A terrific resource for those looking for a basic understanding of the UCC Article 3 and 4 rules on checks should take a look at
The Check Book; A Guide for Check Disputes, by Gene Elerding. Gene has given us permission to offer
The Check Book free of charge in our Banker Tools section. You can find it at
http://www.bankersonline.com/tools/training/ucc3_4trng_ge.html. {The rest of this response is revised.]
The depositary bank warrants to the paying bank that it has the right to enforce the check and that all the signatures (other than the drawer's) are authorized and genuine. That puts the depositary bank on the hook for a forged endorsement, and a claim for breach of warranty in most states is valid for up to three years (it's a shorter period in Georgia and Florida and perhaps elsewhere).
As the depositary bank, you have to decide whether to honor the paying bank's claim (which should at least be supported by an affidavit from the payee) or to contest it. If you contest it, you'll possibly be defending the claim in court.