On Appeal from Superior Court, Rutland Unit, Civil Division William D. Cohen, J.
The opinion of the court was delivered by: ¶ 1. Skoglund, J.
PRESENT: Reiber, C.J., Dooley, Johnson, Skoglund and Burgess, JJ.
Homeowners filed a declaratory judgment action to establish defendant title insurance company's obligations to defend or indemnify them regarding an encroachment of their septic system onto neighboring property. They appeal the trial court's conclusion that the terms of their title insurance contract did not require title insurer to defend or indemnify homeowners to establish a right to maintain the system. The court found the circumstances were not within the covered title risks absent an action on neighbor's behalf to force removal of the septic system. On appeal, homeowners argue that the trial court: (1) misconstrued the language of the policy, which they contend provides coverage under the forced removal and marketability provisions; and, consequently, (2) erred in determining that there was no obligation to defend homeowners' title. We affirm.
¶ 2. The court found the following facts. Homeowners purchased the land in question on January 3, 2005. In conjunction with the sale, they obtained title insurance from defendant, Connecticut Attorneys Title Insurance Company. Homeowners purchased an expanded policy and the covered risks of their policy included defending against situations where "Your title is unmarketable," and where "you are forced to remove your existing structure--other than a boundary wall or fence--because: (a) it extends on to adjoining land or on to any easement."
¶ 3. Mount Holly Community Historical Museum, Inc. owns property bordering homeowners' land to the north. In the fall of 2007, homeowners received a telephone call from the museum's realtor requesting a donation towards the museum's planned expansion, and explaining that such goodwill might help settle any dispute concerning homeowners' right to continue having their septic system on the museum's property. This was the first indication homeowners had that their septic tank and leach field encroach on the museum's property.*fn1 The situation was further explained by a letter the museum sent to homeowners on October 24, 2007. The letter stated that the former owners of both properties had verbally agreed to allow the septic system to be built partially on the museum's property. According to the museum, this permission was revocable upon the museum's request. The letter did not, however, revoke permission, demand removal of the septic system or threaten legal action.
¶ 4. Homeowners apparently perceived the letter as a threat to their title and contacted their real estate closing attorney, who noticed insurer of homeowners' claim by letter dated January 29, 2008. Insurer replied in May 2008, and informed homeowners that although its findings were not complete it appeared title rights were not implicated.
¶ 5. The museum sent another letter on August 5, 2008, notifying homeowners that the museum intended to begin construction on its land adjacent to homeowners' property. The letter stated that because homeowners had not responded to the previous letter, the museum was "uncertain whether [homeowners'] failure to reply suggests an abandonment of any claim on the part of [homeowners] to the use of the septic system on the Museum's property." The letter further notified homeowners "that the activity which will soon commence may well compromise any such use." The museum did not demand or threaten removal of the septic system, instead the museum expressed a willingness to meet and consider suggestions to resolve the problem.
¶ 6. On August 19, 2008, insurer sent another letter denying coverage. Insurer based its denial on an exception in the policy, which states that there is no insurance for damage that "an accurate survey or personal inspection of the land would disclose." According to insurer, a survey and inspection would have revealed the encroachment. Insurer also explained in its letter that no coverage attached because the alleged encroachment did not make homeowners' title defective.
¶ 7. On September 5, 2008, homeowners filed suit naming insurer and the museum as defendants. Against insurer, homeowners sought a declaratory judgment ordering insurer to prosecute its right to have the septic system on the museum's land based on the forced removal and marketability provisions of the policy. Homeowners also alleged that insurer had breached the title insurance contract by declining coverage and sought damages. As to the museum, homeowners claimed a right to title or access to the land where the septic system was located by adverse possession, prescriptive easement or license. The museum did not countersue or request injunctive relief to have the septic system removed.
¶ 8. In August 2009, homeowners and the museum reached an agreement setting a mutual boundary line and settling rights. Homeowners received the right to maintain their septic system in the same location as long as they replaced their septic tank with a new, larger tank with filters, and the museum obtained the right to share homeowners' artisan well and to locate their propane tank on homeowners' property. Homeowners continued to pursue their claim against insurer, alleging that its denial of coverage breached the parties' contract and seeking damages for engineering costs, the septic tank replacement, and attorney's fees.
¶ 9. Following a bench trial, the court ordered judgment in insurer's favor. The court concluded that pursuant to the plain meaning of the insurance contract there was no coverage under the forced removal clause. The court held that homeowners were not "forced" to remove their septic system because the museum did not demand removal by letter or file suit or countersuit to compel removal. The court further held that the marketability provision did not apply because there was no challenge to homeowners' title.
¶ 10. On appeal, homeowners claim that two covered risks are triggered in this case. First, they argue that there is coverage under the covered title risk protecting them against being "forced to remove [their] existing structure . . . because . . . [i]t extends on to adjoining land." They contend that the museum was forcing them to remove their septic system because it extended onto museum land, and, thus, insurer was obligated to defend and indemnify them. Second, they argue that their title is unmarketable due to the encroachment of their septic system on the museum's land.
¶ 11. The proper construction of language in an insurance contract is a question of law that we consider de novo. Fireman's Fund Ins. Co. v. CNA Ins. Co., 2004 VT 93, ¶ 8, 177 Vt. 215, 862 A.2d 251. The terms of an insurance contract are accorded their plain meaning, and "[a]ny ambiguity will be resolved in the insured's favor, but we will not deprive the insurer of unambiguous terms placed in the contract for its benefit." Id. ¶ 9. Further, we give insurance contracts a "practical, reasonable, and fair interpretation, consonant with the apparent object and intent of the parties, and strained or forced constructions are to be avoided." McAlister v. Vt. Prop. & Cas. Ins. Guar. Ass'n, 2006 VT 85, ¶ 17, 180 Vt. 203, 908 A.2d 455 (quotation and alterations omitted).
¶ 12. Here, homeowners' right to coverage turns on the meaning of the policy's terms extending coverage to instances where the insured is "forced to remove" a structure. Applying the ordinary meaning of the language, the trial court concluded that homeowners were not forced to remove their septic system because the museum did not demand removal in its letters or seek to enforce removal through suit or countersuit. Homeowners argue that the court's interpretation was overly narrow and that this clause should instead be given a broader interpretation with the reasonable expectation of the parties in mind because "[t]here are many forms of coercion that equate with force, a Court order being only one." According to homeowners, potential damage, in addition to literal removal, should be included because it also results in loss of the septic system's ...