First Trinity Capital Corp. v. Canal Indem. Ins. Co.

FIRST TRINITY CAPITAL CORPORATION PLAINTIFF v. CANAL INDEMNITY INSURANCE COMPANYand CRUMP INSURANCE SERVICES, INC. DEFENDANTS

CIVIL ACTION NO. 2:12-CV-157-SA-SAA

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF MISSISSIPPI DELTA DIVISION

SO ORDERED: February 5, 2014

MEMORANDUM OPINION

This cause comes before the Court on Defendants' Motions for Summary Judgment [52, 54]. Upon due consideration of the motions, responses, rules, and authorities, the Court finds Defendants' motions are well taken and shall be GRANTED.

FACTUAL AND PROCEDURAL BACKGROUND

This action was removed from the Circuit Court of Bolivar County, Mississippi on the basis of diversity jurisdiction. Plaintiff First Trinity Capital Corporation ("First Trinity") asserts multiple causes of action against Defendants Canal Indemnity Insurance Company ("Canal") and Crump Insurance Services, Inc. ("Crump") seeking the return of unearned premiums for two purported insurance policies allegedly financed by First Trinity, as well as interest, costs, and punitive damages.

First Trinity is involved in the business of insurance premium financing. A premium finance agreement is "an agreement by which an insured or prospective insured promises to pay to a premium finance company the amount advanced or to be advanced by an insurer or to an insurance agent or broker in payment of premiums of an insurance contract together with interest or discount and a service charge. . . ." Miss. Code Ann. § 81-21-1. The instant action arises from the financing of premiums for two insurance policies allegedly issued by Canal through Crump to CBR Transport, Inc. ("CBR").

First Trinity claims that Crump acted as the general agent for Canal and placed the policies through Central Mississippi Insurance Agency ("CMI"). First Trinity claims CMI was acting as the agent of Crump and Canal and initiated the transactions by sending First Trinity completed Premium Finance Agreements ("PFAs") on behalf of CBR. CMI allegedly sought financing for two policies that had purportedly been bound by Canal and Crump. First Trinity further claims CBR agreed in the PFAs to repay First Trinity the full amount financed and gave First Trinity the right to cancel the policies if CBR defaulted on its repayment, assigning to First Trinity its right to payment of any unearned premiums in connection with the policies in the event of cancellation. First Trinity claims it paid CMI $55,125.00 on February 9, 2009 to finance a commercial auto policy and $15,750.00 on May 27, 2009 to finance a business owner policy.

First Trinity claims it sent Crump a Notice of Premium Finance when it financed the policies, to which Crump allegedly did not respond. Further, when CBR failed to repay the loans, First Trinity claims it sent Canal and Crump Notices of Cancellation and again received no response. Defendants' motions make it clear that the subject transactions are one of many apparently fraudulent transactions consummated by CMI's owner, Jan Gunn, in an attempt to defraud numerous premium finance companies such as First Trinity. Crump and Canal claim the policies at issue were never issued, but were part of a scheme devised by Gunn to misappropriate monies from financed premiums. Crump and Canal further claim that CMI was not acting as their agent and that they never received any premiums. Seeking the return of unearned premiums from the policies, First Trinity filed the instant action, and Crump and Canal have each filed motions for summary judgment.

SUMMARY JUDGMENT STANDARD

Summary judgment is warranted under Rule 56(a) of the Federal Rules of Civil Procedure when the evidence reveals both that there is no genuine dispute regarding any material fact and that the moving party is entitled to judgment as a matter of law. The rule "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).

The party moving for summary judgment "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Id. at 323, 106 S. Ct. 2548. The nonmoving party must then "go beyond the pleadings" and "designate 'specific facts showing that there is a genuine issue for trial.'" Id. at 324, 106 S. Ct. 2548 (citation omitted). In reviewing the evidence, factual controversies are to be resolved in favor of the nonmovant, "but only when ... both parties have submitted evidence of contradictory facts." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (en banc). When such contradictory facts exist, the Court may "not make credibility determinations or weigh the evidence." Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S. Ct. 2097, 147 L. Ed. 2d 105 (2000). However, conclusory allegations, speculation, unsubstantiated assertions, and legalistic arguments have never constituted an adequate substitute for specific facts showing a genuine issue for trial. TIG Ins. Co. v. Sedgwick James of Wash., 276 F.3d 754, 759 (5th Cir. 2002); SEC v. Recile, 10 F.3d 1093, 1097 (5th Cir.1997); Little, 37 F.3d at 1075.

ANALYSIS AND DISCUSSION

Though Canal and Crump each filed separate motions, both raise the same issues and arguments, and First Trinity has filed a single, consolidated memorandum in response. As such, the Court herein addresses both motions simultaneously.

Policy Contingent Claims

First, Defendants argue that First Trinity's claims for breach of statutory law, negligence per se, breach of contract, and any other claims seeking the return of unearned premiums must fail because there is no valid insurance policy or finance agreement. Under Mississippi law:

[w]henever a financed insurance contract is cancelled, the insurer shall return to the premium finance company as soon as reasonably possible whatever gross unearned premiums are due under the insurance contract, and also shall furnish to the premium finance company a report setting forth an itemization of the unearned premiums under the policy that includes a detailed mathematical summary of the computation of the return premium.

Miss. Code. Ann. § 81-21-21.

First Trinity claims it paid CMI a total of $70,875.00 to finance two insurance policies on behalf of CBR. Whereas First Trinity asserts that "payment to the broker is payment to the insurer," Defendants contend there can be no premiums, earned or unearned, without a policy. Indeed, in a similar case involving both First Trinity and Crump, another district court sitting in Mississippi recently found that "in the absence of an insurance contract, there could be no unearned premiums; and in the absence of an insurance contract there could be no violation of § 81-21-21. . . ." First Trinity Capital Corp. v. Catlin Specialty Ins., 2013 WL 6230099, at *3 (S.D. Miss. Dec. 2, 2013) (citing Insurasource, Inc. v. Phoenix Ins. Co., 912 F. Supp. 2d 433, 439-440 (S.D. Miss. 2012). Defendants contend First Trinity has failed to prove the policies at issue existed, and therefore, they cannot be held liable for First Trinity's claims for breach of statutory law and negligence per se.

In response, First Trinity attempts to establish a genuine dispute of material fact through the affidavit of employee Clarence Zahn, wherein Zahn claims that he contacted Crump in order to obtain the policy numbers for the purported policies and was given two policy numbers. However, this testimony does not create a genuine issue of material fact as to the existence of the policies at issue. As was the case in Catlin, "First Trinity has produced no policy, no application for a policy and no evidence of underwriting for a policy." Id. This Court agrees with the finding in Catlin that "even assuming that an unidentified Crump representative provided information to Zahn or First Trinity, that does not prove that a policy, in fact, existed." Id. As such, First Trinity has failed to present sufficient evidence to create a triable issue as to whether the policies existed, and summary judgment is appropriate on its claims for breach of statutory law and negligence per se.

In pleading its breach of contract claim, First Trinity alleges that:

[w]hen it financed CBR's premiums for the Policies, First Trinity stepped into the shoes of CBR for all payments and set-offs while leaving the insurer-insured relationship between Canal and CBR intact. First Trinity acquired, held and perfected a security interest in all unearned premiums in connection with the Policies when it funded the Policies on the aforesaid dates. Upon cancellation of the Policies, Canal and Crump owed First Trinity all unearned premiums in connection therewith in the amount of the unearned premium balance at the time of cancellation, plus interest and finance charges owed to First Trinity. . . . Canal and Crump breached their duties to return the aforesaid unearned premiums to First Trinity. Such failures constitute a breach of the contractual duties owed by Canal and Crump to First Trinity. . . .

Like its claims for breach of statutory law and negligence per se, this claim also hinges upon the existence of a valid insurance policy and premium financing agreement. See Catlin, 2013 WL 6230099, at*4 (citing Phoenix Ins. Co., 912 F. Supp. 2d at 440 (noting that an identical claim "requires the existence of a valid insurance policy, providing [the insured] with the right to unearned premiums upon policy cancellation, and a valid agreement between [the premiumfinance company] and [the insured], allowing [the finance company] to recover any unearned premiums in place of [the insured]"). Given the Court's determination that no genuine...