Brokers / Underwriters

Plaintiff Hudson Insurance Company brought suit against DuRussel Insurance Agency, Inc. and Blue Water Agribusiness LLC concerning the alleged breach of two separate crop insurance contracts issued by Hudson. The first contract was between only Hudson and DuRussel and provided that DuRussel would sell crop insurance and place it with Hudson. The first contract also provided that commissions might be paid by Hudson to DuRussel in advance based on projected policy placement and that DuRussel would be obligated to Hudson for any resulting overpayment of commissions. Both parties conceded the existence of this obligation and that DuRussel owed Hudson an amount of overpaid commissions. The second contract was between all three parties and provided an identical sale structure and advance commission provision as the first contract. The parties conceded that Hudson did not pay Blue Water any advance commissions pursuant to the second contract.

On Hudson’s motion for summary judgment, the court examined each contract separately. For the first contract, the court granted summary judgment against DuRussel because there was no genuine dispute between the parties as to DuRussel’s obligation to pay back any overpaid commission and the pending amount owed to Hudson. Although DuRussel claimed that since Hudson sought summary judgment against both DuRussel and Blue Water, its otherwise meritorious claim against just DuRussel cannot be sustained, the court reasoned that either Blue Water is not liable because it signed a separate agreement, or it is jointly liable with DuRussel because it signed the same agreement. For the second contract, the court held that summary judgment for breach of contract was inappropriate against Blue Water because Hudson did not pay Blue Water any advance commissions. Hudson Insurance Co. v. DuRussel Insurance Agency, Inc., No. 15-cv-12073 (USDC E.D. Mich. May 9, 2016).

This post written by Brian Perryman.

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A California federal district court granted in part and denied in part various motions involving Star Insurance’s action seeking to rescind an insurance policy based upon certain alleged material misrepresentations concerning the nature of the insured’s business. The insured, Sunwest Metals, Inc., incurred substantial damage to its property following an arson fire. After Star advanced certain benefits to Sunwest, Star sued to rescind the policy based upon certain alleged misrepresentations which Sunwest, through its agent, made on the insurance application which underreported the percentage of income from Sunwest’s recycling business. The parties did not dispute that the misrepresentations were false. In defense, Sunwest argued the misrepresentations were unintentional and not material. Sunwest counterclaimed against Star and cross-claimed against its agent as well as against Star’s surplus lines broker, G. J. Sullivan. The parties cross-moved for judgment.

First, the court denied Sunwest’s motion for judgment on the pleadings, rejecting Sunwest’s argument that Star was required to plead and prove that Sunwest’s intentionally mispresented the income from its recycling operations on the aapplication. As a matter of law, California law allows an insurer to rescind a policy based upon an insured’s negligent or intentional concealment or misrepresentation of a material fact.

Next, the court denied in part Star’s motion for summary judgment. Sunwest raised genuine issues of material fact as to whether Star had inquiry notice of the misrepresentations. Specifically, Star’s underwriters had seen Sunwest’s website which prominently displayed Sunwest’s recycling business and reviewed a report which should have put it on notice to further investigate Sunwest’s annual revenue breakdown. Moreover, because a genuine issue of material fact existed as to when Star should have been on notice of Sunwest’s actual income, the court determined that genuine issues of material fact also existed as to whether or not Star waived the misrepresentation by allegedly unduly delaying its rescission. While it agreed with Sunwest that genuine issues of material fact existed as to inquiry notice and waiver, the court found as a matter of law that the misrepresentations were indeed material.

Finally, the Court granted Sullivan’s motion for summary judgment. The parties did not dispute Sullivan acted as Star’s agent. The issue became whether Sullivan acted in a capacity as a dual agent which could have given rise to a cause of action by Sunwest against Sullivan. The court rejected Sunwest’s argument, finding that a reasonable jury could only conclude that Sullivan was not a dual agent. Star Insurance Co. v. Sunwest Metals, Inc., Case No. SACV 13-1930 DOC(DFMx) (C.D. Cal. Dec. 29, 2014).

This post written by Leonor Lagomasino.

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We have posted on this case filed against two reinsurance brokers several times.  Since our last posting regarding this case, which reported on the results of the trial, an appeal was filed in Florida’s Third District Court of Appeal.  The appeal has been dismissed pursuant to a joint stipulation. Instituto Nacional de Seguros v. Hemispheric Reinsurance Group, LLC, No. 3D14-1590 (Fla. Ct. App. Nov. 14, 2014).

This post written by Kelly A. Cruz-Brown.

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