In San Jacinto Z, LLC v. Stewart Title Guaranty Company (an unpublished appellate decision filed on April 2, 2014), the court held that, even though a title policy excluded eminent domain actions, a title company was obligated to defend when title was challenged in an eminent domain case. The court stated:
“True, exclusion No. 2 provides there is no coverage for eminent domain actions, and certainly, we see no reason why a title company should have to defend against a public entity’s statutory right to take property. It is a different matter altogether, however, to suggest that, once an eminent domain action has been initiated, there is no coverage with respect to title claims asserted by another defendant to that action.”
Therefore, in eminent domain cases where title is disputed by third parties, defense should be tendered to the title insurance company.