The case of Zurich American Insurance Co. v. Diamond Title was a "declaratory relief action seeking rescission of a title agent's errors and omissions policy". Zurich American Insurance Co. v. Diamond Title, 2013 WL 6283684 *1 (M.D. Fla. December 4, 2013).
The title insurer alleged that the applicant for title agent's errors and omissions coverage, Diamond Title, "misrepresented material facts in its application for insurance" by incorrectly answering Question 21, reproduced below. Question 21 is apparently a standard question, with that number, in many title insurance applications in use across the nation.
Question 21 of the title insurance agent E&O application asked:
Does the Applicant or any prospective insured know of any circumstances, acts, errors or omissions that could result in a professional liability claim against the Applicant?
Zurich American Insurance Co. v. Diamond Title, 2013 WL 6283684 *2 (M.D. Fla. December 4, 2013).
One Rotolo "was the owner, operator, and President of Diamond Title at that time". She answered Question 21 with a "No" in 2007. In 2009, she admitted that between 2002 and 2008 she had conspired "to make materially false statements to FDIC-insured banks for the purpose of influencing those banks in connection with mortgage loans and to committing wire fraud". The purpose of the fraud "was to obtain loans secured by mortgages from FDIC-Insured banks and mortgage lending business." Among the "false statements" were statements about the buyers and sellers; the family relationships among them; "the properties' actual purchase prices; the borrowers' intended use of the properties; the amount and source of the equity contributed to the purchase of the property by the borrowers," among other things. Zurich American Insurance Co. v. Diamond Title, 2013 WL 6283684 *1 (M.D. Fla. December 4, 2013).
The Court in this case had no trouble declaring this conduct was among the things that a title insurance agent does and for which a title insurance agent obtains E&O coverage. "These false statements are within the Policy's definition of professional services because they are the duties of a closing agent and escrow agent." Zurich American Insurance Co. v. Diamond Title, 2013 WL 6283684 *3 (M.D. Fla. December 4, 2013). On that ground alone, rescission was in order in the eyes of this Court.
But there was a further ground for rescission. "The Policy makes clear that it does not cover liability for criminal acts .... Rotolo was not relieved of her duty in the application to report acts that could result in a professional liability claim simply because the Policy many not have covered those acts." Zurich American Insurance Co. v. Diamond Title, 2013 WL 6283684 *3 (M.D. Fla. December 4, 2013). [Italics in original; boldface added.]
The Court in that case granted the insurance company's motion for summary judgment and directed the Clerk to enter judgment in favor of the plaintiff insurance company.
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