CEBV, LLC (as assignee of Ameris Bank) v. ABC HoldCo, Inc., Docket No. GLO-L-000856-22 (N.J. Super. 2023)

Issue Discussed: Fraud

Submitted by Fielding Huseth

Date Promulgated: February 7, 2024

The Complaint alleged that three men (the “Principals”) ran a fraudulent scheme to misappropriate over $21 million in premium finance loans issued by Ameris Bank. Premium finance companies offer policyholders “a means to buy insurance and pay for it in manageable periodic payments plus a finance
charge[.]” See Sheeran v. Sitren, 168 N.J. Super. 402, 410 (Law. Div. 1979). The Principals carried out the scheme using four of their affiliated insurance agencies—ABC Inc., Brandywine, Trigen, and NSU (“the Principals’ Agents”). The Principals’ Agents submitted premium finance applications to Ameris Bank on behalf of purported policyholders (the “Borrowers”) of certain insurance companies, including
Clear Blue Insurance Company and Beazley Insurance Company (“Insurers”).

Unaware of the fabricated insurance policies included with the applications, Ameris Bank approved the
applications and entered into premium finance contracts with the Principals’ Agents and Borrowers. The Principals allegedly took the loan proceeds and, together with the Borrowers, used them for their own illegal purposes.

Plaintiff asserted that the Principals’ Agents were independent insurance agents for the Insurers and had “apparent and implied authority to write policies of insurance for the Insurers.” Plaintiff also asserted that, upon issuing the premium finance loans, Ameris Bank sent notices to the Insurers but received
no response from them. Primarily based on these allegations, Plaintiff brought two counts against the Insurers: (1) breach of the premium finance contracts; and (2) aiding and abetting the Principals’ violations of New Jersey Racketeer Influenced and Corrupt Organization Act (“NJRICO”) and conversion.

The Insurers moved to dismiss both counts. On December 15, 2022, the New Jersey Superior Court dismissed with prejudice Plaintiff ’s breach of contract claim against the Insurers. The Court held
that the Insurers were not parties to the premium finance contracts. The Principals’ Agents’ alleged “authority to write policies of insurance for the Insurers” did not extend to executing premium
finance contracts for the Insurers.1

1 On August 3, 2023, the New Jersey Superior Court dismissed without prejudice Plaintiff’s claim that the Insurers aided and abetted the alleged violations of NJ RICO and conversion. The Court held that allegations of the Insurers’ “mere inaction” (i.e., not responding to the premium finance company’s notices) were insufficient to plead aiding and abetting. Plaintiff has not sought to amend the Complaint to replead its aiding-and-abetting claim against the Insurers. Plaintiff’s case against the non-Insurer defendants remains ongoing.