Opinion
CIVIL ACTION NUMBER 99-0202 SECTION "L".
April 17, 2000.
April 18, 2000.
ORDER AND REASONS
Before the Court are the following motions: (1) the motion of plaintiff Metairie Bank Trust Co. for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure; (2) the motion of defendant Surety Premium Finance, Inc. for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure; and (3) the motion of defendant Hocon, Inc. d/b/a Anchor Marine Insurance Co. for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the following reasons, plaintiff Metairie Bank Trust Co.'s motion is DENIED; defendant Surety Premium Finance, Inc.'s motion is DENIED; and defendant Hocon, Inc. d/b/a Anchor Marine Insurance Co.'s motion is DENIED.
I. BACKGROUND
Metairie Bank made a loan to Jack C. Payne, III, ("Payne") to finance the purchase of a charter fishing boat. When Payne purchased the vessel, he contacted Anchor Marine Insurance Co. ("Anchor") in an attempt to procure insurance for the vessel. Anchor obtained an insurance policy from CIGNA for Payne. Anchor also obtained financing from Surety Premium Finance, Inc. ("Surety") for Payne. A premium finance agreement was purportedly executed between Payne and Surety. The agreement contained a power of attorney authorizing Surety to cancel the CIGNA policy on behalf of Payne if he defaulted on the loan payments. Thereafter, Surety paid CIGNA the entire premium due for the insurance policy.
Payne was late on several payments and, on May 8, 1998, Surety sent Payne a notice of intent to cancel the policy due to delinquent payments. After no payments were made to cure the default, Surety canceled the policy pursuant to the power of attorney contained within the finance agreement. Metairie Bank was never given any notice of the cancellation.
Payne's vessel sustained extensive damage on or around July 31, 1998, when it was involved in a collision. After the accident Payne defaulted on the mortgage payments owed to Metairie Bank. Subsequently, he executed a dation en paiement in which he relinquished all his rights and interest in the vessel to Metairie Bank. Metairie Bank asserts that it has both a claim as a mortgagee and as a successor to the rights of Payne.
Metairie Bank moves for summary judgment claiming the CIGNA policy was not effectively canceled prior to the collision. Metairie Bank alleges that Payne never signed the premium finance agreement which was purportedly executed between Payne and Surety. Furthermore, it alleges that one of Anchor's employees signed it for Payne and that Payne never gave anyone authority to sign the agreement on his behalf. The agreement contained an appointment of Surety as Payne's attorney-in-fact which authorized Surety to cancel the policy under certain conditions. Metairie Bank contends that the premium finance agreement does not meet the requirements of R.S. 9:3550 and that the power of attorney within that agreement is not valid. Thus, Metairie Bank claims that Surety was never authorized to cancel the policy and that the cancellation of the policy was not a remedy to which Surety was entitled after Payne defaulted on the payments of the loan. As a result, Metairie Bank claims that Surety is liable for the damages to the vessel because it used the forged power of attorney to cause the cancellation.
Metairie Bank also claims that Anchor is liable for the damages to the vessel because its employee forged Payne's signature on the premium finance agreement. In doing so, Metairie Bank claims that Anchor exceeded the authority which Payne had granted to it and is answerable to Payne for any damages which he might sustain as a result. Since these rights have been assigned to Metairie Bank, Metairie Bank claims that Anchor is liable to it for the damages to the vessel.
Surety moves for summary judgment arguing that it complied fully with the requirements set forth in R.S. 9:3550 and that even if Payne's signature was forged, he ratified or confirmed the agreement by his subsequent actions. Surety claims that it satisfied all the statutory requirements necessary to cause an effective cancellation of the CIGNA policy. It further claims that Metairie Bank did not appear on the premium finance agreement as a mortgagee and, thus, was not entitled to any notice of cancellation. Surety also claims that Payne ratified or confirmed the agreement because he made the first few payments pursuant to the finance agreement and he accepted the benefit of the policy knowing that Surety had paid for it. Furthermore, Surety claims that Payne knew of the cancellation and did nothing to oppose it.
Anchor moves for summary judgment claiming that it cannot be held liable because it is not an insurer or agent of the insurer. It claims that it is merely an insurance broker and cannot be held liable for the damages sustained by Payne's vessel. Anchor does not address the assertion that an employee signed the premium finance agreement on behalf of Payne without the authority to do so.
II. SUMMARY JUDGMENT STANDARD
Summary judgment will be granted only if the pleadings, depositions, answers to interrogatories, and admissions, together with affidavits show that there is no genuine issue as to any material fact and that the defendant is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56. If the party moving for summary judgment demonstrates the absence of a genuine issue of material fact "the nonmovant must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial." Willis v. Roche Biomedical Laboratories, Inc., 61 F.3d 313, 315 (5th Cir. 1995). "[A] dispute about a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. When evidence of contradictory facts has been submitted, "the evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). To oppose a motion for summary judgment, the nonmovant cannot rest on mere allegations or denials but must set forth specific facts showing that there is a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 321-22 (1986). "[A] dispute about a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.
The burden of demonstrating the existence of a genuine issue is not met by "metaphysical doubt" or "unsubstantiated assertions." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986)). The Court must "resolve factual controversies in favor of the nonmoving party, but only when there is an actual controversy, that is, when both parties have submitted evidence of contrary facts." Id. The Court does not, "in the absence of proof, assume that the nonmoving party could or would prove the necessary facts." Id. If the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, no genuine issue exists for trial. See Matsushita, 475 U.S. at 588. Finally, "the mere existence of some factual dispute will not defeat a motion for summary judgment; Rule 56 requires that the fact dispute be genuine and material." Willis, 61 F.3d at 315. "Only disputes over facts that might affect the outcome of the suit under the governing law will preclude summary judgment." Id.
III. ANALYSIS
The main issue is whether or not the premium finance agreement entered into between Surety and Payne authorized Surety to cancel the insurance policy issued by CIGNA to Payne. This case is governed by R.S. 9:3550 which states that "[T]his section shall apply to any person engaged in the business of financing insurance premiums for consumers entering into premium finance agreements or otherwise acquiring premium finance agreements." La. Rev. Stat. Ann. § 9:3550(A) (West 1999).
Surety's argument that it did not have to notify Metairie Bank of its intent to cancel the policy is supported by R.S. 9:3550. The statute only requires that the premium finance company send a cancellation notice to the insurance agent who negotiated the insurance contract and whose name appears on the premium finance agreement. See id. § (G)(2). Additionally, the notice should contain the name of any mortgagee entitled to notice of cancellation as shown on the insurance premium finance contract. See id. Metairie Bank did not appear on the premium finance agreement and, thus, Surety claims that their failure to notify it of the cancellation was justified. The evidence supports Surety's claim that it notified all appropriate parties and fully complied with R.S. 9:3550. However, this argument is premised on a valid premium finance agreement. Thus, before addressing the notification requirements of the statute, the validity of the agreement and subsequent cancellation must first be examined.
R.S. 9:3550 sets forth the procedures an insurance premium finance company must follow to validly cancel an insurance policy. See General Motors Acceptance Corporation v. Gill, 525 So.2d 1108, 1111 (La.Ct.App. 1988). Louisiana courts have stated that for a cancellation to be effective, the finance company must comply fully with R.S. 9:3550. See Hunter v. Automotive Casualty Insurance Company, et al., 606 So.2d 571, 574 (La.Ct.App. 1992). Courts require strict adherence to the requirements set forth in R.S. 9:3550 when a finance company exercises its power of attorney to cancel an insurance policy. See Delatte v. Lemotte, 633 So.2d 686, 689 (La.Ct.App. 1993).
R.S. 9:3550 states that an insurance contract can be canceled upon default as follows:
When a premium finance agreement contains a power of attorney enabling the insurance premium finance company to cancel any insurance contract or contracts listed in the agreement, the insurance contract shall not be canceled by the insurance premium finance company unless such cancellation is effectuated in accordance with this subsection.
La. Rev. Stat. Ann. § 9:3550(G)(1) (West 1999). The statute also requires that the premium finance company mail to the insurer a copy of the notice of cancellation together with a statement certifying that the premium finance agreement contains a valid power of attorney. See id. § (G)(3)(a). It further requires that premium finance agreements be signed by the insured or by its agent under a validly executed power of attorney. See id. § (D)(1).
R.S. 9:3550 contains several requirements which were not met in this case. The statute requires that the insured sign the premium finance agreement or that an agent under a validly executed power of attorney sign the agreement for him. In the instant case, the evidence indicates that Payne did not sign the agreement and that he did not execute a power of attorney authorizing an agent to sign it for him.
R.S. 9:3550 also requires that the finance agreement contain a power of attorney enabling the finance company to cancel the policy upon default. See id. § (G)(1). The statute further requires the finance company to send a certified notice to the insurer that it has a valid power of attorney authorizing it to cancel the policy on behalf of the insured. See id. § (G)(3)(a)(i). The importance of the power of attorney is evident in the language of R.S. 9:3550. If neither Payne nor his authorized agent signed the agreement, the validity of the power of attorney within the finance agreement is uncertain. Therefore, Surety's authority to cancel the policy on behalf of Payne is factually determinative.
Another issue which is unclear is the identity of the person who actually signed the finance agreement on behalf of Payne. Additionally, Surety's knowledge that the finance agreement was a forgery is also uncertain. Both these factual issues must be addressed before determining the possible liability of either party.
Surety argues that Payne ratified and confirmed the obligation which he owed to Surety. The Louisiana Civil Code defines ratification as "a declaration whereby a person gives his consent to an obligation incurred on his behalf by another without authority." La. Civ. Code Ann. art. 1843 (West 1999). Tacit ratification may result when a person, with knowledge that another has incurred an obligation on his behalf, accepts the benefit of that obligation. See id. Payne's actions may constitute a tacit acceptance of the obligation which he owed to Surety. However, whether that ratification confirms the power of attorney within the finance agreement is another issue. While Payne may have ratified the monetary obligation owed to Surety, the ratification of the actual finance agreement and the power of attorney within it is unclear.
Many questions of fact surround the actions of all parties involved and whether or not the premium finance agreement, in this instance, allowed Surety to effectively cancel the policy. If the cancellation is deemed ineffective, more questions arise as to who is responsible for the damages to Payne's vessel. The only certainty in this case is that several genuine issues of fact exist which make this case inappropriate for summary judgment.
IV. CONCLUSION
For the foregoing reasons, plaintiff Metairie Bank Trust Co.'s motion for summary judgment is DENIED; defendant Surety Premium Finance Co.'s motion for summary judgment is DENIED; and defendant Hocon, Inc. d/b/a Anchor Marine Insurance Co.'s motion for summary judgment is DENIED.
Done this 17 day of April, 2000. New Orleans, Louisiana.