INTEREST ON APPROPRIATED MONEY HELD NOT RECOVERABLE UNDER FIDELITY INSURANCE

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INTEREST ON APPROPRIATED MONEY HELD NOT RECOVERABLE UNDER FIDELITY INSURANCE

The central issue in this case was whether or not employee dishonesty insurance, included in a comprehensive dishonesty, disappearance and destruction policy, covered interest lost on a substantial sum of money that had been stolen and was eventually recovered. The pertinent coverage was written in an amount of $500,000 per person.

The president of an insured toy manufacturing company misappropriated $502,000 over a period of years, $278,000 of which was stolen during the years that the policy was in force. Through the intercession of the Securities and Exchange Commission, because of violation of federal laws, the entire amount of money was recovered from the offender and returned to the insured.

The insured, accordingly, notified its insurer of the recovery, but claimed the amount of interest lost on the $278,000 stolen during the coverage periods, computed up to the date the money was returned, a period of almost seven years. The sum was $560,000; the insured claimed $500,000, the policy limit. The insurer denied coverage and legal action ensued. Both parties filed motions for summary judgment. The trial court granted the insurance company's motion. The insured appealed.

The insured argued that the phrase "loss of money," used in the policy, covered the principal amount stolen and lost interest on the $260,000 stolen until it was returned. The appeal court interpreted this to mean that the term "money," as used in the policy, was ambiguous. It said that it was not, as the term was defined in the policy as:

"Currency, coins, bank notes and bullion, and travelers checks, register checks and money orders held for sale to the public." The court said that the term "interest" on stolen currency, coins, etc. was not included in the definition. Hence the policy in question was written to compensate only for the principal amount stolen.

The judgment of the trial court was affirmed in favor of the insurance company and against the insured.

(EMPIRE OF CAROLINA, INC., Plaintiff v. CONTINENTAL CASUALTY COMPANY, Defendant. North Carolina Court of Appeals, No. 917SC410. March 17, 1992. 414 S,E.2d 389. CCH 1992 Fire and Casualty Cases, Paragraph 3916.)