Justia Insurance Law Opinion SummariesArticles Posted in Banking
BMO Harris Bank N.A. v. Edward E. Gillen Co.
BMO Harris Bank holds a security interest in the assets of Gillen, formerly in the construction business. Gillen failed to perform on a subcontract with Meyne, which received an arbitration award of $1.8 million. Liberty Mutual, Gillen’s primary insurer, paid Meyne $1 million, the policy’s limit. Gillen unsuccessfully sought to set aside the award, then appealed. To avoid execution of the judgment, Gillen posted a supersedeas bond, underwritten by F&D. The appeal was settled and dismissed; as part of that agreement, F&D paid Meyne the remaining $800,000 and stepped into its shoes as Gillen’s creditor. ICSOP, the insurer under an “excess” policy, paid $1.2 million into the court’s registry. BMO sought the entire amount, arguing that its status as a secured creditor put it ahead of F&D and Gillen. The district court awarded $800,000 to F&D, because it is subrogated to Meyne’s rights, and Meyne could have collected from ICSOP without impairing the Bank’s security interest. The remaining $400,000 was awarded to BMO as Gillen's secured creditor. The Seventh Circuit affirmed. Under Wisconsin law insurance bypasses security interests. Wisconsin is a direct‐action jurisdiction in which the victim of an insured wrong can collect from the insurer, Wis. Stat. 632.24. In Wisconsin, even the insolvency of the client and the presence of other creditors does not affect the victim’s rights. View "BMO Harris Bank N.A. v. Edward E. Gillen Co." on Justia Law
Davis v. Wells Fargo
After a foreclosure case, Davis filed various claims against an entity that he calls “Wells Fargo U.S. Bank National Association as Trustee for the Structured Asset Investment Loan Trust, 2005-11” as the purported holder of Davis’s mortgage. Davis also sued Assurant, believing it to be the provider of insurance on his home. His claims arise from damage that occurred to his house after Wells Fargo locked him out of it, which went unrepaired and worsened into severe structural problems. The district court dismissed Davis’s claims against Wells Fargo, on the grounds that claim preclusion and a statute of limitations barred recovery, and claims against Assurant for lack of subject matter jurisdiction. The Court reasoned that Davis lacked standing to bring those claims because he sued the wrong corporate entity, namely Assurant, when he should have sued Assurant’s wholly-owned subsidiary, ASIC. The Third Circuit affirmed dismissal of Wells Fargo, but vacated as to Assurant. Standing is a jurisdictional predicate, but generally focuses on whether the plaintiff is the right party to bring particular claims, not on whether the plaintiff has sued the right party. View "Davis v. Wells Fargo" on Justia Law
BancInsure v. FDIC
Defendant-Appellants Carl McCaffree, Jimmy Helvey, and Sam McCaffree (director-defendants) and the Federal Deposit Insurance Corporation (FDIC) appealed the district court's grant of summary judgment to BancInsure, Inc. BancInsure issued a Directors and Officers Liability Insurance Policy to Columbian and its parent Columbian Financial Corporation (CFC). the Kansas State Bank Commissioner declared Columbian insolvent and appointed the FDIC as receiver. By operation of law, the FDIC-R succeeded to "all rights, titles, powers, and privileges of [Columbian], and of any stockholder, member, accountholder, depositor, officer, or director" of Columbian. BancInsure received notice of potential claims the FDIC-R intended to file against the bank's officers and directors. In anticipation of such a suit, CFC and director-defendant Carl McCaffree brought suit against BancInsure seeking a declaratory judgment that the policy covered claims made after the date Columbian was declared insolvent, but before the expiration of the policy. The district court ultimately held that the policy remained in effect until May 11, 2010, relying in part on its finding that a regulatory endorsement in the policy "provide[d] coverage for actions brought by deposit insurance organizations as receivers during the policy year," which would have been meaningless if the policy terminated upon appointment of a receiver. On appeal, the Tenth Circuit sua sponte determined that no case or controversy existed at the time of the district court's judgment and remanded with instructions to vacate the judgment for lack of jurisdiction. BancInsure filed the instant action against the director-defendants in Kansas state court seeking a declaratory judgment that it owed no duty of coverage to the director-defendants for claims brought against them by the FDIC-R. The FDIC-R joined and removed the action to the federal district court in Kansas. At approximately the same time, the FDIC-R brought claims against several of Columbian's former directors and officers alleging negligence, gross negligence, and breach of fiduciary duty. The district court held that claims by the FDIC-R were unambiguously excluded by the policy's "insured v. insured" exclusion and that BancInsure was not judicially estopped from denying coverage. Finding no reversible error in that judgment, the Tenth Circuit affirmed. View "BancInsure v. FDIC" on Justia Law
Posted in: Banking, Contracts, Insurance Law
Avon State Bank v. BancInsure, Inc.
Avon Bank customer Herdering was contacted by "Gibson," who claimed to be the son of an African associate with whom Herdering had done business; that his father had died, leaving a $9 million estate; that the family wanted to transfer the funds to the U.S.; that the money was tied up in the Netherlands; and that the transfer required up-front payments of taxes and fees. Herdering sent Gibson money and approached Avon Assistant Vice President Carlson, who issued Herdering a loan from Avon, but contributed $60,000 of his own money. Avon’s President expressed concern that the estate might be a scam. Herdering later recruited others, telling them that Avon was making the loans and having both men write checks to Avon. Froseth contributed $405,000; Imdieke contributed $80,000. Carlson wired the money in violation of Avon policy that prohibited wiring money to non-customers. When the scheme fell apart, Avon terminated Carlson and sent the investors letters stating that it viewed their investments as related to Carlson’s personal dealing and not involving the bank. They sued Avon for fraudulent misrepresentation. BancInsure agreed to provide coverage under the Directors’ and Officers’ Liability Policy, rather than simply defend Avon, reserving its rights. A jury found that, in the scope of his employment, Carlson had breached his duty to disclose material information. BancInsure asserted that neither the Policy nor a separate Fidelity Bond covered the loss. The Eighth Circuit affirmed the district court holding that the Bond, but not the Policy, covered the loss, and an award of prejudgment interest. View "Avon State Bank v. BancInsure, Inc." on Justia Law
Fed. Deposit Ins. Corp. v. RLI Ins. Co.
In 2001, representatives from the Moody Bible Institute of Chicago and Sysix Financial signed a master agreement, laying the groundwork for future leases of equipment from Sysix to Moody. In 2008, two lease schedules for computer items were executed; they appeared to have been signed by Moody’s vice president and Sysix’s president. Sysix assigned its interest in both leases to Rockwell, which acquired loans from PNB to finance the leases. PNB procured indemnification coverage for those loans from RLI in the form of a financial institution bond. Sysix’s president had forged the signature of Moody’s vice president on both lease schedules. Moody never agreed to either schedule nor did it ever receive any of the promised equipment. PNB notified RLI of its potential loss, but PNB itself soon went under. As receiver for PNB, the FDIC sued RLI. The district court granted summary judgment in FDIC’s favor. The Seventh Circuit affirmed, finding that the plain language of the bond covered FDIC’s losses The Financial Institutions Reform Recovery and Enforcement Act limitations period applies,12 U.S.C. 1821(d)(14), so the suit was timely. View "Fed. Deposit Ins. Corp. v. RLI Ins. Co." on Justia Law
Posted in: Banking, Contracts, Insurance Law
Chartier v. Farm Family Life Ins. Co.
When Mark Chartier and Lisa Heward were married, Chartier purchased an annuity policy from Farm Family Life Insurance Co. for which he named Heward as primary beneficiary. Heward later requested the cash value of the annuity to Farm Family by signing Chartier’s name on the form. Farm Family issued a check payable to Chartier in the requested amount, Heward deposited the check into her and Chartier’s joint account with Gorham Savings Bank, and then withdrew $40,000 from the joint account. That same day, Heward informed Chartier that she wanted a divorce. Chartier filed a complaint against Farm Family, Gorham Savings Bank, and Farm Family’s sales agent, alleging breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing, and negligence. The superior court granted summary judgment in favor of the defendants as to all counts. The Supreme Judicial Court affirmed, holding that summary judgment was properly entered in the defendants’ favor as to all counts. View "Chartier v. Farm Family Life Ins. Co." on Justia Law
Posted in: Banking, Injury Law, Insurance Law
BB Syndication Servs, Inc. v. First Am. Title Ins. Co
A large commercial development in Kansas City, Missouri was aborted in the middle of construction due to cost overruns. When the developer would not cover the shortfall, the construction lender stopped releasing committed loan funds, and contractors filed liens against the property for their unpaid work on the unfinished project. Bankruptcy followed, and the contractors’ liens were given priority over the lender’s security interest in the failed development, leaving little recovery for the lender. The lender looked to its title insurer for indemnification. The title policy generally covers lien defects, but it also contains a standard exclusion for liens “created, suffered, assumed or agreed to” by the insured lender. The Seventh Circuit affirmed judgment in favor of the title company. The exclusion applies to the liens at issue, which resulted from the lender’s cutoff of loan funds, so the title insurer owed no duty to indemnify. The liens arose from insufficient project funds, a risk of loss that the lender, not the title company, had authority and responsibility to discover, monitor, and prevent. View "BB Syndication Servs, Inc. v. First Am. Title Ins. Co" on Justia Law
Posted in: Banking, Construction Law, Insurance Law, Real Estate & Property Law
BancInsure, Inc. v. Highland Bank
Highland Bank made a loan to FPC, an equipment lease finance company, based on an assignment of leases. The underlying leases, guaranteed by individuals, were ultimately discovered to be a Ponzi scheme. A guarantor claimed her signature was a forgery. Highland lost more than a million dollars. BancInsure denied Highland’s claim under a Financial Institution Bond that covered “Loss resulting directly from the Insured having . . . acquired, sold or delivered, given value, extended credit or assumed liability on the faith of any original . . . personal Guarantee . . . which bears a signature of any . . . guarantor . . . which is a Forgery.” BancInsure sought a declaratory judgment that Highland's claim was not covered. The district court granted summary judgment to BancInsure, finding that the loss did not “result directly from” a forged personal guaranty because the guaranty was worthless to the bank when it entered into the transactions. While appeal was pending, BancInsure was placed into receivership with the Oklahoma Insurance Commissioner as Receiver under a final order of liquidation. The Eighth Circuit affirmed. Highland failed to show the “direct relation between the injury asserted and the injurious conduct alleged” that the doctrine of proximate cause demands. View "BancInsure, Inc. v. Highland Bank" on Justia Law
Bank of Brewton v. The Travelers Companies
The Bank filed a claim with Travelers for the loss incurred with a long-time customer's default. The customer had pledged various assets as collateral for a loan including stock certificates representing shares in The Securance Group. The court held that, under Alabama law, a financial institution bond's definition of "counterfeit" - "an imitation which is intended to deceive and to be taken as an original" - does not encompass a duly authorized stock certificate procured under false pretenses. In this case, Certificate No. 11 at issue was fraudulently procured and, as such, valueless, it was an authentic document and thus not "counterfeit" under the terms of the bond. Accordingly, the court affirmed the district court's grant of summary judgment to Travelers. View "Bank of Brewton v. The Travelers Companies" on Justia Law
St. Paul Mercury Ins. Co. v. Fed. Deposit Ins. Corp.
In 2010 the Georgia Department of Banking and Finance closed Community Bank & Trust. St. Paul, which provided liability coverage to the Bank’s officers and directors, sought a declaratory judgment in response to a separate lawsuit (underlying action) brought by the Federal Deposit Insurance Corporation (FDIC), as receiver for the Bank, against Miller and Fricks, former Bank officers. In that action, the FDIC alleged gross negligence and breaches of fiduciary duty related to the Bank’s Home Funding Loan Program and claimed more than $15 million in damages. Finding the policy’s an “insured-versus-insured” exclusion unambiguous, the district court held that there was no coverage. The exclusion precludes coverage only for actions brought “by or on behalf of any Insured or Company in any capacity.” Neither the exclusion nor the defined terms make any reference to the FDIC, regulators, or any liquidating entity. St. Paul argued that the FDIC “steps into the shoes” of the bank, as a receiver. The Eleventh Circuit reversed, finding the provision ambiguous. View "St. Paul Mercury Ins. Co. v. Fed. Deposit Ins. Corp." on Justia Law
Posted in: Banking, Government & Administrative Law, Insurance Law