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Chubb loses ruling in dispute with mortgage firm


A federal appeals court has overturned a ruling in favor of Chubb Ltd. in a litigation dispute with a mortgage company over an abandoned laundromat, holding more information is needed to determine who controlled the property.

Chuck and Richard Dai owned a Chicago laundromat, but after defaulting on the mortgage offered the deed to Horsham, Pennsylvania-based Apex Mortgage Corp. in lieu of foreclosure, according to Monday’s ruling by the 7th U.S. Circuit Court of Appeals in Chicago in Apex Mortgage Corp. v. Great Northern Co. et. al.

Apex accepted the deed on condition the property was still marketable. A December 2008 inspection, however, revealed it was not, with the property in disrepair, exposed to the elements, trashed and open to vagrants, according to the ruling.

Apex took measures to preserve the property and sent the deed back to the Dais in April 2009.

In December 2010, two Chicago firefighters lost their lives battling a blaze at the laundromat.  The firefighters’ estates sued Apex in Illinois state court for negligence, and the matter was settled for $15 million. Apex’s general liability policy with Chubb unit Great Northern covered $1 million of the settlement, according to a footnote in the ruling.

After tendering that amount, Great Northern was dismissed from the lawsuit, and Apex then sought coverage under its excess and umbrella policy with Chubb unit Federal Insurance Co. for the remaining $14 million.

After Federal refused coverage, Apex filed suit against the insurer in U.S. District Court in Chicago, which granted summary judgment to Federal based on a foreclosure exclusion in its policy that excluded coverage to the “mortgagee in possession.”

The ruling was overturned by a unanimous three-judge appeals court panel. A “triable issues exists on who possessed the property at the time of the fire,” the ruling said. If Apex did not have actual possession of the property “then Federal cannot invoke the policy’s exclusion for ‘mortgagees in possession,’” the ruling said.

“The district court held Apex must have been in possession of the laundromat in December 2010 because it inspected and cleared the property, installed a tarp over the deteriorated roof, boarded up the windows and changed the locks,” it said.

“But other details deserve consideration, too,” the ruling added. These include Apex’s return of the deed to the Dias in April 2009, along with a letter reminding them of their ownership and mortgage obligation and urging them to inspect and secure the property,” it said.

“Meanwhile, Apex had no contact with the property after April 2009. Together, these facts create a triable issue on who possessed, i.e., physically controlled, the laundromat” at the time of the fire, the ruling said, in vacating the district court’s grant of summary judgment  to Chubb and remanding the case for resolution  of the case’s factual disputes.

Attorneys in the case had no comment or could not be reached.





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