Opinion ID: 628691
Heading Depth: 2
Heading Rank: 1

Heading: Imputation to Sunrise

Text: 10 FDIC argues that while the loan documents provided by the borrowers contained material misrepresentations, the applications for certificates of insurance submitted by Sunrise to Verex made no misrepresentations. The lack of a material misrepresentation by Sunrise is important because in order to avoid the insurance certificates under section 627.409, Verex must show that Sunrise made a material misrepresentation in its application for insurance. FDIC acknowledges Sunrise submitted a package including the borrowers' loan documents with its applications for insurance, but points out that the Master Policy had no language requiring Sunrise to adopt the representations of the borrowers. This lack of adoption contrasts with a 1985 revision to the Policy that expressly states that a lender applying for mortgage guaranty insurance adopts the representations of the borrower contained in the application package, according to FDIC. 11 Another argument presented by FDIC is based on the case of St. Paul Fire & Marine Ins. Co. v. Mayor's Jewelers of Ft. Lauderdale, Inc., 465 F.2d 317 (5th Cir.1972). 2 In St. Paul the insured requested additional coverage under his property insurance policy. The insurance company agreed to extend the coverage on the condition that the insured could verify that he had a specific type of burglar alarm. After telling the insurer that he did not know what type of alarm was installed, the insured called his security company which informed him that he had the requisite type of alarm. The insured then called the insurance company and reported what the security company had told him. This information later turned out to be false. St. Paul, 465 F.2d at 320-21. The court held that the insured had made no misrepresentations because he merely faithfully reported what the security company had told him. FDIC insists that this case is on point with St. Paul because Sunrise simply reported information supplied by the borrowers in its loan applications. Therefore, FDIC argues Sunrise made no misrepresentations and cannot be charged with those made by the borrowers. 12 We are not persuaded by FDIC's arguments that the misrepresentations made by the borrowers should not be imputed to Sunrise. The Master Policy in effect at the time of issuance of these certificates stated that Verex issued the certificates in reliance upon the statements made in the Application submitted by the insured. The Policy required Sunrise to supply an Application in connection with each loan for which coverage under the policy is desired, on forms furnished and with requirements prescribed by Verex. The parties agree that Sunrise was required to furnish the borrowers' loan documents as part of the requirements prescribed by Verex. Thus, under the language of the Policy, the applications Verex required Sunrise to submit included all statements made in the borrowers' loan documents. The Policy indicates that the insurance certificates were issued in reliance upon the statements made in the applications; therefore, Sunrise is properly charged with the consequences of any misrepresentations in the applications. See TCF Mortgage Corp. v. Verex Assurance, Inc., 709 F.Supp. 164, 166 (D.Minn.1989) (construing an identical policy, the court held that because loan documents were submitted by the insured as required by Verex in order to receive insurance, misrepresentations contained therein were made by the insured or at least on the insured's behalf). St. Paul is not controlling because Sunrise was not merely faithfully reporting information supplied by a third party, but rather was required to furnish certain statements, including the borrowers' loan papers, as a part of its application upon which Verex expressly relied under the terms of the Policy. We hold that the misrepresentations made by the borrowers are properly imputed to Sunrise.