A bank whose account was used by an investment adviser to steal money from his employer's customers is not obligated to compensate the American International Group Inc. unit that insured the employer, an appellate court ruled Wednesday.

In 1994, Mark Henry began working as an investment adviser for Bismarck, North Dakota-based Investment Centers of America Inc., which was insured by New York-based National Union Fire Insurance Co. of Pittsburgh Pa., an AIG unit, according to the ruling by the 8th U.S. Circuit Court of Appeals in St. Louis in National Union Fire Insurance Co. of Pittsburgh PA v. Yvonne Raczkowski et al.

In November 2004 Mr. Henry opened a bank account at Carthage, Missouri-based Hometown Bank N.A. under the name “Mark L. Henry d/b/a Investment Centers of America,” but did not have ICA's permission to open the “doing-business-as” account, according to the ruling.

The only identification Mr. Henry provided to Hometown Bank was a driver's license. Hometown Bank claimed it believed Mr. Henry was self-employed and acting on his own behalf when it chose to open the account, according to the ruling.

Because it was a d/b/a account, Hometown Bank allowed Mr. Henry to accept checks made out to ICA from ICA customers and deposit them into the Hometown Bank account. He deposited roughly $292,000 into the account, and later withdrew this money for personal use, according to the ruling.

His fraud was discovered in August 2006. ICA later settled with the defrauded ICA customers, and National Union paid an undisclosed amount in claims on behalf of ICA as its insurer, the ruling said.

National Union filed suit in U.S. District Court in Joplin, Missouri, claiming Hometown Bank was negligent in not confirming with ICA that Mr. Henry had no authority from ICA to open the d/b/a account.

The District Court granted Hometown Bank's motion to dismiss, ruling the bank owned no duty to either ICA or National Union, and National Union appealed.

A three-judge panel of the 8th Circuit unanimously agreed with the District Court's ruling. “Although National Union suggests Hometown Bank should have verified with ICA Henry's authority to use the name, it is no simple matter to identify who exactly holds rights in a name, trademark, or trade name. And National Union proffers no explanation as to where the asserted duty might end,” says the ruling.

“Essentially, if we followed National Union's proposal, we would be requiring Hometown Bank to verify, as to the world at large, whether there were any entities identically or similarly named 'Investment Centers of America,' and once those entities had been ascertained, whether Henry had the authority for any of those entries to open the d/b/a account.

“The scope of this duty would be particularly burdensome in some cases, and imposing the duty may not even generate the result National Union seeks because small differences, such as name or location difficulties, may prevent a bank's search from even locating the correct d/b/a entity,” said the appellate panel.

“The burden of imposing this ill-defined and undisputedly board duty is simply too great in this context,” said the appellate court in affirming the District Court's ruling.