Star Transp., Inc. v. Csir Enterprises, Inc.
| Decision Date | 09 January 2006 |
| Docket Number | No. 3:04-0426.,3:04-0426. |
| Citation | 409 F.Supp.2d 939 |
| Court | U.S. District Court — Middle District of Tennessee |
| Parties | STAR TRANSPORTATION, INC., Plaintiff v. CSIR ENTERPRISES, INC., Certain Underwriters at Lloyds, and Insurer's Unlimited, Inc., Defendants. Insurer's Unlimited, Inc., Third-Party Plaintiff v. Insurance Network Services.Com, Inc., Third-Party Defendant. |
Henry E. Seaton, III, Seaton & Husk, L.P., Vienna, VA, Jere Robert Lee, Nashville, TN, for Plaintiff.
G. Brian Jackson, Kenneth M. Bryant, Miller & Martin, LLP, Gary A. Brewer, Brewer, Krause & Brooks, Nashville, TN, Kevin T. Kavanagh, Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, Philadelphia, PA, for Defendants.
Pending before the court is defendant Insurer's Unlimited, Inc.'s ("I.U.") Motion for Summary Judgment Against Plaintiff Star Transportation, Inc. ("Star") (Docket No. 50), to which Star has responded (Docket No. 69), and I.U.'s Motion for Summary Judgment Against Third-Party Defendant, Insurance Network Services.Com, Inc. ("INS.COM") (Docket No. 53), to which INS.COM has responded and filed a Cross-Motion for Summary Judgment (Docket No. 66), to which I.U. has responded (Docket No. 71). Also before the court is the Motion for Summary Judgment filed by defendant Certain Underwriters at Lloyds1 ("Underwriters") (Docket No. 62), to which Star has responded (Docket No. 81), and Underwriters has replied (Docket No. 82).
For the reasons expressed herein, the Motions for Summary Judgment filed by defendant I.U. and defendant Underwriters will be granted as to plaintiff's claims for apparent agency, ratification and adoption, and negligent misrepresentation. Summary judgment will be denied, however, as to plaintiff's negligence claim, as well as its claim based on the doctrine of equitable estoppel. In addition, INS. COM's Motion for Summary Judgment as to I.U.'s Third-party Claim will be granted, and I.U.'s Motion for Summary Judgment will be denied as moot.
This case, involving one motor carrier and four insurance entities, arises from the September 23, 2002 loss of 69 Dell laptop computers worth approximately $127,000.00. Prior to the loss, plaintiff Star, a federally licensed motor carrier domiciled in Nashville, Tennessee, purchased a fraudulent cargo insurance policy through defendant CSIR Enterprises, Inc., a New York corporation operating as an insurance agency. Although Star believed that it had purchased a policy covering all 500 of the trucks it operated, including the truck carrying the September 23, 2002 Dell load, such was not the case, as CSIR had perpetrated an insurance scam on Star and defrauded it. The facts surrounding Star's purchase of a fraudulent insurance policy, which are undisputed for purposes of the pending motions, are as follows.3
In the fall of 2001, after receiving notice from Star's then current insurer that, beginning November 13, 2001, rates would increase by approximately 38 percent, Ronnie Holland, the Director of Risk Management at Star who was responsible for obtaining insurance to cover Star's operations, initiated the process of soliciting proposals from insurance agents. The primary goal of Holland in soliciting insurance proposals from various insurance agents was to obtain competitive pricing for the insurance needed by Star. Prior to receiving a proposal from CSIR, Holland received proposals from other agents. However, all of the proposals included a substantial premium increase over the previous year.
The existence of CSIR was then made known to Holland through Tom Kelly, a Vice President at Star. Kelly became aware of CSIR through Joel Amerling, an individual from New York who worked in finance assisting companies to purchase trucks.4 Amerling advised Kelly that CSIR, an insurance agency in New York, had the ability to get insurance through Underwriters. Amerling, however, had no connection to Underwriters.
Thereafter, a meeting between a representative of CSIR, Frank DePrisco, and representatives of Star, including Holland, took place at Star's offices in Nashville. According to Holland, DePrisco stated that CSIR was a "Managing General Agent" for Underwriters and had "power of the pen" to act on behalf of Underwriters in placing insurance. On behalf of Star, Holland completed and signed an application for insurance containing information about Star's company, including the number of vehicles it operated, and provided it to CSIR.
CSIR, through DePrisco, made a proposal to Star to place Star's insurance with Underwriters. The proposal for insurance from CSIR was significantly cheaper than the proposals that Star had received from other insurance agencies. In fact, the proposal received from CSIR was $484,000 less than the last proposal from their then current insurer. Star did not ask CSIR to confirm in writing the representations that were made by CSIR regarding its authority to act on behalf of Underwriters, nor did Star request confirmation from anyone other than CSIR that CSIR had such authority.
On November 12, 2001, Holland informed CSIR that Star accepted its proposal and would purchase umbrella and cargo liability insurance through CISR. The agreed-upon premium was to be $610,000 and, on November 16, 2001, Star paid CSIR a down-payment of $183,000 for the insurance policies. Thereafter, Star made seven scheduled monthly payments of $61,000, for a total of $610,000 in premium costs. (Docket No. 67-4, Holland Depos pp. 38-40) Also after Star's acceptance of the proposal submitted by CSIR, CSIR faxed Star an insurance binder form showing a motor truck cargo policy issued by Underwriters and an umbrella insurance policy issued by Underwriters. The policies themselves were not actually provided to Star at this time. (Holland Aff. ¶ 7)
In January of 2002, Star was advised by the Federal Motor Carrier Safety Administration (FMCSA) that certain mandatory filings had not been made by Underwriters. Id. ¶ 8. According to Holland, because these filings "are cargo endorsements which are mandatory in order to retain our authority," Star immediately contacted CSIR to resolve the issue.5 Id.
Also in January of 2002, CSIR contacted INS.COM, an insurance wholesaler primarily engaged on behalf of retail agents seeking coverage for their customers, and inquired as to the type of insurance INS. COM might have available to offer CSIR.6 DePrisco and another representative from CSIR went to Mississippi to meet with INS.COM, and CSIR subsequently forwarded an application for motor truck cargo insurance to INS.COM on behalf of Star. However, the application, which was dated February 6, 2002, was not the one previously completed by Holland and signed on behalf of Star. The application forwarded by CSIR to INS.COM stated that Star was seeking coverage for only ten tractor units, all of which were identified in an attached schedule, as opposed to all 500 units as originally requested by Star to CSIR. According to Holland, the application submitted by CSIR to INS. COM was not completed by anyone at Star. The application provided by CSIR to INS.COM did not bear the signature of any actual representative from Star, and the person who signed this application is unknown to Star.
INS.COM then forwarded the application provided by CSIR on behalf of Star, seeking coverage for only ten Star trucks, to I.U. and requested that I.U. issue a policy for the requested coverage.7 Defendant I.U., in turn, transmitted a policy to INS.COM on behalf of defendant Underwriters, providing coverage for the ten trucks identified in the application.8
In addition, immediately after the Star application was received by I.U. (on or about February 6, 2002), I.U. requested attorneys for Underwriter to file certain documents with the FMCSA on behalf of Star and in connection with the policy of insurance it issued to Star on Underwriters' behalf. I.U. did so based on notes in the application margin that stated "Company needs filing in Washington quickly."9 Because I.U. believed that the application received from INS.COM was for the complete fleet of Star, which it believed had only ten units, it requested that the FMCSA filings reflect the issuance of a cargo insurance policy by Underwriters covering "all vehicles, owned, operated or leased by the insured." I.U. did not check the FMCSA website to confirm Star's size or status until seven months later, when it was informed by Underwriters' Security that the website existed.10
After the February 6, 2002 FMCSA posting, Star made the five remaining monthly premium payments of $61,000, out of the required seven, to CSIR. By May of 2002, Star had completed the required payments.11
After INS.COM received the insurance policy transmitted by I.U., it forwarded that insurance policy, along with an additional copy, to CSIR. It was not until early June of 2002, however, that CSIR sent Star the umbrella policy and the motor truck cargo policy allegedly issued by I.U. on behalf of Underwriters.12 Yet, the policies provided by CSIR to Star were not the policies actually issued to Star by I.U. on behalf of Underwriters.
Upon receipt of the policies forwarded by CSIR, Star contacted CSIR and complained that the policies did not provide the coverage that had been negotiated — specifically, that an exclusion for electronics not be included in the cargo policy. CSIR thereafter issued an endorsement to address the issues raised by Star. However, the endorsement provided by CSIR to Star was not actually issued by I.U. or Underwriters.
It is undisputed that, at least by early September of 2002, I.U. had learned through an auditor at Underwriters that there existed multiple policies issued by CSIR with I.U.'s name on them for excess policies and hundreds of thousands of premiums. On September 2, 2002, Underwriters...
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