MIAMI (11/1/11)--Dade County FCU, Doral, Fla., won a reduced verdict in the amount of $406,200 against its insurance company to fulfill a performance bond claim it made after an employee altered more than 500 delinquent credit card accounts to make them appear current.
The judgment was made Oct. 18 in U.S. District Court for the Southern District of Florida in Miami against defendant CUMIS Insurance Society, part of CUNA Mutual Group.
The credit union filed a claim for $2.4 million, which CUMIS said was inflated. The jury agreed, reducing the amount awarded to $348,183 plus $58,017 in pre-judgment interest from the date of loss--April 2, 2009--resulting in the total $406,200, according to the ruling.
"In this case, the credit union and its lawyers filed a claim for $2.4 million," John Christenson, associate general counsel for CUNA Mutual Group, told News Now. "CUMIS maintained all along that the amount claimed was significantly inflated. In the end, the jury agreed with CUMIS' position, finding that the credit union's covered loss was $348,183, which is less than 15% of what was claimed.
"Paying inflated claims impacts all of our policyholders," he continued. "As a mutual company owned by our policyholders, we are duty-bound to those policyholders to avoid paying inflated claims and to defend against efforts to get us to do so. CUNA Mutual's claims philosophy is to handle all claims fairly, paying what we owe, nothing more and nothing less. That is what we've done in this matter.
"Unfortunately, in situations such as these the only real winners are the lawyers who often generate fees far in excess of any recovery.This seems particularly inappropriate here, where the credit union's lawyer engaged in such misconduct during the trial that the judge felt compelled to instruct the jury to disregard much of her argument," he concluded.
At issue in the case was the credit union bond, which in part sets terms of coverage for loss incurred by the credit union in exchange for a premium paid by the credit union to CUMIS. The credit union alleged the contract agreed to pay the credit union for loss directly resulting from "a named employee's failure to faithfully perform his/her trust."
In April 2009, the credit union discovered that Jorge Garcia was manually manipulating credit card accounts to make it appear as if the accounts were current, the complaint said. Because his actions led credit union staff into believing the card accounts were current, they took no actions on several accounts that actually were delinquent, the complaint said.
The continued manipulation of the credit card accounts meant the credit union could not recover funds on past due accounts, according to the compliant.
In April 2009, Dade County FCU submitted proof of loss to CUMIS, which investigated the credit union's claim and denied it on July 8, 2010.