Some states have permitted credit unions to obtain deposit insurance for its members through private nonfederal corporations.

When this case arose, Missouri permitted such insurance, however, that State legislature now requires deposit insurance be maintained by all credit unions through the National Credit Union Share Insurance Fund (NCUSIF).

In this case, Educational Employees Credit Union formerly maintained deposit insurance with Mutual Guaranty Corporation of Tennessee.

The credit union cancelled said insurance with Mutual Guaranty when Missouri law required it be insured through NCUSIF.

This credit union had previously transferred more than 2 million dollars to Mutual Guaranty and, pursuant to the original contract between the parties, Mutual Guaranty was to return the deposit, less a 30% penalty, to any credit union withdrawing from the contract.

Subsequent to the original contract, however, Mutual Guaranty unilaterally amended the contract so that no funds would be returned to a withdrawing credit union.

Educational Employees Credit Union sued Mutual Guaranty Corporation for a return of funds.

The court held that although the original contract was amended to provide for no refund, a prevailing Missouri statute provided greater protection to the credit union and required Mutual Guaranty to return to the credit union more than 2 million dollars of its capital contribution, including a special assessment.  Educational Employees Credit Union v. Mutual Guaranty Corporation (U.S. District Court, E.D. Missouri, No. 4:92CV1016),

By Charles R. Harroun, Attorney at Law