Another Published Appellate Victory By Selman Breitman In Najah V. Scottsdale Insurance Company

Selman Breitman's insurance client issued a commercial property policy to the named insured borrower. Plaintiffs provided a second mortgage loan to the borrower, and were insured under the policy as second mortgagees. When the insured borrower defaulted on his first and second mortgages, plaintiffs purchased the first trust deed to avoid being "wiped out" as junior lienholders if the senior lender foreclosed. Plaintiffs thereafter bid the full amount owed on their second deed of trust to acquire the property at foreclosure sale. They discovered extensive damage to the property, and sought "vandalism" coverage as purported insured mortgagees.

In a published opinion, the Court of Appeals agreed with Selman Breitman's position that plaintiffs made a "full credit bid" by bidding the full amount due on the second trust deed at the foreclosure sale. A lender who makes a full-credit bid thereby loses any "insurable interest" in the property, and is not entitled to insurance coverage. It did not matter that plaintiffs held the first trust deed as well as the second trust deed. Anyone who acquired the property at the foreclosure sale would need to take the property subject to the first trust deed. Therefore, the amount owed on the first trust deed was necessarily taken into account when plaintiffs made a "full-credit bid" on the second trust deed and a contrary rule would compromise the transparency and integrity of the foreclosure auction process.

This case is another good example of Selman Breitman's experience and ability to defend complex matters involving real estate and secured loans, even in the insurance context. Congratulations to Alan Yuter, Rachel Hobbs and Jim Henshall on another well-deserved appellate victory on behalf of Selman Breitman's client.


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