In a recent U.S. District Court case, insurance coverage was denied to a plaintiff law firm over a forged cashier’s check. The court ruled in favor of the defendant insurance company, stating that the law firm’s loss is excluded by a false pretenses exclusion.
The case, titled Brooks & DeRensis, P.C. v. Twin Cities Fire Insurance Co., involved a law firm based in Boston, Massachusetts. The firm was retained by an individual who called himself Brian Rodriguez to secure money owed to Rodriguez by his employer under a severance agreement. Rodriguez instructed the employer to send the payment to the law firm, and shortly thereafter, the law firm received a cashier’s check in the amount of $89,960 from the employer’s chief financial officer.
Believing the cashier’s check to be legitimate, the law firm deposited it into its account. However, it was later discovered that the check was forged, and the bank dishonored it. The law firm sought coverage for their loss under an insurance policy purchased from Twin Cities Fire Insurance Co.
The court examined the policy and found that the additional coverage for forgery did not apply to this case. The law firm argued that the policy’s Super Stretch Endorsement provided coverage for the forgery of covered instruments. However, the court determined that the law firm did not establish that the plain language of the forged or altered instruments coverage applied in this situation.
The law firm also pointed to the definitions of “money” and “counterfeit” in the policy’s Special Property Coverage Form, suggesting that their loss fell within the Counterfeit Currency and Money Orders Coverage listed in the Forgery Coverage Form. The court noted that there is ambiguity in the term “money order” and that it could be interpreted as either including or excluding cashier’s checks. Under Massachusetts law, any ambiguity in favor of the insured would be resolved in the law firm’s favor.
However, even if the coverage for counterfeit currency and money orders applied, the court found that the law firm’s loss was excluded by the False Pretenses Exclusion in the policy. This exclusion applies when the insured willingly transfers funds based on false representation or receipt of a false check, which was the case for the law firm.
As a result, the court dismissed the law firm’s claims for breach of contract and declaratory judgment for indemnity under the policy. The court also dismissed the law firm’s claim for violation of Chapter 93A, which deals with unfair and deceptive trade practices, as Twin Cities Fire Insurance Co. properly denied coverage under the policy.
This case serves as a reminder of the importance of carefully reviewing insurance policies and understanding their exclusions. It also highlights the potential risks that law firms and other businesses face when dealing with forged or altered instruments.