A loan for over $200,000 was taken out by the "borrower" in 2002. Repayments were made for almost 2 years before the loan went into default. Possession proceedings were commenced by the lender, the "borrower" even coming into the law firm's office to accept service. The lender was successful in obtaining possession orders. However, several weeks later, the lender received a surprise when the Sheriff who was attending the property to change the locks was informed that the "borrower" had been dead for over 2 years. It turned out that the deceased had left his property to his daughter in his will and probate had only just been issued. The beneficiary's lawyers had immediately contacted the lender and commenced injunctive proceedings to have the possession orders set aside.
Action:
We were notified and commenced investigations, as part of the "Duty to Defend" coverage under the policy. It turned out that the deceased's niece was the executrix and therefore had custody of the title deeds. Her (now estranged) husband was a mortgage broker who had used the title deeds to obtain a loan by fraudulent means, purporting to be the "borrower". As the injunctive proceedings were on foot and after discussions with the beneficiary's lawyers. We took the view that the claim should be paid.
