Track Mortgage Group, Inc. v. Crusader Insurance

A lender holds a first deed of trust. The property suffers severe damage. The lender is named a loss payee on the debtor’s property insurance policy. After the debtor defaults on its loan, the lender forecloses on the property and thereafter prevails in its action for breach of contract and bad faith against the insurance company.

The lender’s contract damages are limited to the difference between the amount secured by the deed of trust and the amount of the lender’s credit bid at the foreclosure sale (the credit bid rule). Here we hold the lender’s tort damages are also limited by the credit bid rule absent a showing that the insurance company’s conduct caused the lender to make the credit bid. The lender is entitled, however, to other consequential tort damages such as interest and attorneys’ fees. We affirm.

Facts

Wolfriver Holding Corporation (Wolfnver) owned an apartment building in Los Angeles. Plaintiff Track Mortgage Group, Inc. (Track) held a first trust deed on the building. Crusader Insurance Company (Crusader) insured the building against physical loss or damage. Track was named a loss payee on the policy pursuant to a provision in the trust deed.

On July…