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First Trinity Capital Corporation v. Western World Insurance Group, Inc.

United States District Court, N.D. Mississippi, Delta Division

February 5, 2014



SHARION AYCOCK, District Judge.

Presently before the Court are Defendant Crump Insurance Services Inc.'s Motion for Summary Judgment [93] and Plaintiff's Motion to Substitute Exhibit [100]. After reviewing the motions, responses, and applicable legal authority, the Court finds that judgment in favor of Defendant is appropriate and Defendant's Motion is therefore GRANTED.


This specific cause arises out of a dispute regarding a premium finance agreement allegedly entered into between Running and Rolling Trucking, Inc. ("Running and Rolling") and First Trinity Capital Corporation ("First Trinity") that was purportedly consummated in order Running and Rolling to finance an insurance policy issued by Western World Insurance Group, Inc. ("Western World"). Plaintiff First Trinity, which is in the business of insurance premium financing, typically advances the cost of an insurance policy on behalf of the insured before then recouping that cost in incremental monthly installment payments made by the insured back to First Trinity. Under First Trinity's standard financing agreement, the insured grants First Trinity a security interest in any unearned premiums and additionally grants First Trinity the power to cancel the policy in the event the insured defaults on the monthly repayment obligations.

In the situation presently at bar, First Trinity bases its claim against Crump Insurance Services, Inc. ("Crump") on Crump's involvement as the purported general agent for Western World. Specifically, First Trinity contends that Western World, through its general agent Crump, issued a commercial insurance policy to Running and Rolling with effective dates of coverage from December 24, 2008 to December 24, 2009. According to Plaintiff, First Trinity financed the premium at issue at the behest of Jan Gunn, the owner of Central Mississippi Insurance ("CMI"). Specifically, First Trinity claims to have relied on a premium finance agreement forwarded by Gunn in which she purportedly represented that the Western World policy had been issued to Running and Rolling, that a down payment had been made on the policy, and that she agreed to pay the unearned premiums and unearned commissions to First Trinity in the event that the policy was cancelled or terminated. First Trinity further claims that Gunn served as Crump's agent under alternative theories of either actual or apparent authority.

What is made abundantly clear by Defendant's motion for summary judgment, however, is that the subject transaction is but one of a litany of apparently fraudulent transactions consummated by Gunn in an attempt to defraud numerous premium finance companies such as First Trinity. According to Crump, the aforementioned Running and Rolling policy was never actually issued by Western World, but was a sham devised by Gunn in an attempt to misappropriate the financed premium. Indeed, based on the undisputed record before the Court, after receiving the premium finance agreement from Gunn, First Trinity provided policy financing in the amount of $142, 087.50.[1] First Trinity represents that it generally contacted the general agent to determine that an actual policy had been issued, but has proffered no additional evidence of any attempt to corroborate that the policy was verified before providing said financing. After Running and Rolling failed to make the required premium repayments to First Trinity, Plaintiff sent Defendants a notice of cancellation and cancelled the purported policy effective July 15, 2009.

First Trinity subsequently filed the present action against Defendants Western World and Crump in an attempt to recoup $79, 860.14 for all unearned premiums for the present policy. Plaintiff's amended complaint set forth numerous purported causes of action, including: breach of statutory law and negligence per se (Count One); breach of contract (Count Two); negligence (Count Three); fraud (Count Four); constructive trust (Count Five); actual and apparent authority (Count Six); ratification and estoppel (Count Seven); and punitive damages (Count 8).[2] Pursuant to an Agreed Judgment [89] entered by this Court on July 29, 2013, Western World Insurance was dismissed with prejudice from the current action. Crump thereafter filed the present Motion for Summary Judgment [93], seeking dismissal as to all of First Trinity's claims. In particular, Crump avers that Plaintiff's claims for breach of statutory law, negligence per se, and breach of contract must be dismissed because First Trinity is unable to establish the existence of the alleged Western World insurance policy, and that the remaining claims must be dismissed for lack of proof that Gunn was Crump's agent. The Court now turns to the merits of that motion.


Summary judgment is warranted under Rule 56(a) of the Federal Rules of Civil Procedure when the evidence reveals both that there is no genuine dispute regarding any material fact and that the moving party is entitled to judgment as a matter of law. The rule "mandates the entry of summary judgment, after adequate time for discovery and upon motion, 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." Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

The party moving for summary judgment "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Id. at 323, 106 S.Ct. 2548. The nonmoving party must then "go beyond the pleadings" and "designate specific facts showing that there is a genuine issue for trial.'" Id. at 324, 106 S.Ct. 2548 (citation omitted). In reviewing the evidence, factual controversies are to be resolved in favor of the nonmovant, "but only when... both parties have submitted evidence of contradictory facts." Little v. Liquid Air Corp. , 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). When such contradictory facts exist, the Court may "not make credibility determinations or weigh the evidence." Reeves v. Sanderson Plumbing Prods., Inc. , 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000). However, conclusory allegations, speculation, unsubstantiated assertions, and legalistic arguments have never constituted an adequate substitute for specific facts showing a genuine issue for trial. TIG Ins. Co. v. Sedgwick James of Wash. , 276 F.3d 754, 759 (5th Cir. 2002); SEC v. Recile , 10 F.3d 1093, 1097 (5th Cir. 1997); Little , 37 F.3d at 1075.


Breach of Statutory Law and Negligence Per Se

In support of Plaintiff's breach of statutory law and negligence per se theories, First Trinity argues that it held a perfected security interest in all unearned premiums for the alleged policy, and that Crump was under a statutory duty to return those unearned premiums once the policy was cancelled. Although First Trinity has not cited a particular statute in support of such theory, it seems likely that Plaintiff bases its claim on Mississippi Code § 81-21-21, which mandates:

Whenever a financed insurance contract is cancelled, the insurer shall return to the premium finance company as soon as reasonably possible whatever gross unearned premiums are due under the insurance contract, and also shall furnish to the premium finance company a report setting forth an itemization of the unearned premiums under the policy that includes a detailed mathematical summary of the computation of the return premium.

Miss. Code Ann. § 81-21-21. To this, Crump simply counters that, absent the existence of an actual insurance contract, there could be no unearned premiums and thus no violation of § 81-21-21, which by its own terms applies only "[w]henever a financed insurance contract is cancelled." See Insurasource, Inc. v. Phoenix Ins. Co. , 912 F.Supp.2d 433, 439-440 (S.D.Miss. 2012).

This precise issue was recently considered by another district court in Mississippi in another cause filed by First Trinity, which similarly arose out of Gunn's fraudulent scheme. There, despite many similarly presented arguments, the court ultimately held that First Trinity had failed to put forth sufficient evidence of the existence of the insurance contract and, as such, First Trinity's breach of statutory law and negligence per se claims were due to fail. First Trinity Capital Corp. v. Catlin Specialty Ins., 2013 WL 6230099, at * 3 (S.D.Miss. Dec. 2, 2013); see also First Trinity Capital Corp. v. Canal Indem. Ins. Co., 2014 WL 129802, at *4 (S.D.Miss. Jan. 10, 2014) (reaching a similar finding).

In Catlin, the court found insufficient evidence of a contract in spite of First Trinity's showing that the purported insured was an actual business with previous legitimate insurance dealings, that Gunn had represented the policy had actually been issued, that First Trinity had arguably sent a notice of premium financing but Crump had not informed First Trinity that no such policy was ever issued, and that First Trinity had made a blanket representation that the policy would not have been financed without first contacting Crump regarding the legitimacy of the transaction. Id. at *4. Not surprisingly, First Trinity has lodged many of the same arguments here. As ably noted by the court in Catlin, however:

None of this evidence cited by First Trinity, either alone or in combination, tends to establish that a policy was in fact issued. The fact that [Running and Rolling] was a legitimate company certainly does not. The fact that Gunn certified that a policy was issued is obviously insufficient to prove that a policy was issued. Moreover, even assuming that First Trinity notified Crump of the premium finance agreement for the purported [Running and Rolling] policy, Crump's failure to inform First Trinity that no such policy existed does not establish that a policy was issued.

Id. at *3. The only colorably relevant evidence submitted by First Trinity are statements from Clarence Zahn and Greg Zahn, agents of First Trinity, who testified that it was First Trinity's regular practice to communicate with the general agent identified in a premium finance agreement to verify the information included therein before actually financing the policy. Clarence Zahn also averred that at some unspecified time, he spoke with a representative of Crump who provided the policy number that he then handwrote on First Trinity's notice of cancellation.[3]

The Court finds that the actual testimony fails to live up to its billing. Notably, First Trinity's representation that "First Trinity would not have financed the Policy without first communicating with Crump and confirming the information provided by [Gunn] regarding the existence and issuance of the ...

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