BancInsure, Inc. v. Highland Bank, No. 13-3324 (8th Cir. 2015)
Annotate this CaseHighland Bank made a loan to FPC, an equipment lease finance company, based on an assignment of leases. The underlying leases, guaranteed by individuals, were ultimately discovered to be a Ponzi scheme. A guarantor claimed her signature was a forgery. Highland lost more than a million dollars. BancInsure denied Highland’s claim under a Financial Institution Bond that covered “Loss resulting directly from the Insured having . . . acquired, sold or delivered, given value, extended credit or assumed liability on the faith of any original . . . personal Guarantee . . . which bears a signature of any . . . guarantor . . . which is a Forgery.” BancInsure sought a declaratory judgment that Highland's claim was not covered. The district court granted summary judgment to BancInsure, finding that the loss did not “result directly from” a forged personal guaranty because the guaranty was worthless to the bank when it entered into the transactions. While appeal was pending, BancInsure was placed into receivership with the Oklahoma Insurance Commissioner as Receiver under a final order of liquidation. The Eighth Circuit affirmed. Highland failed to show the “direct relation between the injury asserted and the injurious conduct alleged” that the doctrine of proximate cause demands.
Court Description: Civil case - Insurance. Where the plaintiff denied a claim under the Financial Institution Bond it issued to the Highland Bank, the district court did not err in determining that the Bank's claim did not fall within the coverage; while a provision of the Bond protected the Bank from a forged guaranty, under the facts of this case, the Bank's loss did not result directly from the the forged personal guaranty because the guaranty was worthless to the Bank when it entered into the transactions in question.
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