563 F. App'x 473
6th Cir.2014Background
- Defendant Everest issued a Financial Institution Bond to Plaintiff Bank on Dec 22, 2010; Bond covered forgery risks.
- Plaintiff incurred a $196,000 loss on Oct 4, 2011 from a fraudulent wire transfer request; Defendant denied coverage Jan 23, 2012.
- Plaintiff sued; the district court granted Plaintiff summary judgment and denied Defendant summary judgment.
- Defendant moved for reconsideration, arguing a new legal theory based on Agreement D (Forgery or Alteration) and the need for an Original instrument.
- The district court denied reconsideration; the parties timely appealed the rulings.
- The court held that the loan-loss exclusion did not apply and rejected the new Agreement D argument.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court abused its discretion by denying reconsideration for a new legal argument | Bank argues no abuse; new argument not raised earlier; proper denial. | Everest argues reconsideration permitted new legal theories. | No abuse; new argument not allowed; affirmed. |
| Whether the loan-loss exclusion (2(e)) precludes coverage | Bank contends loss was forgery, not a loan default, so exclusion inapplicable. | Everest asserts loss resulted from credit/loan extension or default. | Loan-loss exclusion does not apply; coverage affirmed. |
| Whether waiver/estoppel principles precluded new defenses on appeal | Bank relies on denial letters and district court ruling; no waiver by refusal to entertain new theories. | Everest argues Michigan law supports waiver when insurer denies coverage and later raises new defenses. | Waiver/estoppel did not require reversal; arguments not raised earlier were properly not entertained. |
Key Cases Cited
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (Supreme Court 1986) (genuine issue of material fact required for summary judgment)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (Supreme Court 1986) (summary judgment standard; absence of genuine issue)
- Carolina Casualty Ins. Co. v. Canal Ins. Co., 2014 WL 114667 (6th Cir. Jan. 14, 2014) (new legal arguments raised on appeal; waiver analysis)
- City of Warren, Mich. v. Int'l Ins. Co. of Hannover, Ltd., 524 F. App’x 254 (6th Cir. 2013) (waiver/estoppel when insurer denies coverage)
- People’s State Bank v. American Cas. Co. of Reading, Pa., 818 F. Supp 1073 (E.D. Mich. 1993) (loan-loss exclusion context in fidelity bond)
- Hudson United Bank v. Progressive Cas. Ins. Co., 284 F. Supp. 2d 249 (E.D. Pa. 2003) (excludes credit risks within financial institution’s expertise)