Thanks for visiting! Welcome to a new way to research case law. You are viewing a free summary from Descrybe.ai. For citation and good law / bad law checking, legal issue analysis, and other advanced tools, explore our Legal Research Toolkit — not free, but close.
National Bank of Andover v. KBS
Citations: 225 P.3d 707; 290 Kan. 247; 2010 Kan. LEXIS 168Docket: 95,548
Court: Supreme Court of Kansas; March 5, 2010; Kansas; State Supreme Court
An appeal involving the National Bank of Andover and Kansas Bankers Surety Company (KBS) arises from the unauthorized honoring of insufficient funds checks by an employee, leading to financial loss for the bank. KBS sought to rescind the Financial Institution Crime Bond it issued to the bank, prompting the bank to file a breach of contract claim against KBS. The cases were consolidated for trial, where KBS initially won, but the trial court later granted the bank a new trial, resulting in a favorable verdict for the bank. KBS appealed, and the bank cross-appealed, leading to the Court of Appeals reversing and remanding for a third trial. Key issues addressed include: 1. The Court of Appeals did not err in allowing KBS to rescind the bond based on the insured's conduct, which is less serious than fraudulent misrepresentation. 2. The application’s phrase "does your bank require" pertains to both standards and actual performance. 3. The appellate panel correctly upheld the trial court’s judgment regarding the bank's response to Question 1 of the application. 4. Transactions by employee Steward were not classified as bank loans. 5. KBS did not demonstrate prejudice from certain trial court orders. 6. The appellate panel's decision to remand for a third trial was upheld. On KBS's cross-appeal: 1. The panel did not err in failing to reinstate KBS's initial jury verdict. 2. The panel correctly determined that no coverage exists under Insuring Agreement (A) of the bond. 3. The panel erred in not overturning the trial judge's ruling regarding Question 2 of the bond application. The court affirmed some aspects while reversing others, ultimately ordering a third trial. The case history details the procedural context, including the bank's application for bond renewal, which included representations that were critical to the bond's validity and KBS's ability to rescind it based on misrepresentation. Bank president Bush was required to answer three specific questions as part of an application: whether all bank employees understood the Board-approved policies and procedures (Question 1), if there was a program for segregation of duties to prevent any single person from fully controlling a transaction (Question 2), and if all correspondent, suspense, and transit accounts were regularly balanced by a second person at least monthly (Question 3). Bush answered affirmatively to all questions. Following this, KBS issued a bond on March 15, 2002. A week later, suspicious checks were found in the desk of Paula Steward, the head accounting clerk since 1998. Between 1999 and early 2002, Steward paid insufficient funds checks for three customers—William Spillman, Dr. John Brooks, and Meadowbrook Farms, Inc.—without charging their accounts, falsifying bank records to conceal the payments despite instructions to not pay those checks. Steward claimed she acted out of panic due to work pressures and believed the customers would repay the bank. On March 27, the bank alerted KBS to the issue, prompting an investigation by Kennedy and Coe, LLC, which confirmed the unauthorized payments and identified a net loss of nearly $900,000, after Spillman's refund. The investigation revealed a lack of segregation of duties related to handling return items and account reconciliations. The bank submitted a sworn proof of loss statement to KBS for coverage of the losses. KBS vice president Paul Bures conducted his investigation, reviewing the bank's Compliance Policies and Procedures Manual, which outlined the responsibilities of the cashier, including daily reconciliation of deposit accounts and monthly reconciliation of correspondent accounts. Steward's job description indicated her responsibility for balancing these accounts. Bures found that Steward was the only employee trained to balance correspondent accounts and that these accounts had not been regularly balanced or reviewed by a second person prior to the discovery of the losses. KBS president Donald Towle declared the bond rescinded ab initio due to the bank's false response to Question 3 on the renewal application and returned the bond premium. Towle subsequently amended the rescission basis to include false answers to Questions 1, 2, and 3. KBS then filed a declaratory judgment action in Shawnee County District Court, asserting that the bond was void ab initio due to the bank's misstatements, claiming no contractual obligation under the bond. The bank responded with a breach of contract action in Butler County District Court, asserting KBS had no grounds for voiding the contract. Both cases were consolidated, and motions for summary judgment and orders in limine were filed. The trial court denied both parties' summary judgment motions but granted the bank's motion in limine, excluding evidence of the bank's employees' failure to follow policies, which the court deemed irrelevant. After a trial, the jury ruled in favor of KBS. The bank then sought a new trial, which the trial court granted based on KBS's violation of the in limine orders, improper jury instruction on disregarding certain evidence, and juror misconduct regarding the bank's practices. A second trial led to a verdict favoring the bank for $896,755.35, with the court denying KBS's motions for a new trial and for judgment notwithstanding the verdict. The bank was awarded attorney fees and prejudgment interest. KBS appealed, and the bank cross-appealed, leading to the Court of Appeals reversing and remanding for a third trial due to various errors by the trial court. The bank argued that KBS needed to prove more than negligent misrepresentation to rescind the bond, asserting that common law requires a higher standard than mere negligence. KBS contends that the bond application allows for rescission due to negligent misrepresentation or omission, asserting that the application requires the information to be complete, true, and correct. It specifies that any material misrepresentation or omission can lead to the rescission of any bond issued based on that information. The trial court denied KBS's request to instruct the jury on negligent misrepresentation, instead opting for a higher standard of fraudulent misrepresentation, as articulated in Jury Instruction No. 4. This instruction necessitates that KBS prove that the National Bank of Andover engaged in fraudulent misrepresentation regarding its affirmative answer to a specific application question. Fraudulent misrepresentation involves knowingly false statements or positive assertions made without knowledge of their truthfulness, which mislead and are material to the risk. KBS argues that the court's instruction imposes an unfairly high burden compared to the bond's terms, which allow for rescission based on any incorrect statement of material fact. The appellate court will review whether the trial court erred in its jury instructions and determine if the jury was appropriately instructed on KBS's theory of the case. Courts must provide proper instructions based on sufficient evidence and allow for rational conclusions by factfinders, while errors require prejudice to the appealing party to warrant reversal. The interpretation of the insurance contract is a legal question subject to unlimited review by appellate courts. Furthermore, the legal principle maintains that competent parties can contract freely unless such contracts are illegal, against public policy, or entered into under conditions like fraud or duress. Courts are tasked with upholding the legality of contracts, which are presumed valid unless challenged by the disputing party. The legal analysis focuses on the enforceability of a bond provision permitting rescission based on negligent misrepresentation by an insured bank, which raises questions of legality and public policy in Kansas. Citing Scott v. National Reserve Life Ins. Co., the Court of Appeals notes that Kansas courts typically do not allow rescission for mere negligent misrepresentation. However, the court also references Van Enterprises, Inc. v. Avemco Ins. Co., which indicated that a contractual clause could allow rescission for negligent misrepresentation if explicitly stated in the policy. The current case includes such language, leading the panel to conclude that parties may contract for rescission based on negligence. The bank argues that this interpretation contradicts established Kansas public policy, which maintains that insurance policies can only be rescinded for fraudulent misrepresentations, as supported by cases like House v. American Family Mut. Ins. Co. and Waxse v. Reserve Life Ins. Co. The bank contends that the provision in the KBS application conflicts with this public policy, rendering it unenforceable. The court's review of relevant case law underscores the prevailing view in Kansas that insurance contracts cannot be rescinded for honest mistakes, despite some states permitting such rescission for negligence. The court evaluated whether evidence supported the district court's finding of material and fraudulent misrepresentation by the insured, which would justify Reserve Life's rescission of the contract. It concluded that there was "no evidence of fraud," leading to the reversal of the lower court's decision and granting summary judgment to the insured. The opinion did not address lesser conduct than fraudulent misrepresentation as grounds for rescission. The court noted a lack of authority cited by the bank to suggest that parties cannot contractually agree to a rescission provision that does not require proof of fraud. K.S.A. 40-2205(C) indicates that a false statement in an insurance application does not preclude recovery unless it contributed to a claim event, while still allowing for policy voidance in accordance with its terms. The decision in American Special Risk Management Corp. v. Cahow clarified that an insurance company could deny a claim due to a bank's nondisclosure without needing to prove intent to deceive or fraud. The court recognized a distinction between excluding a claim and rescinding a contract, stating that while fraud must be proven for rescission, conduct less serious than fraud could still justify rescission. To rescind an insurance policy, the carrier can demonstrate either an intent to deceive (fraud) or prove material misrepresentations that impact the risk acceptance or hazard assumed by the insured. The panel determined that insurer KBS may rescind a policy that permits rescission for conduct less severe than fraudulent misrepresentation, affirming that such agreements between sophisticated commercial entities are enforceable and do not violate public policy. The trial court erred by not adhering to this contractual agreement and failing to properly instruct the jury, making the error reversible. Regarding the application’s phrase "does your bank require," the bank argued it pertains only to having a policy, while KBS contended it implies actual enforcement of the policy. KBS asserted that if the bank had genuinely required a second person for account balancing, misconduct could not have gone unnoticed for three years. The trial court excluded expert testimony that would have illustrated the bank's policies were not adequately enforced, deeming it irrelevant. The bank maintained that KBS's interpretation of "require" was flawed, defining it as having a need for or calling for performance, rather than reflecting actual performance. The issue of account balancing pertains to whether the bank has a definitive requirement for maintaining certain accounts, rather than if this requirement is consistently enforced. The bank's assertion that compliance with its policies equates to a mandate for perfection was rejected, as this interpretation would imply that there could never be losses, negating the purpose of the bond. The panel noted that KBS's argument highlighted significant oversight failures that were clear to the bank's management, indicating that the bank could not affirmatively answer the relevant question if the observations made were accurate. The term "require" was interpreted to mean more than simply issuing policies; it implied an active adherence to those policies, especially in light of the risk presented by certain accounts frequently misused by dishonest employees. The legal review of this matter is conducted under an abuse of discretion standard for orders in limine but shifts to a de novo review when examining the legal basis of the order. The application in question is considered part of the bond, and the interpretation of written instruments is a legal matter subject to unlimited appellate review. Clear and unambiguous policy language must be interpreted according to its plain meaning. The bank does not argue that "require" is ambiguous and maintains that it should be understood in its straightforward sense, while KBS and the Surety and Fidelity Association of America contest this view, suggesting that the bank's interpretation fails to meet the necessary standards for bond underwriting. SFAA provides multiple definitions of "require," asserting that Question 3 concerns whether the bank mandated the regular balancing of accounts and required a second person to verify this monthly. They reference State v. McCord, where the court ruled that "require" is used in its common sense, indicating a limitation on the court's power to compel testimony rather than on the competency of the witness. The bank argues that SFAA's interpretation is unreasonable, citing federal cases that suggest "require" connotes a mandatory action with the authority to impose sanctions for noncompliance, rather than a mere request. The bank claims it fulfilled this requirement by demanding employees balance accounts and having the authority to sanction noncompliance. However, the court disagrees, noting that the bank failed to check for compliance, which is essential to truly "insist upon" or "impose a compulsion." Citing a more recent case, the court emphasizes that without evidence of enforcement, the bank’s policy lacks substance. The relevance of KBS's evidence, showing that only one employee was trained to balance the correspondent account, is critical in determining whether the bank indeed "required" this balancing by a second person monthly. Relevance in legal evidence is defined by the logical connection between facts and the inferences intended to be established, as supported by State v. Richmond and K.S.A. 60-401(b). Evidence showing that no employee attempted to balance accounts during Steward's vacation is pertinent to KBS's claim regarding the bank's requirement for regular account balancing and the bond rescission claim. The trial court incorrectly interpreted a question from the application and wrongly excluded relevant testimony. Specifically, the trial court granted the bank a judgment on KBS's claim related to an allegedly false answer to Question 1, which inquired if all bank employees understood the applicable policies. The Court of Appeals determined that the trial court's ruling was based on an erroneous order in limine and that sufficient evidence existed for a jury to potentially rule in favor of KBS. The bank contended that KBS failed to prove fraud by clear and convincing evidence, while KBS argued the trial court's decision stemmed from the overbroad order in limine, which prevented them from presenting relevant evidence. Regarding the standard of review, appellate courts evaluate motions for directed verdicts by favoring the non-moving party and require that evidence must exist to warrant jury consideration. The bank claims entitlement to judgment as a matter of law because KBS did not verify the accuracy of the answers during its investigation. KBS's Bures testified that he couldn't definitively conclude whether the bank's employees understood their job policies and procedures, which does not resolve the matter. Evidence indicated that some employees, such as Linda Gillet from bookkeeping, were unaware of their job descriptions. The trial court made a legal error by applying a fraudulent misrepresentation standard instead of a less stringent one to KBS's evidence, imposing an incorrect burden of proof. This led to an erroneous judgment for the bank on Question 1, as reasonable minds could differ on the evidence when viewed favorably for KBS. Regarding Steward's transactions, the bank claimed these did not constitute loans since an employee must have authorization to bind the bank. KBS argued that honoring check overdrafts qualifies as loans, asserting that Steward had apparent authority. The bank's bond excludes coverage for losses from loans or credit extensions, but there may be exceptions under Insuring Agreement (A), which covers losses from dishonest or fraudulent acts by employees if they intended to cause the bank to incur such losses for personal gain. The bond was not designed to cover losses from poor loans. Disagreement exists on whether the trial court addressed whether the transactions were classified as loans. A bank's coverage of overdrafts typically constitutes a loan between the bank and its customers; however, in this case, the overdrafts resulted from a criminal act by a single employee, not a bank decision. KBS argues that this implies the transactions were loans, and the bank waived its right to contest this since it did not cross-appeal the trial court's ruling. The bank counters that the trial court did not classify the transactions as loans. The panel, however, agreed that the transactions were loans as a matter of law, referencing definitions from the bond and Kansas Banking Code that include overdrafts as loans. The panel noted that various jurisdictions recognize payment of overdrafts as loans, with common law supporting this view. The bank's appeal did not seriously dispute this characterization but argued that the employee lacked the authority to authorize the overdrafts. The court clarified that determining agency and the existence of competent evidence is a legal question. It highlighted that the trial court concluded the overdrafts were not authorized by the bank due to the employee's criminal actions. The bank relied on precedent suggesting an agent must have authorization to bind the principal, but the court noted that agents can bind principals through actual or apparent authority based on the principal's conduct or representations. The principal's words or conduct may explicitly designate authority, but in some situations, the agent's relationship or title can imply authority. An apparent agent is perceived by third parties as authorized to act for the principal, regardless of actual authority. The case of Smith indicates that while it does not definitively establish Steward's apparent authority to bind the bank, it does not support the bank's claim that Steward lacked the ability to obligate the bank unless explicitly authorized. The court has ruled that apparent authority can exist if the principal has either intentionally or carelessly led third parties to believe an individual is their agent, even without actual authority. KBS asserts that the bank did not exercise ordinary supervisory care, allowing Steward to approve overdrafts for three years, which could have led customers to believe she had the authority to do so. The bank contends that no apparent authority exists due to Steward's violations of bank policies and officer directives. However, the court reiterates that a lack of ordinary care could stem from the bank's failure to enforce its policies on overdrafts. The excerpt references the case of National Farmers Organization v. Kinsley Bank, where the court found that the bank president had at least apparent authority to authorize loans despite statutory limitations due to a lack of structured loan procedures. Similarly, in Lincoln Nat'l Bk. Trust v. Peoples Trust Bk., a teller's unauthorized action of cashing a check over the limit resulted in an overdraft, leading to a depositor’s claim against the bank for policy violations. The depositor alleged that a teller's wrongful creation of an overdraft led to the improper covering of a check and subsequent wrongful setoff by the bank. The court dismissed this claim, citing Section 4-401 of the Uniform Commercial Code, asserting that the check was "properly payable" despite the teller's lack of authority. This situation resulted in an overdraft on the depositor's account, making him liable for the check's amount, which the bank was entitled to charge against his other deposits. The court noted that, while there are distinctions between this case and Lincoln Nat'l (where a depositor sued the bank), a key similarity exists: the teller's internal rule violation did not negate apparent authority or the creation of a loan. The honoring of overdrafts by a bank employee, despite violating rules, still constituted a loan. The bank contended that the ruling undermined the concept of fidelity insurance, but the court disagreed, asserting that not all employee crimes involve loans and that transactions can be covered under the fidelity bond if the employee acted in collusion and gained financially. The court found no error in the panel's ruling regarding the classification of these transactions as loans. Additionally, KBS claimed prejudice from the trial court's evidentiary rulings, arguing that the Court of Appeals panel incorrectly held that it was prejudiced by those rulings. The bank countered that KBS could not show prejudice since certain evidence was not admitted, and KBS had not secured court approval for its proffered evidence. KBS contended its proffer was validly made and approved. Ultimately, the panel determined KBS was indeed prejudiced by the trial court's decisions. The order in limine has significantly restricted KBS's ability to present a defense in the breach of contract case and to argue for rescission of the bond. The district court excluded testimony relevant to potential misrepresentations made by the bank on the renewal application. Under K.S.A. 60-405, a verdict cannot be overturned solely due to the erroneous exclusion of evidence unless the proponent sufficiently articulated the substance of the expected evidence. A proffer serves to create a record of evidence for the trial court's consideration and for appellate review. Satisfactory proffers need to convey the essence of the excluded testimony, and formal offers of proof are not always required if an adequate record exists. The court acknowledged that while a formal proffer was not made for each piece of excluded evidence, the defense's position was adequately communicated through sidebar discussions and in-court dialogue. The appellate review revealed that an order in limine was in effect barring significant evidence, including parts of Bures's investigation file that KBS sought to introduce. While some comments within the file were deemed permissible, the majority were not allowed under the court's order. The bank's petition for review highlights key points regarding the introduction of evidence during trial, specifically concerning Exhibit FFF and KBS's claim file. During the trial, Towle testified about the file parts he relied on to rescind the Bond, but an objection was raised due to Exhibit FFF not being admitted into evidence. The bank asserted that Exhibit FFF was never formally offered. The court and KBS's counsel discussed proffer procedures, allowing KBS to submit proffers post-trial without waiving any rights. The court emphasized that KBS could present evidence at any convenient time, even during jury deliberations. After the jury's submission, KBS's counsel reiterated the desire to proffer parts of the claim file. The court instructed KBS's counsel to identify what evidence they believed should have been admitted for appeal. Bank counsel did not object to KBS's proffer approach and acknowledged the need for KBS to make an appropriate proffer. The lack of objections from the bank regarding KBS's failure to offer the claim file initially indicates that both parties treated this as a nonissue. The bank's counsel ultimately consented to KBS's request for additional time to make their proffer, and the court's comments underscored an emphasis on the relevance of proffers for potential appeal. KBS was instructed to consider what evidence it felt should have been admitted during the trial, despite the bank's argument asserting that KBS failed to demonstrate prejudice resulting from the trial court's rulings. The bank contended that KBS did not seek the trial court's approval for its evidence proffer as mandated by K.S.A. 60-405, claiming this omission hindered appellate review of the trial court's exclusion of evidence. Nonetheless, both the court and counsel agreed that KBS could submit its proffer after the trial, which KBS did 11 days later through a formal pleading titled "Offer of Proof." This included extensive details about the testimonies of Bures, Towle, and six other witnesses, addressing why there were grounds to deny the Bank's claim and specific reasons for rescinding the bond. The proffer also presented a supplemental offer regarding excluded exhibits, particularly the KBS Claim File and interview notes, which were crucial for supporting Towle's testimony. During jury deliberation, the trial court indicated that it would later decide on the admission of these proffered exhibits, and the court acknowledged KBS's intention to use the proffer for appellate purposes. While the bank objected to certain parts of the proffer due to perceived conclusory statements, such objections did not preclude the inclusion of the proffered evidence in the appellate record. The bank failed to demonstrate any formal disapproval of the proffer in the record, and the presence of the proffered exhibits indicated some level of approval by the trial court. Ultimately, the appellate court found that the proffer met the necessary requirements and that an adequate record was established regarding the excluded evidence, affirming that the trial judge was aware of the evidence it excluded. The appellate court has determined that the trial court erred in excluding evidence, which significantly hindered KBS’s ability to present its case for bond rescission and defend against the breach of contract claim. This ruling aligns with precedents indicating that substantial errors affecting trial outcomes necessitate reversal. The case is to be remanded for a third trial. The bank's argument for reinstating its favorable verdict from the second trial, based on alleged cumulative errors, was rejected because the appellate panel found no errors in the rulings it challenged. KBS contended that the appellate court erred by not reinstating its favorable verdict from the first trial, arguing that the trial court improperly considered juror affidavits in granting a new trial. Although the appellate panel acknowledged this error, it did not reinstate the verdict because KBS failed to contest the other two grounds for the new trial: violations of an order in limine and failure to instruct the jury regarding bank policy adherence. KBS claimed it challenged all three grounds, but the court noted that KBS only focused on juror misconduct in its appeal from the second trial’s verdict. The appellate panel emphasized that KBS needed to address the alternative bases for the new trial to succeed in its appeal. The standard of review highlights that granting or denying a new trial is at the discretion of the district court. KBS contends that its appeal brief, despite being broadly phrased, contained specific objections to the trial court’s findings related to a new trial granted to NBA based on alleged juror misconduct. KBS's Issue 4 asserts that the trial court abused its discretion in this decision. KBS claims the trial court erroneously assumed that juror discussions regarding improper evidence stemmed from KBS's conduct, violating the order in limine and affecting the jury's verdict. KBS argues that the trial court's order was overly broad and that its cross-examination and witness testimonies regarding bank employees' policy adherence were appropriate. KBS maintains it did not violate the order, contrary to the bank’s assertions. However, the court notes that KBS's references to the trial court's findings were insufficient to preserve these issues for appeal, as only fleeting mentions were made without substantial argument. Citing established precedent, the court concludes that issues not adequately briefed are deemed abandoned. Consequently, the court finds it cannot assert that the district court abused its discretion in ordering a new trial, affirming the panel's decision to not reinstate KBS’s initial favorable verdict. In addressing Issue 8, KBS argues that the panel should have ruled that no coverage existed under Insuring Agreement (A), despite agreeing with the panel that the transactions were loans. The panel decided that a retrial would determine if there was collusion involving Steward, a necessary condition for coverage under Insuring Agreement (A). The court reiterates that, per Exclusion 2(e), there is no coverage for losses resulting from loans where the insured bank is a lender, except under defined circumstances in the insuring agreements. Dishonest or fraudulent acts by the Employee must be intended to: (a) cause loss to the Insured, and (b) provide financial benefit to the Employee or another party. Losses resulting from Loans are not covered unless the Employee colluded with others in the transactions and received a financial benefit. In matters of contract and insurance policy interpretation, the review is de novo. KBS argues that both conditions—collusion by Steward and receipt of financial benefit—must be met for loss coverage under Insuring Agreement (A). KBS claims that the bank did not dispute that Steward received no financial benefit, implying that summary judgment should favor KBS. However, KBS's summary judgment motion did not address whether Steward received benefits or mention Insuring Agreement (A). The bank noted that KBS's motion relied solely on Exclusion 2(e), relating to loans, leaving no contention for the bank to refute on the financial benefit issue. KBS also asserted that no evidence was produced at trial to show Steward received a benefit, citing bank employees' testimonies without specific references to the record. Supreme Court Rule 6.02(d) allows for presumption of lack of support for factual statements not cited with record references. KBS's failure to properly cite evidence prevents a ruling on the matter. The appellate court must resolve facts in favor of the party against whom judgment is sought, and if reasonable minds could differ, the motion must be denied. KBS's challenge to the panel's ruling is that it overlooked a critical point. KBS must demonstrate through undisputed evidence that the honoring of insufficient funds checks constituted loans to the customer and that Insuring Agreement (A) does not apply. Specifically, KBS needs to show that Steward did not collude with Spillman, Brooks, or Meadowbrook Farms; however, KBS failed to assert this in its statement of uncontroverted facts. This omission led to the conclusion that KBS did not establish entitlement to summary judgment under Insuring Agreement (A) and Exclusion 2(e) of the bond. KBS argues that the panel incorrectly focused on collusion when lack of financial benefit to Steward should suffice to deny coverage. Despite Steward receiving no financial benefit from the loans, the court cannot rule that there was no coverage under Insuring Agreement (A) based on the current record. KBS further contends that the Court of Appeals erred by not reversing the trial judge's judgment against KBS regarding Question 2 of the bond application. The bank had argued that there was no evidence justifying bond rescission based on its responses to application Questions 1 and 2. Although the panel reversed the trial judge's ruling on Question 1, it affirmed the ruling on Question 2, where the bank had answered "yes" to whether it had a planned program for segregation of duties. KBS asserted its Internal Control Policy indicated compliance with such programs, but the panel ruled that Question 2 asked only if policies were in place, not whether there was adherence to those policies. The appellate court applies the same standard as trial courts in motions for judgment as a matter of law, resolving all factual inferences in favor of the opposing party, and must deny the motion if reasonable minds could differ based on the evidence. The inquiry assesses whether evidence demonstrates sufficient disagreement to necessitate jury submission or if it is overwhelmingly one-sided in favor of one party's legal claim. The court evaluates if a reasonable jury could determine that the bank lacked a planned program for segregating duties, which prevents any individual from fully controlling a transaction. If such a determination is possible, the trial court's judgment must be reversed. The discussion highlights that while the bank could truthfully state it had a policy for segregating duties, it would have to answer negatively regarding the requirement for such segregation due to its failure to enforce compliance. The inquiry involves three conditions: the existence of a planned program, the requirement for segregation of duties, and the prevention of single-person control over transactions. The term "planned program" implies more than a simple policy declaration; it necessitates active enforcement of these procedures. The bank's claim of having a program is challenged, as it must ensure compliance with its segregation requirements. A written job description for an employee indicates responsibilities for balancing accounts, while the bank's procedures outline tasks for supervisory roles that, if performed, might have improved compliance with the segregation policy. The court suggests that failure to enforce these procedures undermines the bank's claims regarding its control measures. The document outlines findings related to the National Bank of Andover's Internal Control Policy, particularly concerning the segregation of duties. It states that the Board of Directors is responsible for an annual examination of the adequacy and compliance of the internal control program, which can alternatively be performed by a qualified accounting firm. The policy emphasizes that no individual should control a transaction from start to finish, and there should be a secondary review function for major transactions. Regular quarterly reports are mandated to review internal control procedures and any discrepancies. The text highlights a failure on the part of the bank's Board of Directors to enforce compliance with these internal controls, as evidenced by the lack of segregation in the duties related to reconciliations and the failure to review necessary reports and audits. Specifically, it notes that an employee, Steward, improperly processed insufficient funds checks over three years without proper supervision or reconciliation, suggesting systemic deficiencies in the control measures. Based on this evidence, it is concluded that the bank's published program did not effectively implement the required segregation of duties. The panel's affirmation of the trial judge's decision against KBS regarding the bond application was deemed incorrect, leading to the reversal of the district court's judgment. Additionally, the bank's requests for attorney fees related to the case were denied, and the case is remanded for a third trial.