High-stakes victory in title-insurance dispute

High-stakes victory in title-insurance dispute

Representing a national title insurer, Thomas M. Flanagan, Andy J. Dupre, and Anders F. Holmgren secured the dismissal of claims seeking in excess of $17 million. The claims, sounding in contract and in tort, arose from a venture capital firm's risky loan (and second mortgage) to a new manufacturing concern in Southeast Louisiana. The manufacturer soon defaulted on the loan and sought bankruptcy protection, and the lender acquired the collateral with pre-petition debt and cash. The collateral was worth less than its loan balance, however. Citing an alleged defect in its mortgage, the lender sued. It sought to require the title insurer, under a lender's policy of title insurance, to pay the balance of the loan (and millions more in statutory "bad faith" penalties) even though its mortgage lien had prevailed. On motions for summary judgment, the federal district court decisively rejected the lender's claims, concluding that the title policy did not cover the alleged business loss, and also finding that the lender failed to prove causation on its tort theory.