Agency Back in Litigation Brought by Alabama Boat Dealer Over Unearned Premiums

An Alabama insurance agency cannot yet escape a boat dealer’s claim that the agency failed to refund thousands of dollars after coverage was canceled in 2023, the state Supreme Court said in a recent decision.

McCarron Insurance Group, an independent agency in Orange Beach, had been dismissed from a lawsuit brought by Gulf Shores Power Sports Inc., a boat and equipment dealership, after the agency handed over $15,114 to the Circuit Court in Baldwin County. It’s known as an interpleader action: A party to a dispute turns at least some of the disputed funds over to the court, while the claim is sorted out.

But the boat dealer contends that the agency owes it much more—at least $75,300—in unearned premiums, and that McCarron should not have been dismissed from the suit.

It all began about three years ago. The boat dealer said the firm had paid McCarron $196,463 in premiums for commercial insurance policies in 2023. McCarron obtained coverage through Maritime Program Group, a wholesale broker.

A month later, the Power Sports dealer canceled the policies for reasons that were not explained in the court’s opinion. Maritime, or MPG, refunded $15,114 to McCarron. But the boat dealer, referred to as GSPS, argued that the McCarron agency failed to refund the full amount of unearned premiums and had never properly applied its premium payments to the MPG policies.

“This dispute arises because GSPS never received a return payment for unearned premiums and commissions paid over to McCarron because … McCarron failed to properly pay and apply those amounts to GSPS’s Inland Marine Insurance package ….” the dealer’s complaint alleged.

The trial court in Baldwin County allowed the interpleading and dismissed the McCarron agency from the suit. But the state Supreme Court said in its Oct. 23 opinion that the lower court got it wrong: An interpleading is appropriate only when it resolves matters for the party making the plea.

In this case, the boat dealer had made independent claims against the agency, not just the Maritime program. McCarron cannot offer to interplead the lesser amount—the $15,114—that was refunded from MPG and be entitled to dismissal.

“Here, GSPS made an independent claim against McCarron, alleging negligence, wantonness, recklessness, and/or fraud for wrongfully retaining insurance premiums—in addition to the amount of premiums refunded and subsequently interpleaded—that were allegedly never paid to MPG,” Justice Greg Shaw wrote in the opinion. “That independent liability claim was never determined; thus, the circuit court erred in dismissing McCarron from the action and disposing of all the claims against it.”

The requisite circumstances for interpleader are not present in this case, and the circuit court dismissed claims not implicated by the interpleader, the court said. The court issued a writ of mandamus, ordering the lower court to rescind the dismissal of the agency from the suit, and to proceed with the litigation.

Kevin McCarron, principal at the insurance agency, declined to comment about the court’s decision.