In VAM Check Cashing Corp. v. Fed. Ins. Co., 2012 U.S. App. No. 11-2644-cv (2d Cir. N.Y. Nov. 7, 2012), the insured, a check cashing company, submitted a claim for theft to its insurer when a group of criminals successfully tricked one of its employees into turning over $120,000 in cash to a courier. The order to turn over the money was given by a woman impersonating the wife of the check cashing company’s owner. The employee was given code numbers and was told that the courier would have the same code numbers. When the courier arrived and provided the employee with the code numbers, she gave him the money. It was later learned that this was a fraudulent scheme and that the owner’s wife never made an order to turn over the money to the courier. The employee never felt threatened by the courier and did not believe he was a thief.
The police never caught the perpetrators or recovered the money; they advised the check cashing company that the scheme was the work of a sophisticated group of criminals that had perpetrated similar scams across the country.
Subsequently, the check cashing company made a claim under its crime insurance policy, asserting that the crime was a “robbery” as defined in the policy. The insurer denied the claim. Negotiations between the parties to settle the claim were unsuccessful, and the check cashing company sued for breach of the insurance contract.
The crime policy states in relevant part that “(1) the insurer shall be liable for direct losses: … Within the Premises of Money and other property received from sources other than the sale of Food Stamps but only when such loss is caused by … (2) Robbery or attempt thereat.”
The policy defines the term as follows:
“Robbery” means the unlawful taking of insured property from an Insured, a partner, an Employee or any other person authorized by the Insured to have custody of the property by violence, threat of violence or other overt felonious act committed in the presence and cognizance of such person, except any person acting as a watchman, porter or janitor. (Emphasis supplied)
The check cashing company and the insurer disagreed over the meaning of the phrase “overt felonious act.” The insurer argued that the adjective “overt” should be read to modify the entire phrase “felonious act,” such that it covers only a “felonious act” the felonious character of which is “overt.” The check cashing company countered that coverage applied so long as the courier committed an “act” that was both “overt” and “felonious.”
The court sided with the check cashing company, ruling that its interpretation of the disputed phrase “is at least as plausible a reading of the language as that provided by the insured.” In so ruling, the court reasoned that, under the policy, “the insured will recover for ‘robbery’ whenever property is taken from an employee by means of an observable act that amounts to a felony, provided that the act occurs in the presence of the employee and the employee is aware of the act’s occurrence. But the employee need not be aware that the act itself is felonious.” (Emphasis supplied)
VAM breaks no new ground; however, it serves as a good reminder of a bedrock principle for construing an insurance policy under New York law. Where, as here, the insured’s interpretation of a disputed policy provision is at least as plausible a reading of the language as that provided by the insurer, to paraphrase VAM, New York courts are duty bound to endorse “a reasonable reading permitting recovery” under the policy.