CA1: No E&O coverage for falsified credit reports

New Fed Mortgage Cor v. National Union Fire Insurance Company, No. 07-2762.  This case is timely.  As you know, many of our clients have caused the downfall of civilization as we know it.  Anyway, New Fed is a residential mortgage broker.  Amongst other things, it provides the lenders with the credit reports of its customers.  One of their brokers falsified credit reports.  As you know, mortgages are resold and incorrect credit information has far-reaching effects (in this case $233,052.75 worth of them.  (But somehow people don’t seem to care when the market is good.)  National Union writes its errors and commissions policy.

Anyway, the First looks at the policy and sees that there is an exclusion for employee dishonesty.  It rejects the notion that because New Fed itself didn’t intend to harm the lender it should be covered.  And, like, “duh” of course there is no duty to defend.  Strangely, “The district court's decision rested on an unrelated policy exclusion, which we need not consider here.”