Fraudster Collects Over $250,000
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Valero Followed Instructions from Fraudster
In Valero Title Incorporated v. RLI Insurance Company, No. 22-20155, USCA, Fifth Circuit (February 1, 2023) Valero sued its insurer RLI Insurance Company that denied Valero’s proof of loss claim, which RLI determined was not covered by the funds transfer fraud endorsement in Valero’s crime protection insurance policy. The district court disagreed and granted partial summary judgment to Valero.
FACTS
Valero purchased a crime-protection policy from RLI that included a funds transfer fraud endorsement. The relevant definition for “fraudulent instruction” is “[a] written instruction . . . issued by you, which was forged or altered by someone other than you without your knowledge or consent, or which purports to have been issued by you, but was in fact fraudulently issued without your knowledge or consent.”
Because the Valero employee did not recognize that these instructions were fraudulent, she instructed Valero’s bank to wire $250,945.31 to the fraudster.
ANALYSIS
RLI argued that because the instruction here was issued as it was authorized and approved by Valero, it cannot be “a written instruction . . . issued by you, which was forged or altered by someone other than you without your knowledge or consent.”
The instruction Valero issued to its bank was the same instruction Valero received from the fraudster posing as the lender. Unknown to Valero, the instruction was not the same as the instruction provided by the lender; it was altered to include different recipient account information. Thus, when Valero issued the instruction to its bank, it was not a fraudulent instruction that was “forged or altered by someone other than [Valero] without [Valero’s] knowledge or consent.”
ZALMA OPINION
Insurance contracts are interpreted as written. Since the language of the policy was clear and unambiguous, it covered the error of the Valero employee who accepted an e-mail instruction to send the money it owed to a fraud perpetrator’s account rather than to the account of the lender to whom the money was owed.
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