We found the information below regarding false pretense coverage and the exclusion that states that coverage does not apply to a loss in which for any reason a bank or other drawee fails to pay. We insure a car dealership. A customer completed an online loan application on the dealer's website and was pre-approved for an auto loan. An appointment was made for the customer to come to the dealership, fill out the paperwork, and purchase the vehicle. Customer provided all requested information including driver's license, copy of his social security card, etc. The customer put a $2,000 down payment on it and was able to leave with the vehicle. A couple weeks later, Chrysler Financial rejected the loan stating the social security number that the customer provided was fraudulent. The dealership attempted to recover the vehicle from the owner and return his $2,000 down payment. After a couple of failed attempts at recovery, a police report was filed and the case was taken to a grand jury. The customer was indicted and a warrant was issued for his arrest, but the dealership still was not able to recover the vehicle. As a result, a claim was made with the thought that false pretense coverage would apply.

There is much discrepancy between the insurer, insured, and agent over whether or not the exclusion on the endorsement applies in this situation.

We would appreciate your unbiased and professional opinion on whether or not the exclusion applies to the scenario described above.