4 F. Supp. 3d 790
W.D.N.C.2014Background
- BofA seeks over $279 million in benefits under Old Republic’s T90 Policy for 4,400+ loan-default claims.
- This diversity action involves insured HELOANs with a four-page policy form and endorsements.
- Courts previously granted partial summary judgment: policy governing terms and prohibition on using information not known to underwriters at origination.
- Bellwether trial plan for 24 loans; Old Republic planned to process 17 loans for payment, which would moot the bellwether trial.
- Bank of America sought administrative relief to preclude extrinsic evidence and misrepresentation-based denial, consistent with earlier rulings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Policy is fully integrated and unambiguous. | Policy is fully integrated; extrinsic evidence cannot alter its terms. | Policy is not fully integrated; extrinsic evidence can construe or modify terms. | Policy is fully integrated; extrinsic evidence cannot alter unambiguous terms. |
| Whether Old Republic may deny coverage based on borrower misrepresentation unknown to Bank of America at origination. | Unknown borrower misrepresentations cannot defeat coverage. | Misrepresentations or information outside the file may affect coverage per guidelines. | Old Republic cannot deny coverage based on unknown misrepresentations. |
| Whether extrinsic documents (e.g., 2006 Term Sheet) or industry custom may be used to construe or add terms to the Policy. | Extrinsic evidence may supplement the policy under non-integrated theories. | Extrinsic evidence should be admissible to add terms or interpret the policy. | Extrinsic evidence cannot alter unambiguous terms of a fully integrated policy. |
| Whether the 2006 Term Sheet constitutes an amendment or part of a broader agreement. | Term Sheet represents additional terms. | Term Sheet is not a binding amendment; not pursuant to P&S 9. | Term Sheet not an enforceable amendment; cannot modify the Policy. |
Key Cases Cited
- First-C citizens Bank & Trust Co. v. 4325 Park Road Assoc., Ltd., 133 N.C.App. 153 (N.C.App. 1999) (extrinsic evidence cannot create or alter terms of a fully integrated contract)
- Wachovia Bank & Trust Co. v. Westchester Fire Ins. Co., 276 N.C. 348 (N.C. 1970) (insurance policy terms control; extrinsic evidence not allowed to alter terms)
- Neal v. Marrone, 239 N.C. 73 (N.C. 1953) (contracts integration presumption; written agreements fully integrate terms)
- Root v. Allstate Ins. Co., 272 N.C. 580 (N.C. 1968) (integration and interpretation of insurance contracts)
- E.L. Scott Roofing Co. v. State, 82 N.C.App. 216 (N.C. App. 1986) (custom or usage may explain ambiguous terms but cannot create new contract)
- Hickory Orthopaedic Center, P.A. v. Nicks, 179 N.C.App. 281 (N.C. App. 2006) (course of dealing cannot alter unambiguous policy terms)