Bank of Bozeman v. Bancinsure, Inc.

MEMORANDUM

A condition precedent to coverage under Banclnsure’s Financial Institution Bond (FIB) is “[ajctual physical possession of [original security documents] by the Insured ... or [its] authorized representative.” Appellants (Participant Banks) did not present evidence that they or an authorized representative had “actual physical possession” of the original security documents before they extended credit. Cf. Banclnsure, Inc. v. Marshall Bank, N.A., 453 F.3d 1073, 1075-76 (8th Cir.2006). The banks that sold the loan par ticipations (Lead Banks) did not agree to act as the Participant Banks’ “authorized representatives” for purposes of the FIB. To the contrary, the Loan Participation Agreements (LPAs) provide that the Lead Banks “make[ ] no warranty or representation of any kind or character relating to ... the [collateral,” and that each Participant Bank “is relying upon its own due diligence, credit investigation and credit analysis, and not on any representations, warranties or statements of [the Lead Banks].” These provisions make clear the Lead Banks were not agents of the Participant Banks as to any obligations contained in the FIB concerning the collateral. See…