Insurance coverage for mortgage fraud was not excluded where the mortgage proceeds were paid to the borrower’s lawyer despite an exclusion clause where payment of mortgage proceeds was made to any person or entity other than the borrower

Insurance law – Mortgage insurance – Exclusions – Fraud – Interpretation of policy – Practice – Appeals

Nodel v. Stewart Title Guaranty Co., [2018] O.J. No. 1872, 2018 ONCA 341, Ontario Court of Appeal, April 9, 2018, G.J. Epstein, D. Paciocco and I.V.B. Nordheimer JJ.A.

The insured was a private mortgage lender and the victim of a mortgage fraud. He sought coverage from the insurer pursuant to a mortgage insurance policy. The insurer denied coverage on the basis of an exclusion clause which applied “in the event the proceeds of the Insured Mortgage are paid to any person or entity other than… to the insured title holder.” The mortgage proceeds had been paid to the insured title holder’s lawyer. The Court held that payment to the insured’s title holder lawyer was in law the same as payment to the insured title holder. In the alternative, there was ambiguity in the clause that should be interpreted in favour of the insured. Accordingly, the claim was covered by the policy.

This case was digested by Dionne H. Liu, and first published in the LexisNexis® Harper Grey Administrative Law Netletter and the Harper Grey Administrative Law Newsletter.  If you would like to discuss this case further, please contact Dionne H. Liu at dliu@harpergrey.com.

To stay current with the new case law and emerging legal issues in this area, subscribe here.