Another of the accumulating lawsuits involving Title Insurance Companies presents a twist: Old Republic Nat'l Title Ins. Co. v. Landmark Closing Co., Download Old Republic National Title Insurance Co. v. Landmark Closing Co. (E.D. Ark. Case No. 4.09.00422, Opinion Filed June 1, 2010) also published as 2010 WL 2228436 (E.D. Ark. 2010)(Westlaw subscription required to access Westlaw).
Old Republic contracted with Landmark for Landmark to "act as Old Republic's policy issuing agent in White County, Arkansas." Old Republic National Title Insurance Co., 2010 WL 2228436 at *1. Old Republic conducted an audit of Landmark and found that funds were missing from an escrow account maintained by Landmark for Old Republic at First Community Bank.
Landmark was apparently broke. Old Republic sued First Community Bank for negligence and conversion. Id. at *2. Old Republic's negligence claim against the Bank was rejected under Arkansas law, but its conversion cause of action is still active as the Federal Trial Court denied a motion for summary judgment filed by the Bank, as to that conversion claim.
The Federal Court based its holding on settled Arkansas law to the effect that if a Bank has notice or knowledge of a breach of trust by an improper withdrawal or withdrawals of funds, or benefitted from it or them, then it can be subject to liability. Id. at *4. Applying this rule of law to the facts of that case, "there is an issue of fact as to whether the bank ... was on notice and had knowledge of ... misappropriations, participated in her misappropriating the funds, and benefitted financially from it." Id. at *5.
This is a case which displays the reasons why Courts began to carefully consider that Contract Law may not furnish the appropriate remedies demanded by Fiduciary Law, a development traced by Dennis J. Wall in ยง 2:2 of "Litigation and Prevention of Insurer Bad Faith" (Shepard's/McGraw-Hill First Edition; West Publishing Co. Second Edition and 2010 Supplement in process).
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