Banc of California National Association v. Federal Insurance Company (9th Cir. Dec. 12, 2022, No. 21-56179) 2022 WL 17583056

This dispute stemmed from a forgery insurance policy that the defendants carrier issued to GMSR’s client, a bank.  After purchasing the Policy, the bank made a fifteen-million-dollar loan in reliance on a document later determined to be forged.  After the bank contacted its forgery insurer to obtain coverage for the losses, the carrier denied coverage.  The bank then sued the carrier asserting breach of contract and bad faith.  Both parties moved for summary judgment.

The district court granted summary judgment on the breach of contract claim in favor of the carrier, because it found the bank had not met the Policy’s first of six conditions for coverage:  The agreement at issue did not qualify as an Evidence of Debt or as a Security Agreement, as the bank contended, so the forgery did not appear on one of the permitted types of collateral.

The Court of Appeals reversed.  It found that the Policy was ambiguous for failing to specify what sort of “interest” had to be retained in the personal property or fixture in order for the Control Agreement to qualify as a Security Agreement, and resolved the ambiguity in favor of the insured and against the insurer.  It then remanded for the district court to consider the other elements required for coverage.

To read the Court of Appeals’ memorandum disposition, click HERE.