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A federal appeals court has overturned a lower court for the second time and held a Hartford Financial Services Group Inc. unit may be obligated to indemnify a mortgage lending company and its former president.
According to court papers in First One Lending Corp. et al. v. The Hartford Casualty Insurance Co., San Juan Capistrano, California-based First One Lending Corp. and its former president, John Vescera, sued Hartford Casualty in 2013, alleging it should have defended and indemnified them when they were sued by the Boston-based Neighborhood Assistance Corporation of America, a nonprofit community advocacy and homeownership organization.
The complaints against the defendants alleged a fraudulent mortgage modification scam targeting vulnerable homeowners who were seeking mortgage modifications, according to a 2017 ruling in the case by the U.S. District Court in Pasadena, California.
In 2016, Mr. Vescera “pled guilty to crimes related to defrauding the public through this scheme with First One,” said the ruling.
The NACA suit was subsequently settled, but Hartford denied coverage, and the plaintiffs filed suit against the insurer in the District Court.
The court initially granted Hartford Casualty’s summary judgment motion and held the insurer had no duty to defend the plaintiffs because NACA’s complaint only sought restitution of ill-gotten gains, which are not insurable as matter of public policy, according to the 2017 ruling.
But in 2016, the 9th U.S. Circuit Court of Appeals in San Francisco reversed the District Court on those grounds, stating Hartford Casualty was not entitled to summary judgment because the underlying action potentially sought damages covered by the policy.
On remand, Hartford Casualty once again successfully obtained summary judgment in the case, and again the 9th Circuit overturned that ruling in Tuesday’s decision.
A unanimous three-judge appeals court panel held that Hartford Casualty had failed to demonstrate that policy exclusions “apply to all of the claims alleged against First One and Vescera ‘in all possible worlds,’” said the ruling, quoting an earlier ruling, reversing the lower court and once again remanding the case.
First One attorney Cecilia O’Connell Miller, a partner with Procopio, Cory, Hargreaves & Savitch LLP in San Diego, said in a statement, “We agree with the decision of the Ninth Circuit and look forward to pursing our client’s insurance recovery in the District Court on remand.”
A Hartford attorney could not be reached for comment.
U.S. authorities said in October that Nomura Holdings Inc. had agreed to pay $480 million to resolve civil claims by the U.S. government that it misled investors in marketing residential mortgage-backed securities.
A Hartford Financial Services Group Inc. unit may be obligated to indemnify a chocolate company that was victimized by a phishing scheme, says the Vermont Supreme Court, in a ruling that overturns a lower court decision.