Chris McKibbin, Author at Fidelity Blog

FCL Fidelity Blog

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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.

Hantz Financial Services: U.S. District Court applies “Direct Means Direct” Approach in Finding No Coverage for Third-Party Losses under Financial Institution Bond

In Hantz Financial Services, Inc. v. National Union Fire Insurance Company of Pittsburgh, PA., the U.S. District Court for the Eastern District of Michigan held that a Financial Institution Bond did not provide coverage to a financial services firm in respect of frauds perpetrated by an employee upon the firm’s clients. The decision is notable in that the Court applied the “direct means direct” approach to loss causation under the Bond. The Court also made some interesting comments with respect to the manifest intent requirement for coverage, and whether a defaulter can manifestly intend a loss to the insured in

W.L. Petrey Wholesale: Eleventh Circuit applies Inventory Shortages Exclusion in finding No Coverage under Crime Policy

In our March 24 post, we summarized the decision of the U.S. District Court for the Middle District of Alabama in W.L. Petrey Wholesale Co., Inc. v. Great American Insurance Company. In that decision, the Court applied the Great American policy’s Inventory Shortages exclusion in holding that no coverage was available to the insured, notwithstanding that the insured (“Petrey”) had been indemnified in respect of a (superficially) similar claim two years before. The Eleventh Circuit Court of Appeals recently affirmed the District Court’s decision. The Eleventh Circuit held that, while evidence of an employee’s exclusive access to insured property may

Taylor & Lieberman: U.S. District Court applies “Direct means Direct” Causation Requirement in finding No Coverage for Client Funds lost in Wire Transfer Fraud

In Taylor & Lieberman v. Federal Insurance Company, the U.S. District Court for the Central District of California applied the “direct means direct” approach to causation in holding that a business management firm did not have coverage in respect of client funds which it was fraudulently induced to wire overseas. The Facts Taylor & Lieberman (“T&L”) was an accounting firm which also performed business management and account oversight services for various clients, including the client in issue. Clients’ funds were held in separate bank accounts maintained with City National Bank. Clients granted Powers of Attorney over their accounts to a

Jacobson Family Investments: New York Appellate Division interprets Scope of Financial Institution Bond’s Investment Advisor Coverage and Securities Broker Exclusion

On June 18, 2015, the New York Supreme Court, Appellate Division released its decision in Jacobson Family Investments, Inc. v. National Union Fire Insurance Company of Pittsburgh, Pa. This decision examines the interplay between a Financial Institution Bond’s Outside Investment Advisor coverage rider and the Securities Broker exclusion, in the context of a loss resulting from Bernie Madoff’s Ponzi scheme. The Facts Jacobson Family Investments (JFI) managed the assets of several companies, including MDG 1994 Grat LLC (MDG). In 2008, JFI submitted a claim to National Union for losses, including losses to MDG, allegedly sustained as a result of the

First National Bank of Northern California: Ninth Circuit analyzes scope of “Customer” under Financial Institution Bond’s Telefacsimile and Voice Instruction Transactions Coverage

In First National Bank of Northern California v. St. Paul Mercury Insurance Company, the Ninth Circuit Court of Appeals analyzed certain requirements for Telefacsimile and Voice Instruction Transactions coverage under a Financial Institution Bond issued by St. Paul (now Travelers) to First National Bank of Northern California (the “Bank”). The decision highlights the importance of clearly establishing the exact contractual arrangement between the insured financial institution and its customer in analyzing these types of transfer coverages. The Facts The Bank’s customers, Brent and Paula Edwards, were trustees for the Edwards Living Trust. Mr. and Ms. Edwards opened an account (the

Taylor, Bean & Whitaker: U.S. District Court applies Alter Ego doctrine to deny coverage in respect of both Majority Shareholder and Colluding Subordinate Employees

A recent decision of the U.S. District Court for the Middle District of Florida, In Re Taylor, Bean & Whitaker Mortgage Corporation, provides a helpful illustration of how to assess coverage where an insured’s alter ego allegedly colludes with subordinate employees who are not, themselves, directing minds of the insured. The Facts The insured, Taylor, Bean & Whitaker Mortgage Corporation (“TBW”), had been a leading wholesale mortgage lending firm, but collapsed in 2009 due to massive fraud directed by its majority shareholder, Lee Farkas. Farkas removed over $87 million from TBW, primarily by siphoning money out of TBW into various

Tesoro Refining: U.S. District Court analyzes scope of “Unlawful Taking” and “Forgery” under Employee Theft Coverage in Commercial Crime Policy

On April 7, 2015, the U.S. District Court for the Western District of Texas released its decision in Tesoro Refining & Marketing Company LLC v. National Union Fire Insurance Company of Pittsburgh, Pennsylvania. The decision analyzes what constitutes “unlawful taking” for the purposes of the Employee Theft coverage, and also provides guidance with respect to the forgery clause now found in some forms of that coverage. 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 alleged defaulter, Leavell, was the manager of

W.L. Petrey Wholesale: U.S. District Court discusses Inventory Exclusion and Threshold for Corroborating Evidence of Employee Dishonesty

In W.L. Petrey Wholesale Co., Inc. v. Great American Insurance Company, the U.S. District Court for the Middle District of Alabama granted summary judgment dismissing a claim under Great American’s Employee Dishonesty coverage. The Court held that the Inventory Shortages exclusion applied to the loss, notwithstanding that the insured (“Petrey”) had been indemnified by the same insurer in respect of a (superficially) similar claim two years before. The decision provides a useful illustration of the types of claims which will, and will not, fall within inventory exclusions. The Facts There are two relevant losses, both involving tens of thousands of

Highland Bank: Eighth Circuit affirms Necessity of Bank’s Direct Reliance on Personal Guarantee under Financial Institution Bond’s Securities Coverage

On March 3, 2015, the Eighth Circuit Court of Appeals released its decision in BancInsure, Inc. v. Highland Bank. The decision provides guidance with respect to (i) what constitutes a “direct loss” under the Securities Coverage of the Financial Institution Bond; and (ii) the nature of the reliance required for an insured to demonstrate that it has “extended credit … on the faith of” a forged guarantee. The Facts In 2005, First Premier Capital (FPC), an equipment lease finance company, entered into a Master Lease Agreement with Equipment Acquisition Resources (EA). Player and Malone, who were spouses, each owned 50

Raza Kayani: Ontario Court of Appeal addresses Scope of Fictitious Payee Defence under Canada’s Bills of Exchange Act

In the recent decision of Raza Kayani LLP v. Toronto-Dominion Bank, the Ontario Court of Appeal addressed the scope of the “fictitious payee” defence available to banks and other financial institutions under Canada’s Bills of Exchange Act. The decision has important implications for entities seeking to recover against financial institutions in cheque fraud cases. The plaintiffs were a law firm and another individual lawyer who fell victim to essentially identical counterfeit cheque scams. The plaintiffs were each retained by a purported purchaser in connection with a commercial transaction involving a vendor known as Nithiyakalyaani Jewellers. As part of the closing

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