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Title insurer had duty to defend

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The 7th Circuit Court of Appeals found that Ticor Title Insurance Co. breached its duty to defend Home Federal Savings Bank on a counterclaim brought by a general contractor on the failed ethanol plant in Cloverdale.

Altra Indiana LLC got a $95.5 million loan from Home Federal Savings Bank to construct the ethanol plant. Home Federal obtained a mortgage on the property and purchased title insurance from Ticor. The policy included a mechanic’s lien endorsement, which obligated Ticor to defend Home Federal in litigation in which a third party asserts a claim …alleging a ... lien …”

In September 2008, F.A. Wilhelm Construct Co. filed a mechanic’s lien on the property after Altra fired the contractor. Wilhelm claimed it was owed $6 million for work on the project. An October 2008 title search by Ticor revealed the lien. Ticor declined to defend Home Federal on its claim that its attempt to foreclose on the plant property took priority over the lien.

Home Federal and Wilhelm eventually settled for $1.8 million, with no contribution from Ticor. Home Federal then sued Ticor alleging the company acted in bad faith and breached its duties to defend against Wilhelm’s counterclaim that its mechanic’s lien had priority or was equal to the mortgage, and failed in not indemnifying the bank for the settlement and attorney fees.

U.S. Judge Jane Magnus-Stinson ruled in favor of Ticor, relying on the policy exclusion for any “Defects, liens, encumbrances, adverse claims or other matters … created, suffered, assumed or agreed to or by the Insured claimant.”

Ticor did have a duty to defend under the policy, Judge John Tinder wrote in Home Federal Savings Bank v. Ticor Title Insurance Co., 11-3446. The exclusion relied on the by the District Court to grant summary judgment for Ticor does not apply, the judges ruled, rejecting Ticor’s numerous claims. Ticor argued that Home Federal “created, suffered assumed or agreed to the Wilhelm Lien” because the bank “made the conscious decision not to distribute the remaining loan funds and chose not to pay Wilhelm. It also argued the bank breached a duty to Ticor to distribute the entirety of the loan proceedings and that the “created or suffered” exclusion applies because the bank sought to obtain an inequitable windfall.

The judges ordered summary judgment be entered for Home Federal and for further proceedings on the issue of damages to be awarded to the bank.

 

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  1. So that none are misinformed by my posting wihtout a non de plume here, please allow me to state that I am NOT an Indiana licensed attorney, although I am an Indiana resident approved to practice law and represent clients in Indiana's fed court of Nth Dist and before the 7th circuit. I remain licensed in KS, since 1996, no discipline. This must be clarified since the IN court records will reveal that I did sit for and pass the Indiana bar last February. Yet be not confused by the fact that I was so allowed to be tested .... I am not, to be clear in the service of my duty to be absolutely candid about this, I AM NOT a member of the Indiana bar, and might never be so licensed given my unrepented from errors of thought documented in this opinion, at fn2, which likely supports Mr Smith's initial post in this thread: http://caselaw.findlaw.com/us-7th-circuit/1592921.html

  2. When I served the State of Kansas as Deputy AG over Consumer Protection & Antitrust for four years, supervising 20 special agents and assistant attorneys general (back before the IBLE denied me the right to practice law in Indiana for not having the right stuff and pretty much crushed my legal career) we had a saying around the office: Resist the lure of the ring!!! It was a take off on Tolkiem, the idea that absolute power (I signed investigative subpoenas as a judge would in many other contexts, no need to show probable cause)could corrupt absolutely. We feared that we would overreach constitutional limits if not reminded, over and over, to be mindful to not do so. Our approach in so challenging one another was Madisonian, as the following quotes from the Father of our Constitution reveal: The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse. We are right to take alarm at the first experiment upon our liberties. I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations. Liberty may be endangered by the abuse of liberty, but also by the abuse of power. All men having power ought to be mistrusted. -- James Madison, Federalist Papers and other sources: http://www.constitution.org/jm/jm_quotes.htm RESIST THE LURE OF THE RING ALL YE WITH POLITICAL OR JUDICIAL POWER!

  3. My dear Mr Smith, I respect your opinions and much enjoy your posts here. We do differ on our view of the benefits and viability of the American Experiment in Ordered Liberty. While I do agree that it could be better, and that your points in criticism are well taken, Utopia does indeed mean nowhere. I think Madison, Jefferson, Adams and company got it about as good as it gets in a fallen post-Enlightenment social order. That said, a constitution only protects the citizens if it is followed. We currently have a bevy of public officials and judicial agents who believe that their subjectivism, their personal ideology, their elitist fears and concerns and cause celebs trump the constitutions of our forefathers. This is most troubling. More to follow in the next post on that subject.

  4. Yep I am not Bryan Brown. Bryan you appear to be a bigger believer in the Constitution than I am. Were I still a big believer then I might be using my real name like you. Personally, I am no longer a fan of secularism. I favor the confessional state. In religious mattes, it seems to me that social diversity is chaos and conflict, while uniformity is order and peace.... secularism has been imposed by America on other nations now by force and that has not exactly worked out very well.... I think the American historical experiment with disestablishmentarianism is withering on the vine before our eyes..... Since I do not know if that is OK for an officially licensed lawyer to say, I keep the nom de plume.

  5. I am compelled to announce that I am not posting under any Smith monikers here. That said, the post below does have a certain ring to it that sounds familiar to me: http://www.catholicnewworld.com/cnwonline/2014/0907/cardinal.aspx

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