Mortgage Associates, Inc. v. Fidelity & Deposit Co. of Maryland

As the result of a fraudulent scheme perpetrated by a mortgage lender’s employees and third persons, the mortgage lender made several loans for more than the value of the mortgaged properties. The mortgage lender, unable to recoup its losses through foreclosure, submitted claims under its financial institution bond (which covered some but not all losses resulting from employee dishonesty) and under 16 title insurance policies it had purchased for the mortgaged properties. Both insurers denied the claims, and both were sued by the mortgage lender. The insurers’ motions for summary judgment were granted, and the mortgage lender now appeals. We affirm both judgments.

Facts

A.

Mortgage Associates, Inc. (MAI), a mortgage banking company, was in the business of making purchase money mortgage loans on real property. Most of MAI’s business came from either loan brokers or real estate investors who had purchased foreclosure properties for resale at a profit and who referred their buyers to MAI. As relevant to this case, MAI had two types of insurance: (1) a financial institution bond issued by Fidelity and Deposit Company of Maryland (F&D) to cover losses resulting from…