BancorpSouth, Inc. v. Federal Ins. Co.

Dist. Ct. did not err in granting defendant-insurance company’s motion to dismiss plaintiff-insured’s action alleging that defendant breached terms of insurance policy by failing to defend or indemnify plaintiff for $24 million settlement of underlying lawsuit alleging that plaintiff had assessed and collected excessive overdraft fees from its bank customers. Dist. Ct. could properly find that provision in policy that excluded coverage for claims “based upon, arising from or in consequence of fees or charges” applied, such that defendant was not required to defend or indemnify plaintiff in underlying lawsuit. Ct. rejected plaintiff’s argument that dismissal was improper because underlying lawsuit asserted injuries that were primarily caused by plaintiff’s policies and practices, since: (1) only harm alleged in underlying lawsuit was plaintiff’s maximization of excessive overdraft fees; and (2) there was no policy or practice alleged that existed independent of plaintiff’s overdraft fee scheme. Ct. further noted that instant exclusion served necessary purpose of avoiding “moral hazard,” where plaintiff would otherwise be free to create another alleged improper fee scheme knowing that defendant would reimburse it if and when said scheme was discovered.