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Bancorpsouth, Inc. v. Federal Insurance Co.

United States District Court, S.D. Indiana, Indianapolis Division

January 26, 2017

BANCORPSOUTH, INC., Plaintiff,
v.
FEDERAL INSURANCE COMPANY, Defendant.

          ORDER ON MOTION TO DISMISS

          SARAH EVANS BARKAR, JUDGE

         This is an insurance case. Before us is Defendant Federal Insurance Company's (“Federal”) Motion to Dismiss for failure to state a claim upon which relief can be granted filed pursuant to Federal Rule of Civil Procedure 12(b)(6). [Dkt. No. 17.] Plaintiff has responded in opposition. For the following reasons, we GRANT the Motion.

         Facts

         BancorpSouth, Inc. (“Bancorp”) is a financial institution which provides, among other things, checking and savings accounts to individuals. Bancorp purchased a bankers' professional liability insurance policy from Federal with a policy period of November 15, 2009 to November 15, 2010 (the “Policy”), a copy of which is attached as Exhibit 1 to the Complaint. The Policy obligates Federal to provide insurance coverage as follows:

1. INSURING CLAUSE
The Company [Federal] shall pay, on behalf of an Insured, Loss[1]on account of any Claim first made against such Insured during the Policy Period or, if exercised, during the Extended Reporting Period, for a Wrongful Act[2] committed by an Insured or any person for whose acts the Insured is legally liable while performing Professional Services, [3] including failure to perform Professional Services.

         The Policy contains various exclusions, including the following:

         3. EXCLUSIONS

         The Company shall not be liable for Loss on account of any Claim:

. . .
n. based upon, arising from, or in consequence of any fees or charges; . . . .

[Policy § 2 (“Exclusion 3(n)”).]

         On May 18, 2010, Shane Swift filed a class action lawsuit on behalf of himself and others against Bancorp in the Northern District of Florida, case number 1:10-cv-90-SPM-AK (“Swift Complaint” or “Swift Lawsuit”).[4]

         The Swift Complaint's opening allegation states:

1. This is a civil action seeking monetary damages, restitution, and declaratory relief from Defendant, [BancorpSouth], arising from its unfair and unconscionable assessment and collection of excessive overdraft fees.

[Swift Compl. ¶ 1.][5] The Swift Complaint alleges that Bancorp maximized its overdraft fees to its customers by: (1) “reorder[ing] the debits from largest to smallest” in an effort to maximize overdraft fees [id. ¶ 30]; (2) provid[ing] “inaccurate balance information to customers” through its electronic banking programs by reporting a positive balance despite its knowledge that outstanding transactions would result in a negative balance, as well as placing holds on certain funds which caused negative balances and overdraft fees [id. ¶ 44]; (3) failing to notify customers when their transactions would result in an overdraft fee and failing to inform customers of their option to opt-out of Bancorp's overdraft policy, thereby avoiding any overdraft charges [id. ¶¶ 48, 49]. These allegedly “wrongful overdraft policies and practices” harmed him and others, examples of which charges were provided by Swift, some of which would have been avoided had Bancorp not reordered his transactions. [Id. ¶¶ 61-64, 69 (“Thus, as a consequence of BancorpSouth's overdraft policies and practices, Plaintiff and the [class members] have been wrongfully forced to pay overdraft fees.”).]

         Asserting claims for breach of contract, unconscionability, conversion, unjust enrichment, and violations of state statute [id. ¶¶ 73-108], Swift sought to represent a class of “[a]ll BancorpSouth customers in the United States who . . . incurred an overdraft fee as a result of BancorpSouth's practice of re-sequencing debit card transactions from highest to lowest” [id. ¶ 15]. Swift sought the following relief:

         PRAYER FOR RELIEF

         WHEREFORE, Plaintiff and the Classes demand a jury trial on all claims so triable and judgment as follows:

1. Declaring BancorpSouth's overdraft fee policies and practices to be wrongful, unfair and unconscionable;
2. Restitution of all overdraft fees paid to BancorpSouth by Plaintiff and the Classes, as a result of the wrongs alleged herein in an ...

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