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North Shore Bank has lost another round in a long legal fight for insurance coverage over a bad loan on a $680,000 motor home that never existed.

It was 2006 when Russel Ott sought to finance the purchase of a 2007 Beaver Marquis. It appeared he ran a successful motorcycle and ATV dealership in Illinois, and the bank thought it would be a good transaction and a way to add a valuable new customer. It loaned Ott $404,000.

The bank did some background work, checking out Ott's dealership, financials and tax returns. A bank rep even went to the dealership and inspected the RV on site, checking to see that the VIN matched the one on the certificate of origin Ott supplied. Illinois issued a title with North Shore as the lien holder.

But when Ott defaulted two years later and North Shore went to repossess the pricey wheels, they discovered a big problem: it didn't exist. The manufacturer said it had never made a 2007 Beaver Marquis with the listed VIN. It appeared Ott had faked a VIN and put it on a 2003 model, then made up the certificate with the same number.

North Shore filed a claim with Progressive Casualty, but the insurer said the bad certificate didn't meet the bond's definition of counterfeit. A federal magistrate found that a counterfeit in that context is a duplicate of an actual, valid, orginal document; in this case, Ott created a wholly new bogus document about a specific motor home that didn't exist.

Last week, the U.S. 7th Circuit Court of Appeals agreed.

The court pointed out that the bank could have taken additional steps that would have revealed Ott's fraud: comparing the motor home it inspected with the manufacturer's listed features, comparing the certificate Ott presented with one from the manufactuer; or checking the listed VIN with the manufacturer.

North Shore's only solace might be knowing it wasn't Ott's only victim. "During its investigation, the bank discovered that Ott had defrauded several other financial institutions of millions of dollars," according to the appellate decision.