Opinion ID: 203976
Heading Depth: 2
Heading Rank: 1

Heading: Relevant Documents and Relationship of Parties

Text: BCC leases commercial equipment and provides commercial equipment lease financing services to business lessee customers throughout the United States. Under its standard equipment lease, BCC requires its lessees to obtain property and liability insurance coverage on the leased equipment and designate BCC as the loss payee and additional insured. When a lessee fails to obtain or maintain insurance, BCC protects its property interests as owner and lessor of the equipment by procuring insurance for the equipment in BCC's own name and naming BCC as policy owner and sole insured. It then bills the lessee for the insurance cost, including premiums and a service fee. ALI is a licensed insurance agency that provides equipment lease insurance programs to equipment lease financing companies such as BCC. On October 2, 2006, ALI and BCC entered into an initial six-month lease insurance agreement (Original Program Agreement) which would cover existing leases and any new leases begun after October 2, 2006. Under the agreement, ALI was appointed to serve as BCC's Insurance Manager, with duties including monitoring insurance coverage on leases, communicating with lessees, processing evidence of lessees who had obtained alternative coverage, and issuing coverage on leases when lessees failed to obtain their own coverage. ALI also was required in certain situations to cancel lease insurance, such as when a lessee failed to pay its insurance charges or when a lessee obtained other insurance that satisfied certain agreed-upon criteria. In setting up the Original Program Agreement, ALI acted as agent for Balboa Insurance, a subsidiary of Balboa Life. Balboa Insurance was the actual issuer of the insurance policy (Insurance Policy) to BCC. BCC agreed to renew its agreement with ALI in April 2007. This agreement (Program Agreement), effective on April 2, 2007, is one of the central documents in this dispute. In order to avoid the risk and expense of financing this insurance itself, BCC also entered into a six-month agreement (Original Finance Agreement) on October 2, 2006 to finance the Insurance Policy through AICCDC. Under this agreement, AICCDC would advance the insurance premiums (owed to Balboa Insurance) and insurance manager fees (owed to ALI). These funds were gradually recouped from the insurance charges BCC billed to its individual lessees and then sent to AICCDC. AICCDC also received a finance charge (FINCO charge) as compensation. BCC, thus, did not have to dedicate any capital to maintaining this insurance. In fact, BCC earned money on the deal: it is designated as subcontractor in the Program Agreement, with duties to transfer data on lessees and bill and collect insurance charges on the covered leases, and it is compensated for these services. In April 2007, BCC renewed its agreement with AICCDC. This agreement (Finance Agreement), effective on April 2, 2007 as well, is also at issue in this case. Both the Finance Agreement and the Program Agreement were set to renew automatically at one-month intervals. But either side could terminate without cause by providing written notice at least ten days prior to the next renewal date. [3] In the event of such termination, however, § 21(b) of the Program Agreement provides that: the Insured Lessor [BCC] agrees that all Coverage effective prior to termination shall remain in effect with the Insurance Company [Balboa Insurance]. The Insurance Manager [ALI] shall not thereafter cancel Coverage with respect to any Lease of Equipment that is subject to Coverage at the time of termination of this Agreement, except as provided in this Agreement or the Insurance Policy. Similarly, § 14 of the Finance Agreement provides that following termination without cause, this Agreement shall continue in full force and effect with respect to Leases which remain subject to Coverage at the time of termination of this Agreement. Section V of the Insurance Policy, which is referred to in § 21(b), sets forth basic provisions for termination and is entitled How Coverage May be Voided or Canceled. Section V.2 covers How YOU [BCC] may cancel this Policy, and § V.3 covers How WE [Balboa Insurance] may cancel this Policy. Both sections contain near-identical language: first, the cancelling party must, at least ninety days in advance, send written notice of when the cancellation will be effective. Following cancellation, coverage on Covered Equipment issued prior [to] the effective date of [the] cancellation of [this] Policy will remain in effect until individually canceled as provided in Section V, paragraph 1 above or until termination of each lease agreement of Covered Equipment. Sections V.2 and V.3, respectively, refer to the individual cancellations that are provided by § V.1, entitled What happens if YOUR [BCC's] LESSEE has other coverage. Because of the timeframe of this dispute, the relevant paragraph is § V.1(b), which covers time Before a Loss [4] [i.e. damage to, or theft of, leased equipment], and six months or more after the date coverage commences under this Policy. § V.1(b) provides that If OUR Agent [ALI] is notified timely that there is other specific insurance on the individual Covered Equipment that meets all the requirements in YOUR [BCC's] lease agreement, as determined by YOU [BCC], OUR [Balboa Insurance's] coverage will be canceled as of [one of two date calculations]; and in either case all related unearned premiums as of such cancellation date will be refunded to YOU [BCC]. Approximately half of BCC's lessees opted to use the default insurance system provided by the BCC-ALI-AICCDC agreements.