July 2, 2015
The Wisconsin Appellate Law report has this entry about a recent Seventh Circuit decision that shows the precarious position lenders are in in recovering their losses arising from their loans. As that article recites, in BB Syndication Services, INc. v. First American Title Insurance the Federal Seventh Circuit Court of Appeals ruled that a construction lender does not have a claim against the title insurer for liens that arose as a result of their cutting off funds to the project.
The Seventh Circuit relied upon a provision in the title insurance policy excluding coverage for liens “created, suffered, assumed or agreed to” by the insured lender.
The Court found that because the liens arose as a result of the lender cutting off funds to the project (thus causing the borrower to default in his obligations to subcontractors and material men, and then liens to be filed against the project), coverage did not lie.