ action. As of the date of this memorandum, Calderwood & Harkness has incurred fees of approximately $137,400 and costs of approximately $8,260 in defending the action. In addition, Hargrove & Liddell, P.A. (local counsel in Seminole County) has incurred fees of approximately $22,500. If the case is reactivated and proceeds through trial, total defense costs are estimated at $350,000 to $475,000 (Calderwood & Harkness estimate) plus local counsel fees. All of these costs are potentially recoverable from Meridian if coverage is established.
(b) Right to assert bad faith. If Meridian unreasonably delays or denies coverage, Fairwater may have a cause of action for bad faith under Florida Statutes § 624.155. Under that statute, an insured may bring a civil action against an insurer that has failed to attempt in good faith to settle claims when, under all the circumstances, it could and should have done so. The statute provides for recovery of compensatory damages, attorneys' fees, and costs. Before filing a bad-faith action, the insured must file a Civil Remedy Notice with the Florida Department of Financial Services, giving the insurer sixty (60) days to cure the alleged violation. We recommend that Fairwater be prepared to file a Civil Remedy Notice if Meridian fails to respond to the demand letter within the thirty-day deadline or if Meridian issues an unreasonable denial of coverage.
(c) Right to seek indemnification. If the Ridgemark DJ action results in an adverse judgment — that is, if the court declares the Cross-Parcel Easement valid and subsisting — Fairwater should be prepared to make a formal demand on Meridian for indemnification under the policy. The indemnification claim would encompass the diminution in value of the Property resulting from the easement, as well as any consequential damages, up to the policy limit of $47,300,000.
C. Separate Potenti