The treasurer of a church embezzled almost $33,000 of church funds by writing 24 checks to himself over a period of several weeks. Claim for the loss was brought by the church under its employee dishonesty coverage. The church sued its insurer when the insurer offered to pay only $5,000, the limit of insurance provided by the policy for loss in any one "occurrence." The insured church appealed trial court judgment in favor of the insurance company.
On appeal, the insured contended that the treasurer had committed 24 separate acts of embezzlement and that it was entitled to reimbursement for the full amount of its loss. It claimed that the writing of each check was a separate act to which the specified limit of $5,000 applied.
The appeal court noted that the policy covered employee dishonesty up to $5,000 "for loss in any one occurrence." The term "occurrence" was defined in the policy as "....all loss involving a single act, or series of related acts, caused by one or more persons...."
The insured argued that the word "related" was ambiguous and that, accordingly, the definition should be interpreted in its favor. The appeal court disagreed, citing the United States Court of Appeals for the Tenth Circuit in Appalachian Insurance Company v. Liberty Mutual Insurance Company, 676 F.2d 56, 61 (3d Cir. 1982). Therein, it was held in similar check writing circumstances that loss was caused by "continued dishonesty of one employee" with "intent to continue the dishonesty, not to commit an entirely new and different act of dishonesty."
The court concluded, in the case at hand, that the writing of each check was not a new act of dishonesty. The writing of 24 checks was "a series of related acts," one occurrence.
The judgment of the trial court was affirmed in favor of the insurer and against the insured.
(CHRIST LUTHERAN CHURCH, Plaintiff-Appellant v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant-Appellee. North Carolina Court of Appeals. No. COA95-873. June 4, 1996. CCH 1996 Fire and Casualty Cases, Paragraph 5737.)
