FCL Fidelity Blog

Fidelity. Covered.

Chris McKibbin

About Chris McKibbin

As the only lawyer in Canada whose practice focuses primarily on fidelity insurance, Chris McKibbin has provided nearly 18 years of quality service and excellent results for virtually every fidelity insurer. He has been involved in most of the significant litigated fidelity coverage disputes in Canada since 2003, including complex coverage disputes involving fidelity policies, financial institution bonds and cyber policies arising from employee fraud, forgery of negotiable instruments, computer and funds transfer fraud and social engineering fraud. Chris also maintains a busy fraud recovery practice on behalf of both fidelity insurers and corporate clients.

Citizens Bank: U.S. District Court rejects contra proferentem reading of Financial Institution Bond in finding No Coverage for Forged USDA Guarantees

On November 16, 2016, the U.S. District Court for the Eastern District of Wisconsin released its decision in Citizens Bank Holding Inc. v. Atlantic Specialty Insurance Co. The Court held that forged business loan guarantees purportedly issued by the U.S. Department of Agriculture (USDA) did not qualify for indemnity under Insuring Agreements D or E of a Financial Institution Bond. The decision is notable in that it reaffirms the interpretive principle that the Bond is not to be interpreted contra proferentem, as it is a product of negotiation between the banking and fidelity insurance industries. The Facts Citizens Bank maintained

Hantz Financial Services: Sixth Circuit enforces Suit Limitation Provision in finding No Coverage under Financial Institution Bond

On November 9, 2016, the Sixth Circuit Court of Appeals released its decision in Hantz Financial Services, Inc. v. American International Specialty Lines Insurance Co., affirming the U.S. District Court for the Eastern District of Michigan’s grant of summary judgment in favour of National Union in a claim advanced on a Financial Institution Bond. As we discussed in our September 29, 2015 post, the District Court held that no coverage was available to the insured, Hantz Financial Services, Inc. (“Hantz”), for losses resulting from its employee’s perpetrating a fraud on its clients, as such losses were indirect. The District Court

Apache Corporation: Fifth Circuit holds that Commercial Crime Policy’s Computer Fraud Coverage does not extend to Social Engineering Fraud Loss

On October 18, 2016, the U.S. Court of Appeals for the Fifth Circuit released its opinion in Apache Corporation v. Great American Insurance Company.  This is one of the first appellate decisions to consider coverage for a social engineering fraud loss under “traditional” commercial crime policy wording since the widespread introduction of social engineering fraud endorsements.  In holding that the loss did not trigger indemnity under the Computer Fraud coverage, the Fifth Circuit adopted the interpretive approach to Computer Fraud coverage taken by the Ninth Circuit in Pestmaster Services v. Travelers (which we discussed in our August 4, 2016 post)

Tesoro Refining: Fifth Circuit analyzes scope of “Unlawful Taking” and “Forgery” in Commercial Crime Policy’s Employee Theft Coverage

In our April 14, 2015 post, we analyzed the decision of the U.S. District Court for the Western District of Texas in Tesoro Refining & Marketing Company LLC v. National Union Fire Insurance Company of Pittsburgh, Pennsylvania and its implications for what constitutes “unlawful taking” for the purposes of the Employee Theft coverage.  The Fifth Circuit Court of Appeals recently affirmed the District Court’s grant of summary judgment in favour of National Union. The Facts The insured (“Tesoro”) was a refiner and marketer of petroleum products.  In 2003, Tesoro began selling fuel to Enmex, a petroleum distributor, on credit.  The manager

Pestmaster: Ninth Circuit affirms Fidelity Insurer’s Intent on Scope of Computer Fraud and Funds Transfer Fraud Coverages

In our January 6, 2015 post, we analyzed the decision of the U.S. District Court for the Central District of California in Pestmaster Services, Inc. v. Travelers Casualty and Surety Company of America and its implications for the interpretation of the Computer Fraud and Funds Transfer Fraud coverages.  On July 29, 2016, the Ninth Circuit Court of Appeals released a brief opinion affirming the District Court’s interpretations of these coverages. The Facts Pestmaster, a pest control business, was insured under a Travelers Wrap+ policy.  In 2009, Pestmaster hired a payroll company, Priority 1, to handle its payroll and payroll tax

Aqua Star: U.S. District Court applies “Authorized Entry” Exclusion to claim under Computer Fraud Coverage

On July 8, 2016, the U.S. District Court for the Western District of Washington released its decision in Aqua Star (USA) Corp. v. Travelers Casualty and Surety Company of America.  The decision offers guidance to fidelity insurers with respect to the application of the “authorized entry” exclusion found in the base wording of many commercial crime policies (sometimes referred to as the “authorized access” exclusion), and illustrates how this exclusion may operate in the context of a social engineering fraud loss. The Facts The insured, Aqua Star (USA) Corp. (“Aqua Star”), is a seafood importer that had a pre-existing relationship with a

Telamon: U.S. District Court finds Insured’s Vice-President to be Independent Contractor falling outside Crime Policy’s Employee Theft Coverage

In Telamon Corp. v. Charter Oak Fire Ins. Co., the U.S. District Court for the Southern District of Indiana held that a Vice-President of Major Accounts who provided management and marketing services to a telecommunications company was not an “Employee” within the meaning of the employee theft coverage afforded by its Travelers Wrap+ policy, but rather an independent contractor. The Facts The insured, Telamon Corporation (“Telamon”), is a telecommunications company headquartered in Indiana.  Telamon installed telecommunications equipment for customers such as AT&T.  The alleged defaulter, Juanita Berry, operated a one-person telecommunications consulting company, J. Starr Communications, Inc. (“J. Starr”). Pursuant

Western Alliance Bank: U.S. District Court dismisses Creditor Bank’s Claim under Debtor’s Commercial Crime Policy

On February 18, 2016, the U.S. District Court for the Northern District of California released its decision in Western Alliance Bank v. National Union Fire Insurance Company of Pittsburgh, Pa.  The Court dismissed a creditor bank’s direct action against a fidelity insurer for indemnity in respect of alleged thefts by the debtor insured’s employees of assets over which the bank held a security interest.  The decision reinforces the first-party nature of commercial crime coverage and is consistent with other recent U.S. and Canadian case law on “third party direct actions” against fidelity insurers. The Facts Sorrento Networks GmbH (“Sorrento”) carried

EMCOR Group: Fourth Circuit applies Prior Insurance Provision to Restrict Coverage under Commercial Crime Policy

In EMCOR Group, Inc. v. Great American Insurance Company, the Fourth Circuit Court of Appeals applied a prior insurance provision in a Commercial Crime Policy to restrict coverage to only the immediate prior year that the insured maintained fidelity coverage, rather than the previous five years, as asserted by the insured.  The decision highlights the importance of properly analyzing and applying prior insurance provisions in loss-sustained forms in multi-year loss scenarios. The Facts EMCOR is a construction and building maintenance company.  In 2005, it reported a $10 million employee dishonesty loss to Great American in respect of allegedly fraudulent acts

St. Paul Croatian: U.S. District Court applies Termination Provision to Claim on Credit Union’s Fidelity Bond

On January 14, 2016, the U.S. District Court for the Northern District of Ohio released its decision in National Credit Union Administration Board v. CUMIS Insurance Society, Inc., following a trial that focused on the issue of the application of the termination provision in a fidelity bond issued to a credit union.  The Court held that, based on facts known to the president of the credit union’s Board of Directors, the provision applied to terminate coverage.  The decision is significant in that knowledge of the manager’s dishonesty was effectively imputed to the president, even though the president was not aware