Somerset Savings Bank Agreed to Finance a 72-Unit Condominium Project

Somerset Savings Bank agreed to finance a 72-unit condominium project, and Chicago Title issued a policy for Somerset's $9.5 million mortgage. After the title policy was issued, the city of Revere, Massachusetts, refused to issue a permit for the project because of issues with existing zoning laws, including a railroad right-of-way through the property. Somerset was left with a $9.5 million mortgage on condominiums that would never be built. Somerset brought suit against Chicago Title for its failure to note the zoning issue. Which of the following statements is correct?

A) Chicago Title must cover the zoning issue costs, i.e., pay the damages because the property cannot be developed, including the cost of the mortgage.
B) Zoning restrictions are not covered in a title policy.
C) Chicago Title must cover the denial of the permit even though zoning issues are not covered under a title policy.
D) If the zoning restrictions make the property unmarketable, Chicago Title must pay the damages.