One Larry Levi, the assignee of a note and mortgage, purchased what the Federal Court sometimes called "a mortgage title insurance policy" in Levi v. Commonwealth Land Title Insurance Co., 2011 WL 4542904 (S.D.N.Y. September 30, 2011): Download Levi v. Commonwealth Land Title Ins. Co. (S.D.N.Y. Case No. 09 Civ 8012, Opinion and Order Filed Sept. 30, 2011) PUBLIC ACCESS. By whatever name, the Court was interpreting and applying a Title Insurance Policy in that case.
Mr. Levi's claim was for breach of contract. The New York Federal Court applied New York law. The Court held that Mr. Levi adequately proved his covered claim. It granted his Motion for Summary Judgment. Id. at *3-*5. He adequately proved that the mortgage he was assigned was a fraud.
The Federal Court's compilation of recoverable Damages in this case was significant. First, the Court held in accordance with universal law (including New York's) that "[a] title insurer must indemnify the insured for the actual loss, within the policy limit, stemming from the defect in the mortgage." Id. at *6.
Here, Mr. Levi was "a holder of a junior lien," and his recoverable loss would be his actual loss of "the lesser of 1) the unpaid principal on the mortgage debt and 2) the mortgagor's equity in the property, i.e., Levi's recovery if he had been able to foreclose." Id. The Court in this case determined that Mr. Levi's actual loss, and thus his recoverable loss from his Title Insurance Company, was $1,000,000.00 or $1Million, "a point Commonwealth does not contest" -- and an amount which happened to be the Policy Limit on his Title Insurance Policy. Id.
Second, the Federal Court determined that Mr. Levi was entitled to Prejudgment Interest under New York law. Prejudgment Interest accrues in New York from the earliest date on which the cause of action or claim could be ascertained. In this case, the "starting point for prejudgment interest" would be the date when "the insured's cause of action accrues when it suffers an actual loss as a result of the defect in his lien." Id. at *6-*7.
Third and finally, the Federal Court rejected Mr. Levi's claim to attorney's fees, under Federal law. "Commonwealth has not 'acted in bad faith, vexatiously, wantonly, or for oppressive reasons' and therefore a discretionary award of attorney's fees is not warranted." Id. at *7.
The implication of this and many other decisions which follow established principles of Insurance law, on Mortgage and Title Insurance Companies' exposure from fraudulent mortgages in the Great Credit Collapse through which we are all now living, is very clear: The Collapse may also be the cause of the collapse of many as yet unknown Insurance Companies, which will undoubtedly file third-party or direct claims of their own against the persons responsible for the losses resulting from mortgage fraud.
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