We insured the lender in second priority. It was discovered later that the borrower had forged the endorsement on a payout cheque provided by the insured lender and, as a result, the existing second mortgagee was not paid out and that lender had commenced legal action to sell the property. The insured lender was now in third priority behind the second lender.
Action:
We agreed to pay any loss suffered by our insured lender as a result of the lack of priority.
