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Renasant Bank v. St. Paul Mercury Insurance Co.

United States Court of Appeals, Fifth Circuit

February 6, 2018

RENASANT BANK, Plaintiff - Appellant
v.
ST. PAUL MERCURY INSURANCE COMPANY, Defendant-Appellee

         Appeal from the United States District Court for the Northern District of Mississippi

          Before DAVIS, HAYNES, and COSTA, Circuit Judges.

          HAYNES, Circuit Judge

         A Mississippi statute, Miss. Code Ann. § 81-5-15, requires bank employees to post fidelity bonds that protect against "acts of dishonesty." Renasant Bank did not require its employees to post such bonds. Instead, like most banks today, it purchased a Financial Institution Bond, which covers losses caused by employees only when certain criteria are met ("the Bond"). At issue in this case, inter alia, is whether the Bond's criteria improperly limit coverage in light of § 81-5-15's allegedly broad mandate.

         Assuming arguendo that the Bond is governed by § 81-5-15, we conclude that the Bond's terms are enforceable as written because they are consistent with the statute. We also agree with the district court's conclusion that Renasant Bank failed to produce evidence necessary to its breach-of-contract claim and, therefore, that St. Paul Insurance Mercury Insurance Co. ("St. Paul Insurance") is entitled to summary judgment. Accordingly, we AFFIRM.

         I. Factual and Procedural Background

         In September 2008, Renasant Bank obtained a Financial Institution Bond from St. Paul Insurance. Relevant to this appeal, the Bond covers "[l]oss resulting directly from . . . [d]ishonest or fraudulent acts committed by an Employee." When losses result directly or indirectly from loans, however, the Bond limits coverage to situations where the employee extending the loan:

(i) acted with the intent to cause the Insured to sustain such a loss;
(ii) was in collusion with one or more parties to the transaction; and
(iii) has received, in connection therewith, an improper financial benefit.

         Alternatively, if the employee did not receive "an improper financial benefit, " the Bond covers losses resulting from loans if:

(i) other persons with whom the Employee was dishonestly or fraudulently acting in collusion received proceeds from the Loan . . .; and
(ii) the Insured establishes that the Employee intended to share or participate in the proceeds of the Loan . . . .

         A "financial benefit, " the Bond explains, "does not include any employee benefits earned in the normal course of employment, including: salaries, commissions, fees, bonuses, promotions, awards, profit sharing or pensions."

         In July 2009, Renasant Bank notified St. Paul Insurance of potential losses resulting from allegedly dishonest or fraudulent lending activities of a former employee ("the Employee"). Renasant Bank apparently learned of these activities upon reviewing certain outstanding loans in late 2007, as the real estate market deteriorated. According to Renasant Bank, in 2006, the Employee approved two multi-million dollar real estate development loans ("the Loans") that she knew were secured by less collateral (i.e., land acreage) than she initially represented to the bank in obtaining the bank's authorization for the Loans. Renasant Bank also claims the Employee ...


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