Christee Lee Hartse was an employee of American Commerce Insurance Brokers, Inc .(American). American discovered that Hartse took advantage of her access to company funds by using a variety of techniques to embezzle more than $190,000. This substantial amount of money was stolen during a thirteen month period starting in January, 1991.
After discovering the loss, American looked to their insurer, Minnesota Mutual Fire and Casualty Insurance Company (MMFC), for payment under their Employment Dishonesty policy. Originally MMFC agreed to pay its policy limits of $10,000, considering Hartse's various theft schemes to be one occurrence. In supporting its settlement decision, MMFC relied on the policy's wording that defined a series of related acts to be a single occurrence. American filed suit to collect under the basis that Hartse's activities represented multiple occurrences that would enable the company collect its total loss.
MMFC filed cross motions, asking that the court recognize that it was obligated to pay according to a single occurrence. However, before a decision was issued, the carrier re-evaluated Hartse's embezzlement methods and conceded that there were two distinct occurrences. The carrier offered to pay its policy limits for both occurrences ($20,000). The trial court reviewed the parties' arguments and ruled that MMFC was obligated to pay $20,000 for two occurrences; one involving fraudulently handling transactions with American's clients and the other for fraudulent transactions with MMFC. American appealed the decision favoring the insurer.
An appellate court interpreted the situation similarly to American. It also saw the reference to "a series of related acts" as ambiguous and ordered that the case be remanded. MMFC took its turn to appeal, claiming that the policy's wording and intent toward occurrences was clear. A higher court reviewed the situation. It focused attention on whether the wording was ambiguous and what were the number of occurrences. After reviewing the competing arguments, the court decided that applying a broadest reading of occurrences would, depending on the size of losses, result in bad public policy by generating either limitless collections on large occurrences or no payments on minor occurrences (which all fall under a deductible). The higher court also reviewed relevant cases on the matter. In the end it decided that a reasonable reading of the policy would result in recognizing two distinct occurrences. It reversed the appellate court's decision, re-establishing the lower court order to pay American $20,000.
American Commerce Insurance Brokers, Inc., Respondent, vs. Minnesota Mutual Fire and Casualty Company, petitioner, Appellant. No. C9-95-499. State Of Minnesota Supreme Court Filed: July 18,1996. http://www.lawlibrary.state.mn.us/archive/supct/9607/c995499.htm [downloaded 9/11/02]
