FCL Fidelity Blog
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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
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TOPICS
- Authorized Access/Entry Exclusion
- Authorized Representative Exclusion
- Bills of Exchange Act (Canada)
- Computer Fraud
- Counterfeit
- Direct Loss
- Employee Theft
- False Pretences Exclusion
- Forgery
- Funds Transfer Fraud
- Inventory Exclusion
- Manifest Intent
- Other Property
- Outside Investment Advisor Rider
- Ownership
- Prior Insurance
- Securities Broker Exclusion
- Securities Coverage
- Social Engineering Fraud
- Standing
- Subrogation
- Subsidiary
- Suit Limitation Provision
- Termination
- Voluntary Parting Exclusion
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RECENT POSTS
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- Cachet Financial Services: U.S. District Court finds No Coverage under Commercial Crime Policy for Alleged ACH Kiting and Related Frauds
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- Star Title Partners: Eleventh Circuit finds No Coverage for Social Engineering Fraud Loss under Cybercrime Endorsement to Cyber Protection Policy