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Title Agency Prevails Against Borrower Falsely Claiming That It Was Insured by Lender’s Title Insurer

This action was commenced by the plaintiff, a hard money lender, who loaned one million dollars to tthe defendant/third party plaintiff (“Borrower”) on a property that was deeded to the Borrower pursuant to a fraudulent deed transfer. After the plaintiff commenced a foreclosure proceeding against the Borrower, the Borrower brought a third party action directly against the title insurance company that searched the title with respect to the transaction, seeking indemnification. The Borrower submitted a copy of the acknowledgment of the title order for the loan, which listed the Borrower’s name and, to an unsophisticated eye, made it look as if the policy insured the Borrower.

Adam Leitman Bailey, P.C. was retained to represent the interests of the title insurance company, whose time to answer in the action had already expired. After an initial review of the claim, Adam Leitman Bailey, P.C. took the position that the action can be dismissed based on: (1) documentary evidence, arguing that the title insurance company owes no duty and is not in privity with the Borrower, as the loan policy does not insure the Borrower, but rather only insures the loan, (2) failure to state a cause of action, in that coverage cannot be created where it was not contracted for, and (3) lack of personal jurisdiction, arguing improper service upon an LLC. In order to prevail on this motion, Adam Leitman Bailey, P.C. strategically drafted and procured affidavits from both the president and vice president of the title insurance company (to accompany its motion to dismiss).

These affidavits were necessary to ensure that the court was well informed of the customary practices in the field of title insurance, so as to guard against the very real risk that the court would order the title insurance company to remain in the action until discovery proved that the policy did not cover the Borrower. Adam Leitman Bailey successfully argued to the court that, among other things, having a borrower in a transaction pay for the loan policy, does not create a contractual relationship between the payer of the bill and the issuer of the policy, and its motion to dismiss the action against the title insurance company was granted in all respects.

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