Associated Bank, N.A. v. Stewart Title Guaranty Co., 881 F. Supp. 2d 1058

Associated Bank alleges Stewart Title breached the policy by failing to indemnify and defend the Arneson loan foreclosure loss.
Loan to Randy S. Arneson ($450,250) was secured by a Mortgage on property in Minnesota; loan broker New Day Capital provided the application but was not approved and closing witnesses were absent.
Policy insures against loss from invalidity/unenforceability of the insured mortgage lien and includes a duty to defend, with exclusions for defects created by the insured.
Arnesons asserted fraud/misrepresentation defenses in foreclosure pleadings; settlement later acknowledged the Mortgage was invalid and a payment of $175,000 was made to Associated Bank; market value at settlement was about $126,000.
Associated Bank tendered defense to Stewart Title in 2009; Stewart Title did not respond; Foreclosure action settled in 2010 with loss measured at conclusion of foreclosure.

Issue	Plaintiff's Argument	Defendant's Argument	Held
When is the insured loss measured for indemnity?	Associated Bank argues loss measured at loan origination.	Stewart Title argues loss measured at foreclosure conclusion.	Loss measured at foreclosure conclusion; no indemnity liability.
Did Stewart Title have a duty to defend the Arnesons’ fraud claim?	Arneson’s Answer alleged fraud against Mortgage; claim within coverage.	Policy excluded defense for claims not within insured scope or created by insured.	Stewart Title had a duty to defend; breach found due to failure to defend.
Does the 'created, suffered, assumed or agreed to by the insured' exclusion apply?	Arnesons’ pleadings did not show Bank created the defect.	Exclusion may apply when insured caused the defect.	Exclusion not clearly applicable; defense obligation exists.
Are post-tender defense fees recoverable?	Fees incurred to force insurer to pay for defense are recoverable.	Fees limited; only amounts tied to defense duties are recoverable.	Post-tender fees awarded; total $32,760.28 after deducting non-recoverable amount.

Enron Corp. v. Lawyers Title Ins. Corp., 940 F.2d 307 (8th Cir.1991) (duty to defend triggered by adverse claims in underlying action)
Jostens, Inc. v. Mission Ins. Co., 387 N.W.2d 161 (Minn.1986) (insurer bears burden to defend when potentially within coverage)
Gibraltar Sav. v. Commonwealth Land Title Ins. Co., 905 F.2d 1203 (8th Cir.1990) (insurable value corresponds to fair market value of security; not guaranteed mortgage value)