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2016 Board Members
Lawson Thompson - President
Frontier Adjusters
770-951-0044
Robbie Maples -
Vice President
Cunningham Lindsey
770-828-0098
Marilyn Roberts - Treasurer
Chubb
678-795-4293
Griffin Rogers - Secretary
Crawford & Company
404-300-1262
Gwendy Schulte - Asst Secretary/Treasurer
OneBeacon Insurance
781-332-8688
Executive Board
Chris Nichols - Past President
PLS Claims
770-381-8855
Bill Cartwright - Eagle Adjustment Services, Inc.
770-928-9686
Bob Murner - AXIS
678-296-0005
Joel Steber - Engle Martin
678-553-4438
Brian Richey - Custard
678-602-9061
John Southall - Historian
FM Global - retired
770-331-8572
Howard Zandman -
Financial Advisor
Habif, Arogeti & Wynne
404-814-4915
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President's Message
"This is not the end, nor the beginning of the end...it is the end of the beginning..." -Sir Winston Churchill
Thanks so much to our sponsors and members for participation in the SLA Golf outing last month. We have enjoyed tremendous success in administrating these tournaments and plan on offering a more convenient and prestigious way to support the SLA next year. Please keep watch on our website for these new opportunites to market your services. Congratulations, also, to the people of Southern Loiusiana who benefited so much from our donations.
Winston Churchill, statesman, historian, almost the single handed saviour of the British Empire, is one of my favorite historical figures and has given us many pithy quotes, such as, "there are two kinds of drinking problems: drinking too
much, and drinking too little". I know of no one with the SLA who has the second problem.
The above quote pertains to the entry of the United States, with "all its power and might," into World War II. Churchill knew then that the war would be won But much work remained to be done. We in the SLA are in a similar position. A tremendous amount of progress has been made this year in strengthening the organization but much is left to do. We need to seat a new board, develop our tiered sponsorship program, continue to induct new members and recontact the old, and increase our visibility and viability in the insurance community. We need your help to do so. Please carefully consider serving on the board, as a volunteer, or accepting a chair position. I promise you, the rewards, though not monetary, will be worth it.
Happy Thanksgiving!
Lawson
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| Join us for the November Luncheon November 10th The Diner at North Point Our speaker will be James T. Hankins, III, Esq of Goodman McGuffy LLP. Mr. Hankins will present "Dealing with Spoliation of Evidence: How to Navigate the Case Within the Case." This course has been approved for 1 Hour of Georgia CE Credit Register Now! A special thanks to our November Luncheon Sponsor, BluSky |
| Schedule of Events 11/10/16 - November Luncheon 12/08/16 - December Christmas Luncheon |
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Become a Member of Southern Loss Association
Would you like to join Southern Loss Association or know someone who is interested? We can now take your membership application right on line!
Membership is limited and subject to approval by the board of directors and its membership body. Please read all the terms on the application!
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The Southern Loss Association is pleased to present the following article as part one of a two part series, to be concluded in our December publication. Ms. Phillips graciously agreed to write this article for us, but once we saw the complexity of the question we thought it deserved more room for discussion.
CATCH ME IF YOU CAN
An analysis of coverage for theft by deception and other fraudulent inducement related crimes under the ISO Commercial Crime Policy.
Part I
by Jessica M. Phillips
Swift Currie McGhee & Hiers Attorneys at Law
John, the chief financial officer for Company A, received an email from the company president instructing him to issue payment to VendorCorp, a commonly used vendor for Company A pursuant to an attached invoice. As per the email, John was to use VendorCorp's new wiring instructions to issue the payment. John issued payment of $100,000.0 to VendorCorp. However, John did not confirm the authenticity of the outstanding invoice with Company A's own records or with VendorCorp's accounts receivable department. Weeks later, Company A discovers that its payments to VendorCorp exceed the invoices from VendorCorp by $100,000.00. John reviewed the email from Company A's president to discover that the email was actually sent by
[email protected]
instead of the actual company president whose email is
[email protected]
. Company A's been tricked at a loss of $100,000.00. Similarly, the accountant for Company B, Betty, received an email from VendorInc. with an attached pending invoice. The email contained VendorInc.'s logo and, for all intents and purposes, appeared legitimate. The email advised Company B that VendorInc. had switched banks and provided new wiring instructions for the new bank. VendorInc. sent a second email to Betty advising that all future payments for invoices should be wired based on these new wiring instructions. Betty wired $100,000.00 as payment in full for the invoice pursuant to the new wiring instructions from VendorInc. Betty did not call to confirm the new wiring instructions with VendorInc. before wiring the funds. A few months later VendorInc. contacted Betty to follow up regarding the outstanding invoices totaling $100,000.00. At that time, Company B discovered that the previous emails were not sent by VendorInc. at all, but were in fact sent by an imposter. Company B's been tricked at a loss of $100,000.00.
Both Company A and Company B are victims of new 21st Century tricksters who capitalize on the modern corporate reliance on electronic financial transactions. Often, these companies subsequently submit claims for losses under their Commercial Crime Policies. The Insurance Services Organization (ISO) prepared various coverage forms which are commonly used in Commercial Crime Policies.[1] These forms provide coverage for certain types of crime losses. Importantly, these forms provide "named peril" coverage, which, in contrast to "all risk" coverage, only provides coverage for specifically identified types of loss. Thus, a type of loss must fall within one of the specifically identified perils in order for it to be covered under the policy.
The first step must be to determine whether any crime occurred at all when the insured, and not the criminal, has physically transferred the property. In Georgia, "theft by deception" is recognized as a crime and occurs when a person obtains "property by any deceitful means or artful practice with the intention of depriving the owner of the property." In order to show theft by deception, the criminal must (1) obtain property by any deceitful means or artful practice; and (2) with the intention of depriving the owner of the property. However, the gravamen of theft by deception lies in obtaining the property of another by intentionally creating a false impression as to an existing fact or past event. Where the deception regards some event to occur in the future, no legal crime of theft by deception exists. For example, a purchase of a new car by writing a fraudulent check is sufficient to support a crime of theft by deception. Georgia courts have determined that, generally, an insurance policy's typical definition of "theft" encompasses includes "theft by deception" unless otherwise excluded.
Ultimately, the language of the policy should control. ISO Commercial Crime Policies generally define "theft" as "the unlawful taking of property to the deprivation of the insured." (See e.g. CR 0023(2012)). This broad definition is likely to encompass "theft" by deception unless otherwise excluded. As discussed above, the ISO Commercial Crime Policy is a named peril policy which provides coverage for seven specific types of theft. One coverage provision to consider in the circumstances outlined at the beginning of this article is:
2. Forgery or Alteration
We will pay for loss resulting directly from "forgery" or alteration of checks, drafts,
promissory notes, or similar written promises, orders or directions to pay a sum certain
in "
money" that are
(1) made or drawn by or drawn upon you; or
(2) Made or drawn by one acting as your agent;
Or that are purported to have been so made or drawn.
For the purposes of this Insuring Agreement, a substitute check as defined in the Check
Clearing for the 21st Century Act shall be treated the same as the original it replaced.
(CR 0022(2012). Notably, the Commercial Crime form CR 003 and CR 007 contain similar language. In circumstances involving fraudulent invoices, courts are split as to whether the "forgery or alteration" provision applies. The two primary areas of disagreement are whether the fraudulent invoices constitute a "covered instrument" (i.e. check, draft, promissory note or similar written promises, orders or directions to pay a sum in money) and/or whether the fraudulent invoices are "drawn by" or "drawn upon" the insured. The United States District Court for the Northern District of Indiana determined that both the invoice and the draft paying the invoice should be construed as a single instrument and thus the fraudulent invoice was "drawn upon" the insured because the phrase "drawn upon you" should be traced to the ultimate source of liability for the money paid in reliance on the forged instruments. Omnisource Corp. v. CNA/Transcontinental Ins. Co., 949 F. Supp. 681 (N.D. In 1996). However, the United States Court of Appeals for the Fifth Circuit disagreed with this analysis. In Travelers Cas. & Surety Co v. Baptist Health Systems, the Court of Appeals held that the "forgery or alteration" provision was not ambiguous and would not apply to instances where payment was issued to a third party entity based on a fraudulent invoice, stating that "[i]n the commercial paper context the phrases 'drawn by' and 'dawn upon' are not ambiguous and have a definite legal meaning." 313 F.3d 295 (5th Cir. 2002). Based on the foregoing, an insurer may be able to argue that circumstances such as those discussed with respect to Company A and Company B, above, do not fall within the "forgery or alteration" coverage provided by the Policy.
If you would like more information regarding this topic, please contact Ms. Phillips. She may be reached at 404-888-6148 or by e-mail at [email protected].
_________________________
1. Notably, in 2000 the commercial crime coverage forms underwent substantial modification. Prior to 2000, ISO and the Surety Association of America jointly issued commercial crime coverage. However, in 2000 ISO and SAA starting issuing separate coverage forms for Commercial Crime Coverage. ISO's common forms for use in Commercial Crime Coverage are CR 0023 (loss sustained form) and CR 0022 (discovery form) (copyrighted 2012). The language most germane to the discussion in this article is similar in both policy forms, and therefore both forms will be analyzed in a single discussion. We will also note relevant portions of CR 00 04 and CR 00 07 (copyrighted in 1984 and 1987, respectively) as applicable.
Join us in the December issue to conclude our discussion of crime coverage
in the internet age!
This newsletter is a publication of Southern Loss Association, Inc., P.O. Box 421564, Atlanta, GA 30342. The articles written in the newsletter are in a general format and are not intended to be legal advice applicable to any specific circumstances. Legal opinions may vary when based on subtle factual differences. All rights reserved.
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GOLF AND TENNIS TOURNAMENT WINNERS
TENNIS WINNERS
Men's 1st Place - Reid Nix
Men's 2nd Place - Matt Osterhaudkt
Women's 1st Place - Christie Clariet
Women's 2nd Place - Sherrie Wallinger
Fastest Serve - David Brani
Hit the Target - Michael Grabowski
GOLF WINNERS
CHATEAU AND WOODLANDS
Closest To The Pin Woodlands: #2 Roger Morse #13 Jaysen Witherspon
Closest To The Pin Chateau: #8 Bob George #16 Kerry Munk
Longest Drive Woodlands: #1 Cory Krackenberger #10 John Sneider
Longest Drive Chateau: #9 Peter Lortie #15 Billy Ally
GOLF TEAMS
1ST PLACE TEAM SCORE -18
Eric Sherman
Chris Gentile
Dan Powe
PJ Staver
2nd PLACE TEAM SCORE -16
Lee Shaw
Tony Mahaffey
Jaysen Witherspoon
Larry Hinkle
3rd PLACE TEAM SCORE -16
Kirk Martin
Gar Heard
Rob Bentley
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GOLF AND TENNIS TOURNAMENT SPONSORS
911 Textile
ALE Solutions
Applied Technical Services
BELFOR Property Restoration
BGA Consultants
Blackmon Mooring/GMS CAT
BluSky Restoration Contractors, Inc.
Bridgewater Group
Butler Weihmuller Katz Craig, LLP
Capital Restoration, LLC
Collins & Lacy, P.C.
Crawford & Company
CRDN of Atlanta
Disaster One
DONAN
EFI Global
EPIC Response
ERS-Electronic Restoration Services
Forensic Engineering, Inc.
FRSTeam of North & Central Georgia
Full Circle Restoration & Construction Services, Inc.
Haag
Hall Booth Smith, P.C.
Hancock Claim Consultants
Housing Headquarters
HSNO
IN-Line Consulting, LLC
Level Creek Property Restoration
Madsen, Kneppers & Associates, Inc.
Matson, Driscoll & Damico
Meridian Restoration
Mutual Engineering, Inc and Peake Engineering
Paul Davis Restoration & Remodeling of North Atlanta
Premier Adjusting Services
Premier Restoration, Inc.
ProNet Group Forensic Engineer and Fire O&C
Purofirst of Gwinnett
QuestPro Consultants / Q-Temps
Research & Replacement Group, Inc.
RGL Forensics
Rimkus Consulting Group, Inc.
Rytech, Inc.
ServiceMaster Recovery Management
Southern Property Restoration
Temporary Accommodations
Unified Investigation and Sciences, Inc.
Vericlaim, Inc.
YOUNG & Associates
A very special "thank you" goes out to our incredible volunteers who spent months preparing for this day!
Susan Freeman - Haag
Jennifer Hagerman - Birthday girl
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Kristy Hauger - Premier Adjusting Services
Crystal Germanenko
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