Fidelity and Employee Dishonesty Coverage Results

Representative Cases Involving Fidelity and Employee Dishonesty

The following are examples of actual verdicts and settlements obtained by Pillsbury & Coleman in cases involving fidelity claims for employee dishonesty and negligence. Additional results can be reviewed when you speak with an attorney at our firm. If the plaintiff or insurance company names do not appear it is because confidentiality agreements are in place restricting that information.

IRA Services Inc. v. American Zurich Insurance Company Et. Al

Case Info Superior Court of California, County of San Francisco
Case Number: CGC-10-503084
Judge Lynn O’Malley-Taylor
Attorneys Plaintiffs
Phillip L. Pillsbury, Jr.
Vedica Puri
Pillsbury & Coleman LLP

Michael Davisson
Sedgwick LLP

Result Defendant Zurich American Insurance Company offered policy limits and the case settled for more than the policy limits ($1.25 million)
Summary Pillsbury & Coleman LLP represented IRA Services, Inc. a small, Bay Area-based financial services company that, for more than 30 years, has specialized in investing client funds into alternative retirement assets, such as shares of commercial property. IRA Services aggregates its clients’ funds into a “pooled” account that allows investors to purchase alternative assets.

Starting in 2002, a highly trusted employee of IRA Services, Kimberly Kerr, embezzled approximately $1.3 during the course of six years. IRA Services’ control over the pooled funds, held at Wells Fargo Bank, enabled Kerr, now serving jail time, to commit the embezzlement.

IRA Services was insured by defendant Zurich American for employee dishonesty for up to $1,000,000. IRA Services made a claim for the full amount of the policy since the loss exceeded the amount.

Zurich American denied the claim on the grounds that IRA Services neither “held” (meaning possessed or controlled) nor was “legally liable” for the money stolen by Kerr and claimed that Kerr was responsible for reconciling transactions and authorizing wire transfers in violation of the policy’s Segregation of Duties exclusion. Zurich American also insisted that the policy limit did not apply to thefts made before the current policy year.

IRA Services filed suit and the court ordered that the first phase of the trial was to proceed, before a jury, starting Nov. 4. The jury returned a unanimous
verdict on Nov. 10 that IRA Services possessed or controlled the stolen funds and that the Segregation of Duties exclusion did not apply.

Prior to seating the jury for the second phase of trial, which would determine whether the defendant’s conduct in denying the claim was in bad faith, Zurich American offered policy limits. The case then settled for an additional quarter million more than the policy limits ($1.25 million).

The Regents of the University of California v. Stop Loss Insurance Brokers

Case Issue Broker negligence
Result Hundreds of thousands of dollars in damages in a jury verdict, plus 100 percent recovery of case costs
Summary The Regents sued their broker (“Stop Loss”) for professional negligence in failing to obtain the proper kind of insurance.

The Regents argued that Stop Loss pitched itself as an expert, full-service broker that would not only place the Regents with a reinsurer but also obtain claim information, prepare claim forms and request reimbursements directly from the reinsurer. However, in a particularly severe health care claim, that of patient Doe, the Regents claimed that Stop Loss failed to live up to its agreement. Doe suffered acute renal failure and incurred hundreds of thousands of dollars in health care costs. The Regents filed a claim for reinsurance of this amount and was shocked to learn that the claim was denied. The reinsurer denied the claim on the grounds that it had not been disclosed during the application process.

The Regents contended that Stop Loss breached its contract and committed professional negligence by agreeing to but then failing to properly transmit the claim of patient Doe to the Regents’ re-insurer in a timely fashion. Second, the Regents contended that Stop Loss failed to procure the proper amount of reinsurance. At trial, the Regents contended it was entitled to reimbursement of the amounts it paid on the Doe claim.

After a two-week trial in San Francisco Superior Court, the jury found that Stop Loss had breached its contract and fallen below the standard of care and awarded the Regents over hundreds of thousands of dollars in damages. The Regents also recovered 100% of its case costs from Stop Loss.

Tough Negotiators, Passionate Litigators

To discuss your insurance-related concern, contact Pillsbury & Coleman, LLP. From our law offices in San Francisco, we represent clients throughout California and across the nation.