|
Commercial
Crime |
Playing the
Float |
|
Disappearance
and Theft |
Government
Seizure of Property |
Omnex Group, Inc. (Omnex) provided
money transfer services. In March 2009, it contracted with Armored Money
Services (AMS) for AMS to pick up money held by Omnex’s
agents in various locations and to deliver the money to its account at Wells
Fargo Bank. On February 5, 6, 7, 8 and 9, 2010, AMS picked up more than $2
million from Omnex. However, contrary to the parties'
established practice, AMS failed to wire it into Omnex’s
account by the next business day. On February 8, 2010, Federal Bureau of
Investigation (FBI) agents arrested two officers of AMS and an affiliated
company, who subsequently admitted to engaging in a practice known as “playing
the float.” This approach used the continuous influx of cash to cover the
operating expenses of AMS and the affiliated company, repaid prior obligations
to other customers, and made loans to its officers. On February 11, 2010, the
FBI seized approximately $19 million from the vaults of AMS and the affiliated
company but could not account for another approximately $68 million owed to its
customers.
Omnex was insured under a policy issued by United States
Fire Insurance Company (U. S. Fire). The policy covered loss of money “outside
the ‘premises' in the care and custody of ... an armored motor vehicle company
resulting directly from ‘theft,’ disappearance or destruction.” Omnex filed suit against U. S. Fire, seeking reimbursement
for its losses. The Supreme Court of New York County entered judgment in Omnex’s favor and U. S. Fire appealed.
On appeal, the
Supreme Court of New York, Appellate Division, noted that the trial court had
determined that Omnex’s loss resulted from
disappearance. While the policy did not define the term “disappearance,” the
court stated that term had been defined in the context of a theft policy to
mean a disappearance that is not only unexplained, but also raises the
inference of theft. The policy definition of theft included “the unlawful
conversion of ‘covered property’ to the involuntary deprivation of the rightful
owners ... and [t]o the ‘illicit gain’ of the perpetrators.” The undisputed
evidence established that AMS did not deposit the funds into Omnex’s account the day after it picked them up but
retained them for its own purposes.
The appellate
court rejected U. S. Fire’s argument that the loss came under the exclusion for
governmental seizure of property because the theft occurred several days before
the FBI seized the money in the vaults, when AMS failed to deposit Omnex’s funds into its account. It affirmed the lower
court’s judgment.
Omnex Group v. United States Fire Ins. Co.
Supreme Court of New York, Appellate Division. May 6, 2014-2014. WL 1775665