Bank Not Indemnified for Reliance on False Document
The 7th Circuit affirmed the decision of the lower court that a falsified certificate of origin was not “counterfeit” as to require indemnification under a bank’s insurance policy. North Shore Bank issued a loan for the purchase of a motor home accepting the motor home itself as collateral after inspecting the vehicle and the certificate of origin. However, it was later discovered that the certificate of origin was falsified and no vehicle existed with that VIN. The bank then attempted to recover almost $370,000 from its insurance company under a policy that called for the bank to be indemnified if the bank it extended credit while relying on a counterfeit certificate of origin. The policy defined counterfeit as “a Written imitation of an actual, valid Original which is intended to deceive and to be taken as the Original.” However, the Court determined that the document in question was not counterfeit because it was a falsified document—not a reproduction of a real certificate of origin. The Court made it clear that counterfeit documents are treated differently because exercising care in verifying a document is more likely to uncover fraud when there is no original, as in this case.