David Duperrault led the SVLG Team and Achieves Landmark Settlement
Silicon Valley Law Group attorneys achieved a landmark settlement for our client in a mortgage broker malpractice case. Our client, a wholesale lender, recovered nearly 100% of the funds available on its broker malpractice policy.
Our client loaned over $2.3 million to an architect and developer, secured by a 4-unit condominium complex in Southern California. The developer was unrealistic about the value of the property. When he was unable to sell the properties for what he thought they were worth, he sued the mortgage broker and our client, the lender.
We immediately demanded the broker indemnify and defend our client based on the terms of an agreement that protected our client from losses based on broker misconduct. It appeared that our client was protected since the alleged misconduct was by the broker, and the broker carried malpractice insurance. Then the mortgage crisis exploded.
By September 2007, the mortgage broker had collapsed and closed its doors. We were now dealing with insurance company. Unfortunately, our client's indemnity claim was not covered by the insurance policy. Nor were the allegations of fraud against the broker.
We asserted claims against the broker that were covered by the policyprofessional negligence and negligent misrepresentation by the broker. If the broker had done its job properly, our client never would have made the loans, and never would have suffered a loss. The insurance company tried to settle the case with the developer, provided the court would approve it as a good faith settlement. The insurance company asked the court to rule that if they paid the $300,000 to the developer they would be excused from paying anything to our client.
The SVLG team opposed the insurance company's motion won. We pointed out that it was our client that had suffered the lossnot the developer. And a true good faith settlement would protect the broker only against our client's equitable indemnity claims based on liability to the developer. We had asserted independent negligence claims against the broker, not merely equitable indemnity claims. The insurance company appealed the decision. We won again.
The SVLG team negotiated a settlement between our client and the developer, forcing our client's errors and omissions carrier to pay the settlement. We know of no other case in which an insurance company has paid a lender's claim on a broker malpractice policy. Our client would have suffered a huge loss, had we not recovered the money from the insurance carrier.
David Duperrault led the SVLG team. The Silicon Valley Law Group Real Estate and Litigation groups contributed extensively.