Insurance – Bank fraud
A fraud orchestrated from outside a financial institution’s premises is not covered under Clause 2 of a fidelity bond.
“According to the Bank, the decisions we have cited are irrelevant because they concern fraud, while it contends that Sachdeva committed larceny. Yet the on-premises requirement is the same whether the crime is fraud or larceny. The Bank belabors the contention that Sachdeva committed larceny, citing decisions for the proposition that if A sends an agent to steal B’s property, then A has committed a crime even though A did not enter B’s land. That’s true enough but has nothing to do with Clause 2. To come within it, the Bank would need to establish that B (who does enter the victim’s premises) commits larceny even if B is A’s dupe and lacks the mental state required for conviction. Unsurprisingly, the Bank has not produced a decision from any of the 50 states establishing that the dupe can be convicted of larceny. Had Sachdeva asked the Bank to send the checks by mail or FedEx, the postal carrier or courier could not have been convicted of a crime. The Bank lacks an answer to the question why it should matter, under Clause 2, why the criminal rather than the financial institution chooses the guiltless person who transports the checks.”
12-3202 & 13-1506 BankManagers Corp. v. Federal Insurance Co.
Appeals from the United States District Court for the Eastern District of Wisconsin, Randa, J., Easterbrook, J.