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Note: Insurance Distribution Network, Inc., (Broker) and Foundation Insurance Company, (Insurer) entered into a contract referred to as a "Risk Sharing Agreement" (Agreement). Under the Agreement Broker was to manage the losses under its workers compensation policies and to place policies in Insurer's "captive program."

Pursuant to the Agreement, Broker obtained an LC for the benefit of Insurer in the amount of US$240,000.00 of which Broker was entitled to any positive balance remaining. As a result of a series of amendments to the LC, however, Insurer became the applicant for the LC and Clarendon National Insurance Co. (the Underwriter) became the beneficiary. When Insurer later became insolvent, Broker had no claim for balances due and incurred additional costs in having to maintain the LC than it would have absent the amendment.

Having elected not to make a claim against Insurer in the insolvency proceedings, Broker sued Insurer, Insurer's principal, Steven M. Mariano (Principal) and others for breach of contract and fraud. Noting that the complaint alleged a telefax from Principal which urged amendment, the United States District Court for the Southern District of Ohio, Black, J., denied Principal's motion to dismiss for failure to state a cause of action but granted other defendants' motions for lack of evidence and Insurer's motion for summary judgment.

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