my name is dan brown i represent c s macross and there are two straightforward principles that explain the error in the court below in this case the first of them is that exclusions in an insurance policy in minnesota elsewhere are interpreted strictly and construed in favor of coverage where there is a reasonable interpretation that can be done the second is that the words in a policy are given their ordinary non technical meaning from the viewpoint of a lay person in this particular case the two words that are at issue in exclusion are authorized representative and what is important is that both of those words authorized and representative need to be given meaning not every service provider for a principle is an authorized representative not every agent is an authorized representative not every contractor or employee or admin in this case is an authorized representative they are service providers and there is a difference now in any insurance policy the first place to go to interpret that insurance policy is the policy itself and in this case the term authorized representative is used in the policy more than in just the exclusion it is used in the declaration page it's that the appendix at page thirty six and it provides that the policy itself is not valid unless it is signed by a duly authorized representative of the company meaning in this case federal insurance company the clear implication of that sentence in the declaration is an authorized representative is not simply any employee not simply any age and it is someone who in this transaction will actually have the authority to bind the company the term itself isn't defined as that is correct your honor does not so why rather than looking to other parts of the policy wouldn't we look to the minnesota supreme court suggestion that authorized representative has an agency requirement and actually your honor as you state that it's fine you can go to national city and you can say that it has an agency requirement and that is in fact what the supreme court said but that does not mean that that means that every agent is then an authorized representative in national city what actually was at issue was the argument that that particular insured had someone who was holding on to certain contracts for the insured as a predicate for coverage in that case and in that particular case what happens is the insured says well i had someone out there and as it turns out i knew them and the court national city says no wait there's more to it than simply having the happenstance of a relationship with somebody there actually needs to be an agency requirement meaning some authority imbued in that person to actually in this case authorized representative represent the insurer so it's not that i mind national city in fact i'm happy to go to national city but national city was unfortunately overused misinterpreted if what it was deemed to say was that any agent especially any agent when you get to it you know rules of sub agency and imputing you know contracts to people those sorts of things those are not lay person issues a lay person issue would be did i authorize this person to do what it was that they were allowed to do so i authorize them to buying the company and i think that's in fact the best teaching of what we're talking about and national city is a transaction based analysis it is not a any any particular agency relationship will then provide that authorized representative needs to focus on the transaction at issue so i'm ok with going to national city your honor but i don't actually think you do get there i will say with all  respect to ice and so supreme court i don't actually think you get there in this case because you can actually go to the policy it's one thing to say i'm going to wear a federal court minnesota's springboard spoken to were bound by i do understand that one court says that provisions and they're not good for you either what do you do with them that's right well your honor every case of this cited outside of the jurisdiction minnesota deals with either entities themselves that were  indisputably the actual entity that was imbued with that authority or actually the people who are officers in telling on itself was actually the vice president of major accounts who was the wrong door in that case someone who actually shared identity you can look and see what those cases do not address is the specific issue here where there was actually a separation between an entity who had been charged with managing the books and then an admin who in fact was not charged by anyone with actually having the authority to bind the company in any fashion now to be clear in this case we actually don't have authority to bind even in a separate designation from those entity in principle cases that we're looking at another circuit you can just i'm on what about the minnesota supreme court's wording and the travelers case that's about expectations minnesota's apparently an expectation state and there's an expectation that and insured well halfway watching require two signatures are required amount of money or do something and some don't don't we have an expectations issue here that the insured would expect this to be covered we certainly do have an expectation that the insurer would expect this to be covered in this particular case actually i would tell you that the expectation was that having said only certain people can sign checks no one else is delegated with authority to do that there when someone else forges and there was no dispute there was a forgery here that when someone else forges that that there would be an expectation of coverage and i would say that for one of the principal difficulties is that the authorized represent of exclusion here is being used to frustrate what otherwise would be that word marry meaning and then actual expectation of coverage and so you're seeming the insurers are really really good and not really really think it covers both i think the expectations doctor in the minnesota supreme court coverage both of i am criticism of the expectations doctor in some states don't have a counsel that's correct your honor and i'm it and i do believe that minnesota that would apply if they that you have an expectation here to provide coverage in this thing my only point was that in this case just macross and actually had the sorts of controls that one would expect to have and was able to say that they had not actually given any authority access to this tenet pro system as i understand the way this is really done why isn't that enough to make it authorised represented let's just it's true for two reasons one and the most important of which is that actually the direct then you issue the checks and then you sign them you know that works well and i will say though that the direct cause of the loss is still the forgery and so the question is whether or not she is an authorized representative about point because there are by the way  just for what it's worth for a moment there are several different ensuring agreements in any crime policy one of them is forgery there are plenty of other ones in there but when the insurance company expectations again for a moment says i'm going to insure against forgery and then the forgery occurs even of there would be some other claims we could make or arguments we could make that was the direct cause of the loss and you know i'm just going to double check i see that my yellow light is on and i hope to reserve five minutes i don't think it's right i think it is very important quite frankly to not lose sight of the facts at issue here we have ensured blakeley properties and we can get this to our properties if we need to that has no employees it owns question properties it runs a business leasing commercial properties yet it has no employees i was a do business well it does business to a property manager that property managers ballers to management dollars so management itself is a business there is a business as a corporation does it accomplish the task that has been charged to do delegated to a contract with blakely properties it accomplishes that through the individuals that's what we're dealing here with we have an individual who is charged with running likely properties that individual along with the other individual at all or some management co managed the properties and least those properties out that is in the insurance proof laws that is a sworn document where the insured attests to the facts that are supporting that individual was acting on behalf of blakely properties agency which is what the national or the supreme minnesota supreme court says you barry address the fact that authorized representative is not a defined term in a policy when it isn't a defined term we look to comment decks dictionary definitions other courts have done that our court which again this court is bound to follow when the highest court of the state jurisdiction has spoken to an issue says authorized representative when we look to figure out what that means we look to agency principals well that has an agency requirement where the requirements does it have it doesn't say it's the only requirement i will what is not the only requirement well it says i'm quoting be an authorized representative has an agency requirement does it have other requirements the supreme court has not identified other cartman's that's the only instruction that we have been provided by our courts addressing this issue is that it has an element of agency so we look to agency principles and what i've heard here this morning is not every agent is unauthorized representative well if that's true that essentially just discounts entirely what the national city bank case says right if if we're going to apply principles of agency but then at the same time or say well not every agent or authorized representative is an agent well then we don't apply principles of agency it's a circular argument just let me ask a bigger picture question what's your view of the purpose of this exclusion the purpose of this exclusion is to eliminate those individuals for which the insurance company has no idea is conducting business on behalf of its insured from being covered under the policy this is a first party policy mean we're going to ensure last at the insurer itself sustains a big part of that policy is employee theft probably the primary coverage that's provided under these crime policies it's ensuring agreement absolutely willing to underwrite that risk and accept that risk on behalf of the insured that your employees are going to somehow be fried you that's because we know who your employees are or we know what your business is insurance companies have the ability to underwrite their insurance well the majlis e should have been pretty cheap because there were no employee right blakeley properties as one of eight or nine insurance under this policy the primary insured is macross and and that is a very large construction company that has numerous employ when an insurer and insured peer factors out all the entirety of their business it can do that to anybody right and so the insurance company would never have any idea who that's being done to they don't know who they're contracting with and when you're contracting with another party to conduct your business then it's on you as the insurer to do your due diligence to make sure that that other party more or less you're going to underwrite the other party and make sure that they've got the proper controls in place and that you're comfortable doing business with them but once that policy is issued the insurer has no control with whom the insured may decide to do business with and the risk of doing business with a third party is a risk that born in retained by the insurer that's the purpose of that exclusion minnesota's an expectation state you heard what i said before you get a preview of it here why wouldn't the insured think this person should be cover at water case it's kind of the were all the other cases which are derived from reasonable expectations are not relied upon when there's no ambiguity in a policy so once this court if the court presumes and follows the national citibank case as well as all the other circuit cases which i understand is not president this court does not have to follow him but those cases all say the same say it is an agency principle that applies is the company or person authorized to act on behalf of another person that's what authorized so early in power to act i'm sorry the representative an agent is a representative and agent and authorized representative i would say certainly as an agent well would  representative itself be an agent may or may not be i think they're your heaven on not there is a representative i'm sorry could you have an unauthorized representative that seems like an oxymoron  off i think yeah i mean i guess that makes sense that that what i'm looking at there are other situations in the policy where they refer to representative let me not an authorized represent argument if assuming a representative is an agent in order to give any meaning to the concept of authorized wouldn't you have to say that that person had to be authorized to do a particular act no and all of the other circuit court cases of address that very issue ok let's look at what is why those two then don't become redundant why superb well the authoriz signals some empowerment right i mean that's the definition of authorize ations that's where all of those circulated is represented by i think well representative you're acting on behalf of somebody else so i suppose one could argue that it's implicit if you're just using representative but representative is used elsewhere in the policy only as representative not authorized representative so i don't think there is a heightened use of it when it's used you know where else representative is used in the policy well you can refer to one of the arguments that they've made with respect to exclusion be you want to say it's referring to other agent or representative of the same general character so they're using representative not authorized represent ensuring cause you got to help me by the way it's be a it's going well i can probably direct you to me and i may not have all the policy too by the way you know i'm sure you've got this because it's on the same page as the i've got the exclusions for sure be you want to say i found it  the term representative is there i don't see it that maybe i'm just not seeing it if you look there will be one a or the last line agent or representative of the same general character  yet another redundancy well i wouldn't argue that's a redundancy because we use authorized representative in the other exclusion so it should say authorized representative or representative if they were intending to apply to the same thing yeah but i mean for a chit you think an agent is an authorized representative i think that you if you were to put together even diagram authorized representative it's going to be a big circular agent is going to be within that you may have authorized representative beyond agent to we have what the argument i was raised i think the court was addressed earlier i think judge grounder you were the one that raised it with respect to specific authority or what are you specifically authorized all of the other courts have addressed that and the most prominent one is capote and that's the most recent botha is an excellent case because quite frankly it's the same facts as what we have here and that is the bookkeeper this was addressed below quite a lot actually in our briefs in the district court level they argued well no it's an entity case we said no there is no where in this case is a say it's an entity case the judge right here is plainly says it's the bookkeeper and the daughter of the owner that committed the theft you know appeal of that case right it's just a district court case that is correct thank you so what we did then was pulled up the actual supporting documents with respect to that particular case it that's exactly what we're dealing with here we have a co manager of the properties given charge to do numerous tasks and responsibilities to do have a fact question here as to whether ms cust yos actually co principal or just a lower level administrative person there's no fact issue there she is not a co principal she's does not want to ship interest in ball or some management think about a fact issue as to whether she was an authorized representative there is no fact issue either all of the well i mean that's the ultimate legal issue that the court can determine and determining that it's can be done as a matter of law based on the underlying facts and that's exactly what judge erickson did  see can be established by course of dealing to be established by contract we've got both here and there is no escaping the terms of the kind of distinction between a representative and an authorized representative seems to me you're trying to confuse t but we're going to apply agency principles and that's how we're going to figure out whether or not the person or the individual or the company called phase as an authorized representative applying those principles principles of agency we look to whether there's authority headed by the principal whether the agent acts on behalf of the principal whether the agent deals with a third party that's the agency or the gate agents a case that cited in our brief all of those three factors are satisfied here we have a services of the agent to manage operate control rent and lease the properties responsibilities of the agent the owner hereby appoint agent as its lawful agent an attorney in fact with  authority to do any and all lawful things necessary for the fulfillment of this agreement and then it steps through and talks about all of the specific things that the agent is empowered to do on behalf of blakely so i'm looking at the two thousand and six agreement which within that agreement refers to abolish the management it is understood that as part of this agreement agents shall create a team with balls or some management who will respectively be responsible for the property management and leasing responsibilities associated with this contract that's laid out in a memorandum attached to that contract is or the agreement is the memorandum the memorandum provides property management bothersome management will be responsible for the establishment of all bank accounts undertaking all accounting including rental billing deposits distributions and disbursements approval of embraces establishment of necessary service contracts property main circuit and upgrades accounts receivable collections annual budgets reviewer and reconciliations all tenant relations and maintenance of property management software though the above responsibilities will be fully the agent is a corporation it is implied consent is then given to the employees who are empowered to act on behalf of that corporation those employees become so agents or those individuals so anyone who works for baltar's and isn't authorized represent if they're working on what the subject matter of the authority provided by the contract applies to and certainly that is exactly what she was doing here she ran the ten a pro system your honor address that before that's how this fraud occurred now it doesn't mean to in order for there to be coverage that doesn't have to be the extent or in order for the x or amount of time that does not need to be how the the actual loss o vote against says that but the fact is everything ran through the computer that only she had access to and the principal cynthia baller so only access that computer five or six times a year i implied authority is rebutted if there is an express exclusion of that authority and it's clear here that cindy cindy ballers and did not delegate for instance i'll just take the approval of invoices one a really nice easy one right in the heart of this issue right approval of invoices was not delegated to stephanie castillo she did not have authority to approve invoices ballers and management cindy balder sen as the principal ballers of management kept that so if we're going to go down the road of sub agency principals it still matters what was ballers in management delegating to answer the question the answer is or would be at worst from across and a fact question for what that authority that had been delegated to stephanie castillo was a tenet pro system had all the vendors in it right that is true ok now you're telling me that you give somebody access to a computer system that does that but you say oh it wasn't really delegated down to them i don't look at it the question is not whether or not as a service provider that responsibility was delegated the question is whether that is in the his authority that counts and the authority to bind the company is the authority that counts as an authorized representative not sort of i mean people don't ordinary lay person conversation for a moment people don't talk in terms of i had a forty two sort of do the work i had a responsibility to do the work that was my job but that doesn't mean she has authority in the sense of binding macross into something and i do think that it's the binding macross into something that actually matters in this instance and binding them to she doesn't have authority to sign checks if you don't it pro is used for all of these properties right yes yeah you know boy go ahead  but i do think there's a difference between service provider as in data entry and authority actually buying to come ok let me hit on a different question for just a moment here kubota can i just mention for a moment here i know mr weir several times that it was not an entity case it is an entity case i'm looking right at the first part of it the background description says that east carolina equipment was engaged in a series of schemes to defraud in that case the entire discussion is about as the authorized representative it is an entity case it does not actually address anything about the distinction between sub agency principles in there and actually could vote it does not actually fully address whether or not there needs to be a nexus between authority or not because kubota actually assumes in fines that there would have been an excess so if there's a fact question to be had it would be on the idea of whether there's that nexus they're not about it would actually support that y s another important question i do want to address really quickly here which is the purpose of this exclusion first of all if the purpose is that federal is concerned about whether they knew who they were underwriting actually the facts in this case where they made no effort at all to determine what level of contracts or agents or subagents or anything else in the underwriting process to be so to stand and say that the purpose of this exclusion is simply to say we're trying to define who were underwriting it doesn't make a lot of sense to me on the record but more importantly and probably the most important point one of the ways in which the district court got that wrong is let's assume for the moment that that is the purpose of this contract of this particular exclusion in the contract we shouldn't be expecting laypeople to leverage the words authorized representative into the idea that what that really means is any and every agent of my contractor it is the insurance company who has the opportunity to rewrite this policy if it wants to rewrite this policy to say that expressly to not use words like agent instead of in a different provision of the policy and then they authorize representative here authorized representative does mean those two words do have a meaning that requires authority and it did not exist i am out of time thank you very much thank you counsel thank you for your arguments and appearance