DGG & CAR, Inc., doing business as Metrol Security Services (Metrol) discovered that John Wallace Brown (Brown), an accounting employee, had embezzled more than $500,000 over a five-year period by forging company checks. Metrol purchased employee fidelity policies from Employers Mutual Casualty Company (EMC) for the plan years 2000 to 2001 and 2001 to 2002. Covered property was money and employee dishonesty was defined as dishonest acts committed by an employee with the manifest intent to cause loss and obtain a financial benefit. The policy promised to pay loss sustained through acts committed or events occurring at any time and discovered during the policy period, subject to a $50,000 limit per occurrence. Occurrence was defined as all loss caused by or involving one or more employees, whether the result of a single act or a series of acts. This definition was the point of dispute between Metrol and EMC.
Metrol filed a claim seeking reimbursement for its entire loss, arguing that each act of theft was a separate occurrence. EMC stated that Brown's series of thefts constituted a single occurrence and that it owed only $50,000, filing a declaratory judgment action to that effect. Metrol counterclaimed, alleging breach of contract and bad faith. Cross motions for summary judgment followed, focused on the definition of occurrence. The trial court concluded that the policy was ambiguous as to whether each act of theft was itself an occurrence or whether all acts of theft were a single occurrence. It awarded Metrol up to $50,000 for each theft. In a memorandum decision, the court of appeals reversed, reasoning that a series of thefts committed by one employee constituted one occurrence and that Metrol's recovery was subject to the $50,000 occurrence limit for the series of thefts. Metrol petitioned for a review by the Supreme Court because the case concerned a matter of first impression in Arizona and because the definition of occurrence regularly appears in employee fidelity and commercial crime insurance policies.
On review, the Supreme Court determined that the loss resulting from the embezzlement of a single employee, even though including a number of thefts, was a series of acts, each following the other and that the policy plainly considered such loss as a single occurrence and subject to the $50,000 limit per occurrence. It determined that most courts interpret similar language in similar situations the same way.
Metrol also maintained that the policy was ambiguous and stated that the phrase "all loss" in the definition of occurrence is unclear because it uses the word in the singular. It argued that the word "loss" is ambiguous and that when used in these policies actually refers to each individual theft in a series of thefts and that a loss was sustained each time an employee stole money. The court studied these arguments and found Metrol's reading of all definitions unpersuasive. Metrol also stated that, because certain courts had found this language ambiguous, it must be subject to more than one reasonable interpretation. The court rejected this argument as well and stated that varying judicial interpretations do not automatically render an insurance policy ambiguous. Metrol pointed out that it was entitled to recover for nearly 300 "acts" but did not argue that it was entitled to recover for two "series of acts" in two plan years.
The Supreme Court concluded that Metrol had not suggested any public policy that supported its construction of the policy. For this and all the other reasons stated, it vacated the court of appeals decision, reversed the decision of the superior court and remanded to the trial court for proceedings consistent with its opinion.
Supreme Court of Arizona, En Banc. Employers Mutual Casualty Company, an Iowa corporation, Plaintiff/Counterdefendant/Appellant, v. DGG & CAR, Inc., d/b/a Metrol Security Services, an Arizona corporation, Defendant/Counterclaimant/Appellee. No CV-07-0280-PR. Feb 14, 2008. 218 ARIZ. 262, 183 P.3d 513