September 7, 2017
from the United States District Court for the Southern
District of Indiana, Indianapolis Division. No.
l:16-cv-01871-SEB-DML - Sarah Evans Barker, Judge.
Wood, Chief Judge, and Bauer and Sykes, Circuit Judges.
18, 2010, Shane Swift filed a class action lawsuit on behalf
of himself and others similarly situated against
BancorpSouth, Incorporated ("Bancorp") in the
Northern District of Florida based upon its assessment and
collection of excessive overdraft fees. On February 24, 2016,
Bancorp and Swift entered into a settlement agreement wherein
Bancorp agreed to pay $24 million to the settlement class.
Bancorp had previously notified its insurer, Federal
Insurance Company ("Federal"), that it sought
coverage for defending the lawsuit, and eventually, to
indemnify the settlement costs. Federal denied all coverage,
and consequently, Bancorp filed a complaint against Federal
alleging breach of contract, as well as bad faith denial of
coverage. Federal filed a motion to dismiss the complaint,
citing an exclusion of coverage in their policy with Bancorp
for any claim "based upon, arising from, or in
consequence of any fees or charges." The district court
granted Federal's motion to dismiss, and Bancorp
appealed. We affirm.
a Mississippi corporation, is a financial institution which
provides, among other things, checking and savings accounts
to individuals. In November of 2009, Bancorp purchased a
bankers' professional liability insurance policy from
Federal. The first paragraph of the policy, titled
"Insuring Clause, " outlined Federal's
obligation under the policy:
[Federal] shall pay, on behalf of an Insured, Loss on account
of any Claim first made against such Insured during the
Policy Period ... for a Wrongful Act committed by an Insured
or any person for whose acts the Insured is legally liable
while performing Professional Services, including failure to
perform Professional Services.
the policy, a "Claim" is defined, inter
alia, as a "written demand for monetary damages,
" or "a civil proceeding commenced by the service
of a complaint or similar pleading" brought on behalf of
a customer. "Loss" is defined as "the amount
that an Insured becomes legally obligated to pay on account
of any covered Claim, " which includes both settlement
costs, as well as "Defense Costs" or attorneys'
fees. The policy also contained a number of exclusions from
coverage, only one of which is relevant here. The relevant
exclusion stated that Federal "shall not be liable for
Loss on account of any Claim ... based upon, arising from, or
in consequence of any fees or charges" ("Exclusion
18, 2010, Shane Swift, on behalf of himself and others
similarly situated, filed a lawsuit against Bancorp in the
Northern District of Florida ("Swift Complaint").
The Swift Complaint's opening allegation stated:
"This is a civil action seeking monetary damages,
restitution and declaratory relief from [Bancorp] arising
from its unfair and unconscionable assessment and collection
of excessive overdraft fees." The Swift Complaint
alleged that Bancorp maximized the amount of overdraft fees
it could charge customers through a variety of means,
policies, and procedures. First, according to the Swift
Complaint, Bancorp reordered debits from highest to lowest,
instead of chronologically. Second, Bancorp failed to provide
accurate balance information, and purposefully delayed
posting transactions. Third, Bancorp failed to notify
customers of overdrafts, despite having the capability to
ascertain at the point of sale whether there were sufficient
funds in a customer's account. Finally, Bancorp failed to
make their custom- ers aware that they can opt out of
Bancorp's overdraft policy upon request.
Swift Complaint asserted claims for breach of contract,
unconscionability conversion, unjust enrichment, and a
violation of the Arkansas Deceptive Trade Practice Act.
Importantly, Swift sought to represent a class of "[a]ll
Bancorp-South 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
February 24, 2016, Bancorp and Swift entered into a
settlement agreement. Bancorp agreed to pay $24 million to
the class plaintiffs to resolve all the claims, $8.4 million
of which was set aside for attorney's fees, plus $500,
000 in class administrative costs.
notified Federal of the Swift Complaint and sought coverage
for both defending the lawsuit, and indemnifying the cost of
settlement. Federal denied all coverage.
then filed a complaint alleging two breach of contract
claims: that Federal breached its duty under the policy to
defend against the Swift Complaint and pay attorneys'
fees (Count One); and, that Federal breached the duty to
indemnify Bancorp for the cost of settlement (Count Two).
Additionally, the complaint alleged bad faith denial of
coverage by Federal (Count Three). Federal filed a Rule
12(b)(6) motion to dismiss for failure to state a claim on
the grounds that Swift's claims regarding the overdraft