{"id":152,"date":"2013-04-18T16:29:34","date_gmt":"2013-04-18T16:29:34","guid":{"rendered":"http:\/\/www.joneslemongraham.com\/blog\/?p=152"},"modified":"2021-12-21T20:05:58","modified_gmt":"2021-12-21T20:05:58","slug":"no-coverage-under-crime-and-fidelity-coverage-part-of-commercial-lines-policy-for-employee-thefts-occurring-within-policy-period-but-discovered-after-policy-cancellation-where-insured-had-replacement","status":"publish","type":"post","link":"https:\/\/www.joneslemongraham.com\/blog\/no-coverage-under-crime-and-fidelity-coverage-part-of-commercial-lines-policy-for-employee-thefts-occurring-within-policy-period-but-discovered-after-policy-cancellation-where-insured-had-replacement\/","title":{"rendered":"No coverage under crime and fidelity coverage part of commercial lines policy for employee thefts occurring within policy period but discovered after policy cancellation, where insured had replacement coverage"},"content":{"rendered":"

by Christopher J. Graham<\/a> and Joseph P. Kelly<\/a><\/p>\n

Midway Truck Parts, Inc. v. Federated Insurance Co., Case No. 11 CV 9060 (N.D. Ill. Feb. 4, 2013):<\/a><\/h2>\n

Insurer issued Insured a commercial lines insurance policy effective from October 6, 2008 to October 6, 2009. The policy\u2019s Crime and Fidelity Coverage Part, subject to its terms, covered employee thefts discovered after policy cancellation, but only if the discovery was:<\/p>\n

No later than 1 year from the date of that cancellation. However, this extended period to \u201cdiscover\u201d loss terminates immediately upon the effective date of any other insurance obtained by you, whether from us or another insurer, replacing in whole or in part the coverage afforded under this insurance, whether or not such other insurance provides coverage for loss sustained prior to its effective date.<\/p>\n

Insured\u2019s policy ended on October 6, 2009, so Insured purchased a policy from another insurer with employee theft coverage valid October 6, 2009 to October 6, 2010. Insured discovered on September 30, 2010 that a former employee had stolen around $1 million from Insured, so Insured notified both Insurer and the issuer of its subsequent policy. Court granted Insurer\u2019s summary judgment motion, resolving the issues as follows:<\/p>\n

Issue #1:<\/strong> Is \u201creplacing\u201d in discovery clause unambiguous? Yes<\/p>\n

Insurer argued that \u201creplacing\u201d as used in the discovery clause was unambiguous: Insured bought a substitute policy, therefore Insurer\u2019s obligation ended. Insured argued that \u201creplacing\u201d was ambiguous and could be interpreted as only occurring if Insured terminated the policy prior to the scheduled expiration date and purchased substitute coverage covering the same time period the first policy covered.<\/p>\n

Applying Illinois law, the Court held that \u201creplacing\u201d was not ambiguous. While \u201creplacing\u201d was not defined in the contract, the plain meaning (according to Webster\u2019s) is \u201cto take the place of: serve as a substitute for or successor of: succeed, supplant.\u201d<\/p>\n

Issue #2:<\/strong> Should \u201creplacing\u201d be considered ambiguous because of Insured\u2019s \u201creasonable expectations\u201d? No.<\/p>\n

\u201cIllinois law \u2026 disfavors the reasonable expectations doctrine. Smagala v. Owen, 717 N.E.2d 491, 496 (Ill. App. Ct. 1999) (\u201cThe reasonable expectations test has been rejected by the courts of this state.\u201d). At best, the reasonable expectations doctrine is used as a tool of construction in assessing the intent of the parties when a contract is ambiguous, which is not the case here. Id. at 497.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

by Christopher J. Graham and Joseph P. Kelly Midway Truck Parts, Inc. v. Federated Insurance Co., Case No. 11 CV 9060 (N.D. Ill. Feb. 4, 2013): Insurer issued Insured a commercial lines insurance policy effective from October 6, 2008 to October 6, 2009. The policy\u2019s Crime and Fidelity Coverage Part, subject to its terms, covered […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[5],"tags":[],"_links":{"self":[{"href":"https:\/\/www.joneslemongraham.com\/blog\/wp-json\/wp\/v2\/posts\/152"}],"collection":[{"href":"https:\/\/www.joneslemongraham.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.joneslemongraham.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.joneslemongraham.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.joneslemongraham.com\/blog\/wp-json\/wp\/v2\/comments?post=152"}],"version-history":[{"count":2,"href":"https:\/\/www.joneslemongraham.com\/blog\/wp-json\/wp\/v2\/posts\/152\/revisions"}],"predecessor-version":[{"id":3225,"href":"https:\/\/www.joneslemongraham.com\/blog\/wp-json\/wp\/v2\/posts\/152\/revisions\/3225"}],"wp:attachment":[{"href":"https:\/\/www.joneslemongraham.com\/blog\/wp-json\/wp\/v2\/media?parent=152"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.joneslemongraham.com\/blog\/wp-json\/wp\/v2\/categories?post=152"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.joneslemongraham.com\/blog\/wp-json\/wp\/v2\/tags?post=152"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}