Justia Insurance Law Opinion Summaries

Home Federal agreed to lend up to $95.5 million to finance construction of a new ethanol production plant. When the developer of the plant ran into serious trouble finishing the project, the bank did not disburse the final $8 million. The developer defaulted on the debt and fired its general contractor, which then filed a mechanic’s lien on the property to recover $6 million allegedly owed it. When the bank sought to foreclose on its mortgage, the general contractor counterclaimed, asserting that its lien had priority over, or at least parity with, the bank’s mortgage. The bank tendered its defense to the title insurer under a policy that required the insurer to defend the bank against a “claim . . . alleging a defect, lien or encumbrance or other matter insured against by this policy.” The policy contained an exclusion from coverage for claims “created, suffered, assumed, or agreed to” by the insured. The district court ruled in favor of the title insurer. The Seventh Circuit reversed. The undisputed facts show that the title insurer breached its duty to defend the bank on the contractor’s claim that its mechanic’s lien had priority over or parity with the mortgage. View "Home Fed. Savings Bank v. Ticor Title Ins. Co." on Justia Law

In 2007, Fifth Third loaned Buford $406,000 in exchange for a mortgage on property that Buford purportedly owned. Fifth Third obtained a title-insurance policy from Direct Title, an issuing agent for Chicago Title. Direct Title was a fraudulent agent; its sole “member” was the actual title owner of the property and conspired with Buford to use that single property as collateral to obtain multiple loans from different lenders. When creditors foreclosed on the property in state court, Fifth Third intervened and asked Chicago Title to defend and compensate. Chicago Title refused to defend or indemnify. Chicago Title sought to avoid summary judgment, indicating that it needed discovery on the questions whether “Fifth Third failed to follow objectively reasonable and prudent underwriting standards” in processing Buford’s loan application and whether Direct Title had authority to issue the title-insurance policy. The district court granted Fifth Third summary judgment. The Sixth Circuit affirmed, noting that “When a party comes to us with nine grounds for reversing the district court, that usually means there are none.”View "Fifth Third Mortg. Co. v. Chicago Title Ins. Co." on Justia Law

This insurance coverage dispute arose from a policy designed to protect financial institutions from losses caused by dishonest employees. Trying to recover nearly one million dollars stolen by an employee from client brokerage accounts, three financial institutions sued the insurance company that issued the policy. The district court held that the policy covered the losses and granted summary judgment to the financial institutions. The Sixth Circuit Court of Appeals affirmed the court's liability judgment and all but one of its damages calculations, holding (1) the stolen money was covered property; (2) the employee's theft caused a direct loss to the bank; (3) the employee committed his dishonest acts with the manifest intent to cause the loss; and (4) the district court's decision to subtract another insurance company's $50,000 pay-out to the banks based on another employee-dishonesty policy from the damages award was error. Remanded. View "First Defiance Fin. Corp. v. Progressive Cas. Ins." on Justia Law

This insurance coverage dispute arose from a policy designed to protect financial institutions from losses caused by dishonest employees. Trying to recover nearly one million dollars stolen by an employee from client brokerage accounts, three financial institutions sued the insurance company that issued the policy. The district court held that the policy covered the losses and granted summary judgment to the financial institutions. The Sixth Circuit Court of Appeals affirmed the court's liability judgment and all but one of its damages calculations, holding (1) the stolen money was covered property; (2) the employee's theft caused a direct loss to the bank; (3) the employee committed his dishonest acts with the manifest intent to cause the loss; and (4) the district court's decision to subtract another insurance company's $50,000 pay-out to the banks based on another employee-dishonesty policy from the damages award was error. Remanded. View "First Defiance Fin. Corp. v. Progressive Cas. Ins." on Justia Law

As part of a retention package, the bank purchased a split dollar life policy for plaintiff's trust with cash value of more than $662,000. The bank paid part of the premiums and had a senior interest in the policy to the extent of those premiums. To safeguard this interest, the trust assigned the policy to the bank as collateral. The bank paid $421,890 of the premiums. The trust interest was about $240,000. In 2009, the bank failed and was placed under FDIC receivership. The Insurer surrendered the entire cash value of the policy to the FDIC. The trustee demanded return of the value of the policy; the insurer refused. The trustee first contacted the FDIC receiver after expiration of the 90-day period for claims under the Financial Institutions Reform, Recovery, and Enforcement Act, 12 U.S.C. 1821(d)(13)(D), although he received notice 12 days before expiration of the period. The district court dismissed for lack of jurisdiction. The Seventh Circuit affirmed. It would be possible for a claim to arise so close to the bar date as to deprive a claimant of due process, but this case did not present that situation.

A new customer of the bank (Ott) obtained a loan to finance the purchase of a motor home from the dealership that Ott himself owned. Ott presented the certificate of origin and pledged the motor home as collateral. When Ott defaulted two years later, the bank discovered that the certificate of origin was a fake and the motor home did not exist. The bank’s insurer denied recovery because the fake certificate of origin did not meet the insurance bond definition of "Counterfeit." The district court ruled in favor of the insurer. The Seventh Circuit affirmed. The certificate of origin did not imitate an actual, original certificate of origin for a 2007 motor home because there never was an actual, valid, original certificate for the vehicle pledged as collateral: the manufacturer never produced the vehicle described.

Defendant-Appellant Alan Tukes appealed his federal conviction for bank robbery, arguing that the government’s evidence was insufficient to prove that the bank was insured by the Federal Deposit Insurance Corporation (“FDIC”) at the time of the crime. At trial, a prosecutor asked the bank’s branch manager: “Now, the Compass Bank, is that a bank that is federally insured by the [FDIC]?” She responded: “Yes, it is.” When asked whether the bank “has” any documentation proving its insured status, she replied: “Yes. We have a certificate.” When asked whether the certificate “hangs” in the branch, the manager replied in the affirmative. The district court admitted the certificate, dated November 8, 1993, into evidence. The government offered no additional evidence of the bank’s insured status. At summation, Defendant argued that the government had not proven that the bank was FDIC insured at the time of the robbery. The jury returned a guilty verdict. Viewing the evidence in the light most favorable to the government, the Tenth Circuit concluded "it is clear that a rational juror could have concluded beyond a reasonable doubt that the bank was insured at the time of the robbery." The Court affirmed Defendant's conviction.

This case concerned the termination of an employee, plaintiff, in the wake of an investigation into the disappearance of approximately $58,000 from a branch of Washington Mutual Bank (defendant). Plaintiff asserted that defendant unlawfully asked him to submit to a polygraph test and unlawfully failed to notify plaintiff of his right to continue his employer-provided health insurance for a period after his termination. The court held that because defendant requested plaintiff to submit to a polygraph test in connection with an "ongoing investigation" of a specific incident in which defendant had a "reasonable suspicion" that plaintiff was involved, the district court did not err in granting summary judgment for defendant on plaintiff's Employee Polygraph Protection Act (EPPA), 29 U.S.C. 2002(1), claim. The court held, however, that the district court erred in granting summary judgment for defendant on plaintiff's improper notice claim under the Consolidated Omnibus Budget Reconciliation Act (COBRA) 29 U.S.C. 1163(2), 1166, where the court should have considered the claims on the merits because it was timely filed. Accordingly, the court affirmed in part, vacated in part, and remanded for further proceedings.

Plaintiffs Aviva Life & Annuity Company and American Investors Life Insurance Company (collectively, "Aviva") contended the Federal Deposit Insurance Corporation (FDIC) acted in an arbitrary and capricious manner in rendering insurance determinations concerning certain of Plaintiffsâ bank deposit accounts. They appealed a district courtâs order upholding the FDICâs determinations. In 2008, the Kansas Bank Commissioner closed Columbian Bank & Trust Company and appointed the FDIC as receiver. At that time, Plaintiffs maintained twelve deposit accounts at Columbian. The bulk of those funds were held in two accounts (the âChallenged Accountsâ). The remaining accounts bore a variety of titles. Shortly after its appointment as receiver, the FDIC determined that each Plaintiffsâ respective accounts identified as âoperatingâ accounts, which included the Challenged Accounts, would be aggregated as corporate accounts. The FDIC further determined that the accounts designated as âbenefitsâ accounts would be separately insured as annuity contract accounts. Upon review of the FDIC's determination and the applicable legal authority, the Tenth Circuit found that the FDIC ultimately concluded the deposit account records clearly and unambiguously indicated the Challenged Accounts were owned in the manner of âcorporate accounts.â Plaintiffsâ extrinsic evidence was not, therefore, ârelevant dataâ for purposes of the FDICâs final insurance determination: "[t]he absence of any discussion pertaining to this evidence in the FDICâs final determination is therefore unsurprising, and in no way arbitrary or capricious." The Court affirmed the FDIC's determination.

Plaintiffs appealed the district court's order granting American Bankers Insurance Company's (American Bankers) motion to set aside default judgment for excusable neglect under Fed. R. Civ. P. 60(b)(1). Plaintiffs argued that once the district court concluded that American Bankers acted culpably in failing to respond to the complaint, it was precluded as a matter of law from setting aside the default judgment. The court found that a district court could exercise its discretion to deny relief to a defaulting defendant based solely upon a finding of defendant's culpability, but it need not do so. The court concluded that the district court's finding that American Bankers acted culpably did not preclude it, as a matter of law, from setting aside the default judgment under Rule 60(b)(1) based upon excusable neglect. Therefore, the court held that the district court applied the correct legal standard and that it did not abuse its discretion.