InsuraSource, Inc. v. Phx. Ins. Co., Civil Action No. 2:11cv49–KS–MTP.

• Decision Date: 05 December 2012
• Docket Number: Civil Action No. 2:11cv49–KS–MTP.
• Parties: INSURASOURCE, INC., Plaintiff v. The PHOENIX INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Mississippi

912 F.Supp.2d 433

INSURASOURCE, INC., Plaintiff

v.The PHOENIX INSURANCE COMPANY, Defendant.

Civil Action No. 2:11cv49–KS–MTP.

United States District Court,

S.D. Mississippi,

Hattiesburg Division.

Dec. 5, 2012.

Kimberly S. Jacobs, William C. Walter, Grand Bank For Savings, FSB, Hattiesbug, MS, Sarah L. Snow, Grand Bank For Savings, FSB, Hattiesbug, MS, for Plaintiff.

Charles Greg Copeland, Timothy J. Sterling, Copeland, Cook, Taylor & Bush, PA, Ridgeland, MS, for Defendant.

MEMORANDUM OPINION AND ORDER

KEITH STARRETT, District Judge.

This matter is before the Court on the Motion for Summary Judgment [35] of Defendant The Phoenix Insurance Company. Having considered the parties' submissions,the record, and the applicable law, the Court finds that the motion should be granted.

I. BACKGROUND

Plaintiff Insurasource, Inc. (“ISI”) is a Mississippi corporation that finances insurance premiums. Under the typical terms of ISI's finance agreements, policyholders are required to make regular monthly payments to ISI, and they grant ISI a security interest in any unearned premiums that may be refunded upon cancellation of the policy. They also grant ISI power of attorney with respect to cancellation of the policy. Therefore, if a policyholder defaults on its obligations to ISI, ISI can cancel the policy at issue and collect the unearned premiums. ISI typically provides the insurance carrier with notice of the finance agreement, the power of attorney, and the purported security interest in any unearned premiums.

ISI contends that it entered into two premium finance agreements with Universal Ready Mix, Inc. (“Universal”), an insured of Defendant The Phoenix Insurance Company (“Phoenix”), pertaining to Insurance Policy No. BA3865M78309 with effective dates of January 29, 2010 to January 29, 2011. ( See Premium Finance Agreements [39–1].) ISI had no direct contact with Universal with respect to the execution of the Premium Finance Agreements. Instead, ISI relied on the representations of John A. Rocco (“Rocco”), an insurance broker based in Florham Park, New Jersey, concerning Universal's purported willingness to obtain financing for the issuance of Policy No. BA3865M78309. ISI contends that Rocco was an authorized agent for Phoenix, and that it made two payments to him in order to finance Policy No. BA3865M78309: one payment in the amount of $35,232.49 on January 29, 2010, and a second payment in the amount of $36,479.00 on February 19, 2010. ISI asserts that it expected Rocco to forward the payments to Phoenix.

ISI alleges that in conjunction with making each of the aforementioned payments, it sent to Phoenix and Phoenix's general agent, the Norman–Spencer Agency, Inc. (“Norman–Spencer”), a Notice of Financed Premium (“Notice”) [Doc. No. 39–3], which advised that ISI had entered into a contract with Universal to finance premiums for Policy No. BA3865M78309; that the premium payment would be made to Rocco; that Universal had assigned to ISI any unearned premiums that would become available in the event of policy cancellation; and, that ISI had the right to cancel the insurance policy if Universal defaulted under the finance agreement. Each Notice also requested that the “Insurer” sign and return the document, acknowledging that the insurance policy description was correct and agreeing to pay ISI any unearned premiums upon policy cancellation. ISI never received a signed copy of either Notice [39–3] from Phoenix.

Universal's first payment under the Premium Finance Agreements [39–1] was due on February 7, 2010. ISI did not receive any payment on that date. Thus, on February 12, 2010, ISI sent a Notice of Intent to Cancel Insurance [1–1 at ECF p. 19] to Universal advising that Policy No. BA3865M78309 would be cancelled if payment was not received by February 24, 2010. No payment was received by February 24, and thus, ISI sent a Notice of Cancellation [39–6] to Universal, Rocco, Norman–Spencer, and Phoenix, purporting to cancel Policy No. BA3865M78309.

No showing has been made that Rocco forwarded ISI's premium payments to Phoenix. Further, it does not appear that Policy No. BA3865M78309 with effective dates of January 29, 2010 to January 29, 2011, ever existed. The New Jersey Departmentof Banking and Insurance has revoked Rocco's insurance license as a result of its finding that he committed over twenty counts of fraud relating to premium financing. ( See Final Order [35–7].) By all accounts then, this lawsuit arises from another of Rocco's efforts to misappropriate a finance company's premium payments.¹

On January 5, 2011, ISI filed suit against Phoenix in the Circuit Court of Lamar County, Mississippi. ( See Complaint [1–1].) ISI seeks $82,223.62 in unearned premiums from Phoenix pursuant to three legal theories: 1) Phoenix has a statutory duty to return the unearned premiums; 2) Phoenix has a contractual duty to return the unearned premiums; and 3) Phoenix has a duty to return the unearned premiums because of Rocco's actual, apparent, and/or implied authority to receive the premium payments on Phoenix's behalf. ( See Complaint [1–1], Counts I–III.) ISI also alleges that Phoenix is obligated to pay a 5 percent monthly penalty for failing to return the unearned premiums pursuant to N.J. Stat. Ann. § 17:29C–4.1. ( See Complaint [1–1], Count IV.)

On March 3, 2011, Phoenix, a Connecticut company, removed the proceeding to this Court on the basis of diversity of citizenship jurisdiction under Title 28 U.S.C. § 1332. On July 30, 2012, Phoenix filed its Motion for Summary Judgment [35]. The motion has been fully briefed and the Court is ready to rule.

II. DISCUSSION

A. Standard of Review

Federal Rule of Civil Procedure 56 provides that “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “Where the burden of production at trial ultimately rests on the nonmovant, the movant must merely demonstrate an absence of evidentiary support in the record for the nonmovant's case.” Cuadra v. Houston Indep. Sch. Dist., 626 F.3d 808, 812 (5th Cir.2010) (citation and internal quotation marks omitted), cert. denied,––– U.S. ––––, 131 S.Ct. 2972, 180 L.Ed.2d 247 (2011). The nonmovant “must come forward with specific facts showing that there is a genuine issue for trial.” Id. “ ‘An issue is material if its resolution could affect the outcome of the action.’ ” Sierra Club, Inc. v. Sandy Creek Energy Assocs., L.P., 627 F.3d 134, 138 (5th Cir.2010) (quoting Daniels v. City of Arlington, Tex., 246 F.3d 500, 502 (5th Cir.2001)). “An issue is ‘genuine’ if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party.” Cuadra, 626 F.3d at 812.

The Court is not permitted to make credibility determinations or weigh the evidence. Deville v. Marcantel, 567 F.3d 156, 164 (5th Cir.2009). When deciding whether a genuine fact issue exists, “the court must view the facts and the inferences to be drawn therefrom in the light most favorable to the nonmoving party.” Sierra Club, Inc., 627 F.3d at 138. However, “[c]onclusional allegations and denials, speculation, improbable inferences, unsubstantiated assertions, and legalistic argumentation do not adequately substitute for specific facts showing a genuine issue for trial.” Oliver v. Scott, 276 F.3d 736, 744 (5th Cir.2002). Summary judgment is mandatory “ ‘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.’ ” Brown v. Offshore Specialty Fabricators, Inc., 663 F.3d 759, 766 (5th Cir.2011), cert. denied,––– U.S. ––––, 132 S.Ct. 2103, 182 L.Ed.2d 868 (2012) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).

B. Analysis

The parties disagree over what issues control the determination of the Motion for Summary Judgment [35]. Phoenix contends that all of ISI's claims fail because Policy No. BA3865M78309 never existed and the Premium Finance Agreements are not valid contracts. ISI claims that the central issue precluding summary judgment is whether Rocco was Phoenix's agent. The Court finds that Rocco's alleged authority to act as Phoenix's agent is relevant to Count III of the Complaint, while the existence vel non of Policy No. BA3865M78309 and the validity vel non of the Premium Finance Agreements are central to ISI's remaining claims for relief.

1. Counts I and IV of the Complaint

ISI argues that payment to Rocco constituted payment to Phoenix by operation of N.J. Stat. Ann. § 17:22–6.2a. ( See ISI's Resp. in Opp'n [39] at p. 2.) Section 17:22–6.2a provides:

Any insurer which delivers in this State to any insurance broker a contract of insurance ... pursuant to the application or request of such broker, acting for an insured other than himself, shall be deemed to have authorized such broker to receive on its behalf payment of any premium which is due on such contract at the time of its issuance or delivery or payment of any installment of such premium or any additional premium which becomes due or payable thereafter on such contract, provided such payment is received by such broker within 90 days after the due date of such premium or installment thereof or after the date of delivery of statement by the insurer of such additional premium.

N.J. Stat. Ann. § 17:22–6.2a. This statute “was enacted to protect the insurance buying public from the misappropriation, conversion, or other misconduct of an insurance broker in those instances where an insurer uses the broker to effect the delivery of the policy of insurance and to collect the premiums due for it.” Kubeck v. Concord Ins. Co., 103 N.J.Super. 525, 248 A.2d 131, 135 (1968), aff'd,107 N.J.Super. 510, 259 A.2d 473 (1969). It “clearly creates a principal-agent relationship between the insurer and the broker...