Agent Who Kept Premium Owed to Zurich, Loses at Ninth Circuit: Agent Defrauds Insurer by Not Remitting Premium Collected.

• Date: 26 November 2018
• Author: Zalma, Barry

* Insurance agents, by contract with insurers they represent, must place all premium collected on behalf of the insurer and place the funds in a separate trust account. Depending on the terms of the contract the agent then deducts the agreed commission and remits the remainder to the insurer. Failure to remit the premium, less the commission, is a theft or conversion of funds to which the agent had no entitlement.

In Zurich American Insurance Company v. Sealink Insurance Service Corp. And Yan Sara Zhang, And Phann Gelinda Keo, Et Al., No. 17-55776, United States Court of Appeals for the Ninth Circuit (October 15, 2018) Defendants Yan Sara Zhang and Sealink Insurance Service Corporation appealed from the district court's denial of their motion to set aside the entry of default and default judgment against them.

In evaluating such a motion, an appellate court must consider three factors:

1. whether the party seeking to set aside the default engaged in culpable conduct that led to the default;

2. whether it had no meritorious defense; or

3. whether reopening the default judgment would prejudice the other party.

A finding that any one of these factors is true is sufficient reason for the district court to refuse to set aside the default.

The Ninth Circuit did not reach the issue of defendants' culpable conduct because defendants' lack of a meritorious defense was sufficient to justify the district court's refusal to set aside the...