Was a California Bank Held Liable for Honoring Fraudulently Endorsed Checks?

In Brief:

IN A RECENT Federal case decided on California law, an insurer sued a bank that had honored fraudulently endorsed checks. The bank cited the Uniform Commercial Code, arguing that the checks had been fraudulently endorsed by an employee of the account holder. Not so fast, said the court—the bank had a few more legal hoops to jump through to make that defense.

The Facts:

A general contractor general (the “general”) entered into a subco…