Wins

GMSR’s client, a bank, issued a sizable loan, relying for collateral on the borrower’s trust account at another bank.  To secure the loan, the borrower provided an Account Control Agreement that gave GMSR’s client control over the other bank account in case of default.  The Account Control Agreement bore the notarized signature of an officer of the other bank.  But when the borrower defaulted and fled, GMSR’s client discovered that this signature was forged, and the loan was uncollectible.

GMSR’s client sued its forgery insurer for coverage.  The district court granted summary judgment for the insurer based on its conclusion that the Account Control Agreement was not a “Security Agreement” covered by the forgery policy.

The Ninth Circuit reversed.  The court adopted GMSR’s argument that the Account Control Agreement was a covered “Security Agreement” because it gave GMSR’s client the practical power to control the other bank account in order to secure the loan.

Click here to read the court’s memorandum disposition:  Banc of California Nat’l Ass’n v. Fed. Ins. Co., No. 21-56179, 2022 WL 17583056 (9th Cir. Dec. 12, 2022).

Law360 article:  9th Circ. Revives Bank’s $15M Scam Coverage Suit