Title: Auto Lenders Acceptance Corp. v. Gentilini Ford, Inc.

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). Gentilini Ford, Inc. (Gentilini) is an automobile dealership located in Woodbine, New Jersey. PNC Bank, N.A. (PNC Bank) provided financing for installment sales contracts that Gentilini executed with its customers. Auto Lenders Acceptance Corporation (Auto Lenders) had the option to finance any contract rejected by PNC Bank. Customers seeking financing for automobile purchases submitted credit applications to Gentilini, which then forwarded the applications to PNC Bank or Lenders for approval. PNC tended to accept lower-risk applicants, leaving for Auto Lenders the higher-risk, though still creditworthy, applicants. In early 1998, Auto Lenders investigated numerous credit applications that it had accepted through its arrangement with Gentilini. It discovered that Randy Carpenter, a Gentilini employee involved in automobile financing, had engaged in a number of credit-application frauds between February and December 1997 to secure loans for customers who otherwise were not creditworthy. Auto Lenders concluded that, in total, twenty-seven of the credit applications it had approved contained falsified information, including fictitious licenses and falsified pay stubs. Many of the fraudulent submissions appeared to be alterations of Carpenter s own pay stubs. In July 1998, after several of the loans under investigation went into default, Auto Lenders filed suit against Gentilini for fraud and breach of contract. Auto Lenders sought to exercise its right to have Gentilini repurchase all outstanding installment contracts that had not been paid in full and demanded judgment in the amount of $831,932.90. Gentilini filed its answer and a third-party complaint in October 1999. In June 1999, Gentilini amended its answer and third-party complaint, naming the Ohio Casualty Group of Insurance Companies, American West Fire & Casualty Company, and West American Insurance Company (collectively Ohio Casualty) as additional third-party defendants. Gentilini alleged that Ohio Casualty had an obligation to defend Gentilini and indemnify it for its losses under an existing insurance policy, but Ohio Casualty denied any such duty. With the exception of Gentilini s claims against Ohio Casualty, the claims against all other parties were voluntarily dismissed. Gentilini based its claims against Ohio Casualty on a Commercial Package insurance policy with a Master Pak for Property endorsement containing an Employee Dishonesty provision. Interpretation of that provision is at the heart of this matter. Ohio Casualty moved for summary judgment and Gentilini filed a cross-motion for summary judgment. The Law Division granted summary judgment in favor of Gentilini on the issue of coverage under the employee dishonesty provision of the policy. In its decision, the court concluded that Carpenter s conduct constituted dishonest acts as defined by the policy and that his actions resulted in a direct loss to Gentilini. In addition, the court concluded that Carpenter defrauded Auto Lenders on twenty-seven different occasions. Accordingly, the court determined that Ohio Casualty s policy provided coverage to Gentilini Ford for $135,000, or $5,000 for twenty-seven separate occurrences. Subsequently, Gentilini moved for final judgment and attorneys fees. The trial court granted the motion and awarded interest and fees as requested by Gentilini. A final judgment of $191,206.83, encompassing damages, attorneys fees, expenses, and prejudgment interest was entered in November 2001. Ohio Casualty appealed. On appeal, a divided panel of the Appellate Division reversed summary judgment in favor of Gentilini and remanded the matter to the Law Division for entry of judgment in favor of Ohio Casualty. The majority determined that Carpenter s actions were not covered by the policy s terms because his manifest intent was not to cause loss or damage to Gentilini, but to defraud Auto Lenders. In addition, with regard to the question of whether Gentilini had suffered a direct loss as required by the policy, the majority held that no such loss had occurred because the facts involve fraudulent conduct by the employee directed against a third-party. Having determined that Gentilini s claim was not covered by the policy, the majority also vacated the trial court s award of attorneys fees. Judge Wecker dissented, concluding that Carpenter s conduct involved the manifest intent to harm Gentilini and that Gentilini suffered a direct loss within the meaning of the policy. In addition, Judge Wecker concluded that there were twenty-seven separate occurrences each subject to a separate $5,000 limit, but agreed with the majority that Gentilini was not entitled to attorneys fees. Gentilini filed an appeal as of right based on Judge Wecker s dissent. HELD: Gentilini sustained a direct loss as the result of Carpenter s conduct when it was induced by his fraudulent acts to hand over automobiles in exchange for installment sales contracts signed by non-creditworthy customers. Moreover, the twenty-seven automobile sales were twenty-seven separate occurrences under the policy. Summary judgment, however, should not have been granted for either party. The actual losses sustained by Gentilini as a result of Carpenter s conduct require further proof. And several additional issues of material fact, including that of manifest intent, remain for jury determination. 1. We first must address whether Gentilini suffered a direct loss. New Jersey courts have not considered whether the use of a proximate-cause test for evaluating the nature of a loss is appropriate under an employee-dishonesty policy that requires a direct loss. However, the majority of federal courts that have addressed this question have concluded that the term direct loss or its equivalent does, in fact, call for the application of a proximate-causation standard. In view of the prevailing approach taken by courts in New Jersey and elsewhere to defining direct loss, in whatever type of policy that term arose, we adopt the conventional proximate-cause test as the correct standard to apply when determining whether a loss resulted from the dishonest acts of an employee. (Pp. 11-17) 2. We conclude that Gentilini sustained a direct loss of Business Personal Property as the result of Carpenter s conduct when it was induced by his fraudulent acts to hand over automobiles in exchange for installment sales contracts signed by non-creditworthy customers, thereby exposing Gentilini to a risk of default it would not have been willing to accept in the absence of fraud. When Carpenter falsified the credit applications of twenty-seven individuals, he effectively rendered the resulting contracts unassignable to Auto Lenders, ultimately depriving Gentilini of possession of twenty-seven automobiles and the profit to be made on those vehicles. (Pp. 17-20) 3. We then turn to the question of manifest intent. The term manifest intent has been in use in employee fidelity bonds for over a quarter of a century. Three tests have emerged to determine whether an employee acted with the manifest intent necessary to have his or her actions fall within the coverage of an insurance agreement the objective approach, the subjective or specific intent approach, and the substantial-certainty test. Of the three approaches, a purely objective approach appears to be the least utilized by courts. Like other courts that have rejected this approach, we believe that the internal, subjective intent of the actor is relevant, if not critical, to a manifest-intent analysis. Thus, a purely objective approach is not the appropriate way to determine an individual s manifest intent. The two remaining approaches have divided the federal circuits. (Pp. 20-29) 4. We conclude that the substantial-certainty test best comports with our understanding of manifest intent. Thus, we hold that the manifest-intent standard is satisfied either by proof that it was an employee s purpose or desire to cause the insured to sustain a loss and to obtain a financial benefit at the insured s expense, or by proof that the employee knew the aforesaid loss and benefit were substantially certain to result from his or her conduct. The substantial-certainty test is consistent with our general approach to questions of intent and best comports with the insured s reasonable expectations. (Pp. 29-34) 5. Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law. R. 4: 46-2 (c). In this case, summary judgment should not have been granted to either party. Construing the evidence in favor of the non-moving party on the motion and cross-motion for summary judgment, we conclude that the materials presented would permit a rational fact-finder to resolve the alleged disputed issue in favor of the non-moving party in each instance. With respect to Carpenter s manifest intent to harm Gentilini, neither side has offered more than sheer conjecture regarding Carpenter s intent when he falsified credit applications on behalf of the individual borrowers. Carpenter s conduct ultimately burdened Gentilini with the risk of default on twenty-seven installment sales contracts and deprived it of possession of those automobiles. On the other hand, a jury looking at the facts in light most favorable to Ohio Casualty might well conclude that Carpenter did not act with the conscious purpose to harm Gentilini and that Gentilini s losses were not substantially certain to follow from his conduct. Therefore, on the proofs presented, neither party was entitled to summary judgment on the issue of intent to harm Gentilini. Lastly, the proofs with respect to Carpenter s intent to benefit himself or a third party are also insufficient to warrant summary judgment. (Pp. 34-40) 6. After considering the record and the definition contained in the policy, we conclude that the twenty-seven automobile sales were twenty-seven separate occurrences under the policy. Gentilini was required to relinquish possession of twenty-seven cars on twenty-seven separate occasions to twenty-seven distinct customers. In these circumstances, in which each purchaser and the terms of each sale are unique, the similarity of the acts do not transform them into one continuous event subject to a single recovery under the policy. Accordingly, Gentilini is entitled to recover up to $5,000 for each fraudulently induced sale, subject to any applicable deductibles under the policy. (Pp. 40-44) 7. The measure of direct loss caused by Carpenter s fraudulent acts, which deprived Gentilini of twenty-seven automobiles, is the loss Gentilini suffered for having undertaken installment sales contracts at higher-than-acceptable levels of risk. The losses it incurred as a result of each fraudulent act, however, depend on whether Gentilini still has an interest in those contracts, the amount outstanding on those contracts that have entered default, and Gentilini s ability to mitigate its losses through repossession. Gentilini will have the burden of proving its loss on each contract through further proceedings. (Pp. 45-48) 8. On the issue of attorneys fees, had the issue been properly preserved for our review, we would hold that attorneys fees for Gentilini s claim against Ohio Casualty are not warranted. (Pp. 48-50) The judgment of the Appellate Division is AFFIRMED in part and REVERSED in part. The matter is REMANDED to the Law Division for further proceedings consistent with this opinion. CHIEF JUSTICE PORITZ and JUSTICES VERNIERO, LAVECCHIA, ALBIN and WALLACE join in JUSTICE ZAZZALI s opinion. JUSTICE LONG did not participate. Plaintiff, v. GENTILINI FORD, INC., Defendant and Third Party Plaintiff-Appellant, v. PNC BANK NATIONAL ASSOCIATION, JOHN DOES 1-10, RANDY CARPENTER, RICHARD BAKER, SHAWN HAMILTON, SHANDA BODDIE, SEAN MURRAY, THOMAS EIDELL, CHRISTOPHER JACKSON, TAMIKA FORTUNE, STARR BARNUM, CASSANDRA BROCK, LATOYA SAVAGE, KENYATTA SAUNDERS, KENNETH GRAHAM, CORNEILIA THROWER, JOYCE TAYLOR, ALFIE STEPHENS, DELORES SIMPSON, TAIRAT AJOKE DISU, RAYMOND BICKEL, EDWARD ISIAH GRAHAM, TROY BUTLER, JULIUS JERMELLE, EUGENE COBBS, MICHAEL WHITE, JR., BENJAMIN MANSFIELD, WAYNE TUCKER, CHARLES LENTZ, JOANN JACOBS, MICHELE SLOAN and TIFFANY RICHARDSON and CHRISTI INSURANCE GROUP, INC., Third Party Defendants, and THE OHIO CASUALTY GROUP OF INSURANCE COMPANIES, AMERICAN WEST FIRE AND CASUALTY COMPANY and WEST AMERICAN INSURANCE COMPANY, Third Party Defendants-Respondents, Argued January 5, 2004 Decided August 16, 2004 On appeal from the Superior Court, Appellate Division, whose opinion is reported at 358 N.J. Super. 28 (2003). Eric C. Garrabrant argued the cause for appellant (Serber, Konschak & Jaquett, attorneys). Andrew S. Kent argued the cause for respondents (Wolff & Samson, attorneys; Armen Shahinian and Scott D. Baron, of counsel). JUSTICE ZAZZALI delivered the opinion of the Court. Randy Carpenter, an employee of Gentilini Ford, Inc., engaged in numerous credit-application frauds over the course of an eleven-month period, leading to the sale of twenty-seven automobiles to customers who otherwise would not have qualified for credit. In this appeal, we must determine whether losses sustained as a result of Carpenter s conduct are covered under an employee-dishonesty provision of Gentilini Ford s insurance policy. We must also decide whether Carpenter s conduct constitutes a single occurrence under the policy for the purpose of determining the insurance company s potential liability. (a) Cause you to sustain loss or damage; and also (b) Obtain financial benefit (other than salaries, commissions, fees, bonuses, promotions, awards, profit sharing, pensions or other employee benefits earned in the normal course of employment) for: (i) Any employee; or (ii) Any other person or organization. . . . . (3) The most we will pay under this Extension for loss or damage in any one occurrence is $5,000. (4) All loss or damage: (1) Caused by one or more persons; or (2) Involving a single act or series of related acts; is considered one occurrence. Ohio Casualty moved for summary judgment in reliance on the parties pleadings and the plain language of the insurance policy. Gentilini filed a cross-motion for summary judgment. The Law Division granted summary judgment in favor of Gentilini on the issue of coverage under the employee-dishonesty provision of the policy. See footnote 1 In its decision, the court concluded that Carpenter s conduct constituted dishonest acts as defined by the policy and that his actions resulted in a direct loss to Gentilini. In addition, the court rejected Ohio Casualty s argument that Carpenter s conduct was one occurrence under the policy. It concluded that Carpenter defrauded Auto Lenders on twenty-seven different occasions, not that he engaged in twenty-seven fraudulent acts culminating in a single, overarching fraud. Accordingly, the court determined that Ohio Casualty s policy provided coverage to Gentilini Ford for $135,000, or $5,000 for twenty-seven separate occurrences. Gentilini subsequently moved for an entry of final judgment and prejudgment interest, and applied to recover its attorneys fees both for defending against Auto Lenders action and for enforcing its rights against Ohio Casualty under the insurance policy. The trial court granted the motion and awarded interest and fees as requested by Gentilini. A final judgment of $191,206.83, encompassing damages, attorneys fees, expenses, and prejudgment interest was entered in November 2001. Ohio Casualty appealed. On appeal, a divided panel of the Appellate Division reversed summary judgment in favor of Gentilini and remanded the matter to the Law Division for entry of judgment in favor of Ohio Casualty. Auto Lenders Acceptance Corp. v. Gentilini Ford, Inc., 358 N.J. Super. 28, 38 (2003). Turning first to Carpenter s fraudulent conduct, the majority determined that Carpenter s actions were not covered by the policy s terms because his manifest intent was not to cause loss or damage to Gentilini, but to defraud Auto Lenders. Id. at 34. If anything, the majority reasoned, Gentilini was an unintended beneficiary of the fraud because it received and kept the down payment[s] paid by the buyers, received full credit for the amount of the loan amortized by the debtors[,] and retained its right to institute legal action directly against the buyers, both to repossess the collateral and seek payment of the outstanding loan balance. Id. at 34-35 (footnote omitted). In addition, with regard to the question of whether Gentilini had suffered a direct loss as required by the policy, the majority held that no such loss had occurred because the facts involve fraudulent conduct by the employee directed against a third-party. Id. at 36. Applying the plain and ordinary meaning of direct loss, the majority concluded coverage was appropriate only if the employee s action [is] directed against the employer . . . . Ibid. Having determined that Gentilini s claim was not covered by the policy, the majority also vacated the trial court s award of attorneys fees. Id. at 38. In dissent, Judge Wecker argued that Ohio Casualty s insurance policy covered Gentilini s losses and that summary judgment had been properly granted. Id. at 38, 48. She reasoned that under the circumstances, Carpenter s conduct involved the manifest intent to harm, not to help Gentilini, and that Gentilini s obligation under the terms of its contract with Auto Lenders to repurchase the outstanding installment contracts as a result of Carpenter s conduct was a direct loss within the meaning of the policy. Id. at 40-41. In addition, the dissenter concluded that the twenty-seven fraudulent transactions induced by Carpenter over an eleven-month period were separate occurrences each subject to a separate $5,000 limit. Id. at 47. She agreed with the majority, however, that Gentilini was not entitled to attorneys fees. Id. at 48. Gentilini filed an appeal as of right based on Judge Wecker s dissent. R. 2:2(1)(a). A. That approach has been specifically employed even when the applicable policy language required a direct loss. See, e.g., Stone v. Royal Ins. Co., 211 N.J. Super. 246, 248, 250-52 (App. Div. 1986) (utilizing proximate-cause standard under homeowner s insurance policy where policy covered direct loss . . . caused by specified risks); Karadontes v. Cont l Ins. Co., 139 N.J. Super. 599, 601 n.1 (Bergen County Ct. 1976) (explaining term [d]irect loss, as used in fire insurance policies, was equivalent of proximate cause ). As noted by the majority below, those New Jersey decisions applying a proximate-cause test to find coverage under an insurance policy did so in circumstances where the loss ultimately sustained would have been covered by the policy except for an exclusionary clause. Auto Lenders, supra, 358 N.J. Super. at 37; see, e.g., Stone, supra, 211 N.J. Super. at 252 (concluding insured s loss covered by policy provision even though underground water, an excluded peril, started the loss-producing chain of causation[, because] the last event, [a] ruptured hose on [an] appliance, was a covered risk ). Thus, the question in those cases was not whether the loss fit within the definition of the policy, but whether an exclusionary clause could act to nullify the fundamental coverage purportedly offered by the policy. In those circumstances, courts applied a proximate-cause analysis to resolve an apparent conflict in the policy language to fulfill the reasonable expectations of the insured. E.g., Search EDP, supra, 267 N.J. Super. at 543-44. Ohio Casualty argues that this appeal presents a fundamentally different question than that confronted under our case law because the issue here is not whether coverage should apply when a facial conflict exists between a covered risk and an exclusion. Rather, it contends the Court must determine whether a harm appearing to fall entirely outside the ambit of coverage may be salvaged through the use of a proximate-cause test to find a covered loss. Because of the unique nature of the injuries caused by employee infidelity, it asserts that those proximate cause cases are entirely inapplicable to an employee dishonesty policy. New Jersey courts have not considered whether the use of a proximate-cause test for evaluating the nature of a loss is appropriate under an employee-dishonesty policy that requires a direct loss. However, the majority of federal courts that have addressed this question have concluded that the term direct loss or its equivalent does, in fact, call for the application of a proximate-causation standard. E.g., Scirex Corp. v. Fed. Ins. Co., 313 F.3d 841, 850 (3d Cir. 2002) (applying proximate-cause test to direct loss ); Fed. Deposit Ins. Corp. v. Nat l Union Fire Ins. Co. of Pittsburgh, 205 F.3d 66, 76 (2d Cir. 2000) (applying proximate-cause test to policy language covering loss resulting directly from employee dishonesty); Resolution Trust Corp., supra, 205 F.3d at 655-56 (same); Jefferson Bank v. Progressive Cas. Ins. Co., 965 F.2d 1274, 1281-82 (3d Cir. 1992) (same); First Nat l Bank of Louisville v. Lustig, 961 F.2d 1162, 1167-68 (5th Cir. 1992) (same). But see Vons Cos., Inc. v. Fed. Ins. Co., 212 F.3d 489, 492-93 (9th Cir. 2000) (affirming summary judgment for insurer under employee-dishonesty policy, finding direct means direct and holding that in the absence of a third party claims clause, [insured s] policy did not provide indemnity for vicarious liability for tortious acts of its employee ). In fact, the Third Circuit, examining New Jersey precedent, presaged that we would adopt the proximate-cause test in the context of employee-dishonesty coverage. Resolution Trust Corp., supra, 205 F.3d at 655. In view of the prevailing approach taken by courts in New Jersey and elsewhere to defining direct loss, in whatever type of policy that term arose, we adopt the conventional proximate- cause test as the correct standard to apply when determining whether a loss resulted from the dishonest acts of an employee. Our interpretation comports with our general principles of insurance law, including our practice of interpreting coverage provisions broadly. See, e.g., Progressive Cas. Ins. Co. v. Hurley, 166 N.J. 260, 273 (2001) (explaining that policies should be construed liberally in the insured s favor to the end that coverage is afforded to the full extent that any fair interpretation will allow ) (quotations and alterations omitted); Gibson v. Callaghan, 158 N.J. 662, 671 (1999) (observing clauses that extend coverage are to be viewed broadly and liberally ). There being no sound reason why a proximate-cause analysis should not be employed when determining whether a loss is direct under a fidelity insurance policy, we will apply that approach to such policies, including the policy at issue in this appeal. [Keeley, supra, 30 Tort & Ins. L.J. at 919 (quoting Sur. Ass n of Am. Sub-Comm. Report, Revision of the Dishonesty Insuring Agreement of Form 24, at 1 (1976)).] Although the use of manifest intent in fidelity bonds was intended to bring clarity to policies and, more specifically, to make clear those acts covered or excluded by the policy, the term quickly became a major battleground in employee-dishonesty coverage disputes. Christopher Kirwan, Mischief or Manifest Intent ? Looking for Employee Dishonesty in the Uncharted World of Fiduciary Misconduct, 30 Tort & Ins. L.J. 183, 186 (Fall 1994). Because manifest intent was a new term in the industry and had not been defined in the insurance policies in which it was included, courts were left to interpret the meaning of the phrase with little or no guidance from the parties or precedent. Ibid. As a result, they developed several approaches to resolving an employee s manifest intent. In general, three tests have emerged to determine whether an employee acted with the manifest intent necessary to have his or her actions fall within the coverage of an insurance agreement. The first approach, referred to as the objective approach, focuse[s] on the natural consequences of an actor s conduct . . . but d[oes] not necessarily focus on the actor s actual state of mind. Toni Scott Reed, Employee Theft Versus Manifest Intent: The Changing Landscape of Commercial Crime Coverage, 36 Tort & Ins. L.J. 43, 55 (Fall 2000). This test essentially equates manifest intent with recklessness, and in some cases permits a fact finder to ignore all specific intent or testimony regarding intent in favor of [a] recklessness standard[.] Id. at 57, 58. The second approach, characterized as the subjective or specific-intent approach, is the opposite extreme from the objective approach. Id. at 55. When applying that test, courts actually try to determine whether the actor in question specifically intended the resulting loss to the employer in question. Ibid. The third approach, and perhaps the most prevalent standard currently applied, is the substantial-certainty test. Ibid. Like the subjective approach, the substantial-certainty test focuses in part upon the subjective state of mind of the actor to determine whether manifest intent was present in light of all surrounding circumstances . . . . Ibid. As discussed in greater detail below, courts applying the latter two tests vary in the weight that they accord the subjective intent of the actor and the objective manifestations of that actor s intent. Of the three approaches just discussed, a purely objective approach appears to be the least utilized by courts. The reluctance to apply that test appears to be motivated by the desire to avoid a return to the recklessness standard the insurance industry expressly attempted to supplant through the use of the manifest-intent language. Moreover, that approach seemingly ignores the actor s stated intent. See, e.g., Fed. Deposit Ins. Corp. v. St. Paul Fire & Marine Ins. Co., 942 F.2d 1032, 1035 (6th Cir. 1991) (noting that although intent is thought to refer to a subjective phenomenon that takes place inside people s heads, law is concerned only with external behavior ordinarily thought to manifest internal mental states ); Nat l Bank of Pakistan v. Basham, 531 N.Y.S.2d 250, 251 (1st Dep t 1988) (considering only external behavior to determine whether bank employee acted with manifest intent to harm bank), aff d o.b. 539 N.E.2d 101 (N.Y. 1989). Like other courts that have rejected this approach, we believe that the internal, subjective intent of the actor is relevant, if not critical, to a manifest-intent analysis. Accordingly, we do not believe that a purely objective approach is the appropriate way to determine an individual s manifest intent. The two remaining approaches, the substantial-certainty test and the specific-intent test, have divided the federal circuits. For example, the Second, Fourth, and Fifth Circuits have adopted a specific-intent approach, concluding that for coverage to apply the employee must have acted with the specific purpose or desire to both injure the insured and obtain a benefit. Resolution Trust Corp., supra, 205 F.3d at 639 (citing General Analytics Corp. v. CNA Ins. Cos., 86 F.3d 51, 54 (4th Cir. 1996); Lustig, supra, 961 F. 2d at 1166-67; Glusband v. Fittin Cunningham & Lauzon, Inc., 892 F.2d 208, 210-12 (2d Cir. 1989); Leucadia, Inc. v. Reliance Ins. Co., 864 F.2d 964, 972-74 (2d Cir. 1988), cert. denied, 490 U.S. 1107, 109 S. Ct. 3160, 104 L. Ed. 2d 1023 (1989)); see also Nat l Union Fire Ins. Co. of Pittsburgh, supra, 205 F.3d at 73 (reaffirming Second Circuit s commitment to specific-intent approach). Other circuits, such as the Sixth, Seventh, and Tenth Circuits, have concluded that the manifest-intent standard does not necessarily require that the employee actively wish for or desire a particular result, but can be satisfied so long as the employee knew a particular result is substantially certain to follow from conduct. Resolution Trust Corp., supra, 205 F.3d at 638 (citing Peoples Bank & Trust Co. v. Aetna Cas. & Sur. Co., 113 F.3d 629, 635 (6th Cir. 1997); Fed. Deposit Ins. Corp. v. Oldenburg, 34 F.3d 1529, 1539 (10th Cir. 1994); Fed. Deposit Ins. Corp. v. United Pac. Ins. Co., 20 F.3d 1070, 1078 (10th Cir. 1994); Heller Int l Corp. v. Sharp, 974 F.2d 850, 857-59 (7th Cir. 1992); St. Paul Fire & Marine Ins. Co., supra, 942 F. 2d at 1035) (internal quotation marks omitted). Because this standard is satisfied either by proof of the employee s desire to cause a loss or by proof that the loss was substantially certain to result, it has been viewed as embrace[ing] a different, and less culpable mental state, than if the standard required that the evidence show that it was the employee s specific purpose or desire to cause the insured to sustain the loss and obtain a financial benefit at the insured s expense. Id. at 639. In the midst of this chaotic legal landscape, the Third Circuit was charged with predicting how this Court would identify the meaning of manifest intent under New Jersey law. Resolution Trust Corp., supra, 205 F.3d at 637. After exploring the origins of the manifest-intent language, the court set out the cases adopting the substantial-certainty and specific-intent approaches. Id. at 638-41. It explained that the substantial-certainty test could be loosely analogized to the Model Penal Code s mental state knowingly, as a person acts knowingly under the Model Penal Code if he or she is aware that a result is practically certain to follow from his conduct, whatever his desire may be as to the result. Id. at 639 (citing Keeley, supra, 30 Tort & Ins. L.J. at 923-24) (internal quotation marks omitted); see also N.J.S.A. 2C:2-2(b)(2) ( A person acts knowingly with respect to a result of his conduct if he is aware that it is practically certain that his conduct will cause such a result. ). By contrast, it noted that the specific-intent approach was more akin to the purposefully standard of the Model Penal Code, id. at 642, which is satisfied if an actor consciously desires that result, whatever the likelihood of that result happening from his conduct. United States v. Bailey, 444 U.S. 394, 404, 100 S. Ct. 624, 631, 62 L. Ed. 2d 575 (1980) (internal quotation marks omitted); accord N.J.S.A. 2C:2-2(b)(1). After completing its thorough analysis of the case law on this question, the Third Circuit stated the critical distinction between the two approaches: As is evident from our discussion, under either approach, evidence tending to show that the employee acted knowingly would support a jury finding that the employee intended the consequences of his actions. Nevertheless, under the rationale [of the specific-intent approach], proof of an employee s recklessness, or an employee s knowledge that a result was substantially certain to occur from the conduct, are objective indicia -- manifestations -- of the employee s specific purpose or intent. But neither an employee s recklessness or his knowledge that a result was substantially certain to occur would satisfy the language of the policy, absent that inference of specific intent. In contrast, those courts that have equated the term intent with the mental state knowingly would find that the employee acted with the manifest intent where the loss and the benefit were substantially certain to follow, regardless of whether the employee desired such results. [Resolution Trust Corp., supra, 205 F.3d at 641-42 (internal citation omitted).] Thereafter, the court concluded that this Court would adopt the specific-intent test, reasoning that that approach better capture[d] the meaning of intent as it [is] used in the fidelity provision, given the history that prompted its inclusion in the dishonesty definition and its stated purpose. Id. at 642. The court went on to emphasize, however, that although its approach require[d] proof of the employee s purpose in engaging in the dishonest or fraudulent acts, it remained cognizant that the employee s actual subjective state of mind [was] virtually impossible to prove absent resort to circumstantial evidence -- objective indicia of intent. Ibid. Accordingly, it held that to the extent proof of recklessness and/or the employee s knowledge of the likelihood that a loss was to result both serve as manifestations of the employee s specific purpose or design, . . . a jury may consider those factors, along with any other objective indicia of intent, in ascertaining the employee s state of mind in engaging in the wrongful conduct. [Id. at 643.] It reasoned that such an approach str[uck] an appropriate balance because it comports with the drafters obvious intent to limit the types of employee misconduct covered by this provision but ensures that proof of the employee s recklessness and the substantial likelihood of loss factor into the ultimate inquiry into the employee s subjective state of mind. Id. at 642. [Ibid. (internal quotation marks and citations omitted); see also Lustig, supra, 961 F.2d at 1165-66 (defining similar continuum of conduct).] When the employee s conduct lies somewhere in the middle of the continuum, intent becomes a disputed issue of fact generally not appropriate for disposition through summary judgment. Nat l Union Fire Ins. Co., supra, 205 F.3d at 72; see also Oldenburg, supra, 34 F.3d at 1540 ( [W]here an individual s conduct falls somewhere between the two extremes of embezzlement and simple poor judgment, intent becomes a question of fact which will generally not be subject to summary judgment. ) (internal quotation marks omitted). On the record before us, it appears that the present dispute falls somewhere between an act of pure embezzlement, which would plainly satisfy the manifest-intent requirement, and the exercise of poor business judgment, which would not be covered under an employee-fidelity policy. Construing the evidence in favor of the non-moving party on the motion and cross-motion for summary judgment, we conclude that the materials presented would permit a rational fact-finder to resolve the alleged disputed issue in favor of the non-moving party in each instance. With respect to Carpenter s manifest intent to harm Gentilini, neither side has offered more than sheer conjecture regarding Carpenter s intent when he falsified credit applications on behalf of the individual borrowers. For example, Ohio Casualty asserts that it is plain and obvious that Carpenter s intent was not to harm Gentilini but to benefit both his employer and himself, noting that Gentilini presumably profited from the sale of the cars and assignment of its installment contracts to Auto Lenders. However, as noted above, supra at __ (slip op. at 17-18), Carpenter s act of fabricating credit information ultimately burdened Gentilini with the risk of default on twenty-seven installment sales contracts and deprived it of possession of those automobiles. Because the applicants with whom Carpenter was dealing posed a heightened risk of defaulting on their payment obligations, a jury could infer from Carpenter s conduct and the surrounding circumstances that he intended Gentilini to suffer any and all losses resulting from such defaults. See Lustig, supra, 961 F.2d at 1166 ( When an employee obtains fraudulent loans with reckless disregard for a substantial risk of loss to the bank, a jury may infer from his reckless conduct and surrounding circumstances that he intended to cause that loss. ); see also Resolution Trust Corp., supra, 205 F.3d at 643 (explaining jury may consider recklessness and/or [an] employee s knowledge of the likelihood that a loss was to result . . ., along with any other objective indicia of intent, in ascertaining the employee s state of mind in engaging in the wrongful conduct ). In that same vein, although Gentilini argues that Carpenter s conduct satisfies the manifest-intent requirement, a jury looking at the facts in a light most favorable to Ohio Casualty might well conclude that Carpenter did not act with the conscious purpose to harm Gentilini and that Gentilini s losses were not substantially certain to follow from his conduct. Carpenter s scheme depended on Auto Lenders accepting applications with falsified information. The longer he could perpetrate the fraud on Auto Lenders the more sales, and thus the more commissions, Carpenter could garner for Gentilini and himself. Because the losses Gentilini ultimately sustained depended on Auto Lenders uncovering Carpenter s fraud, a jury could conclude that Carpenter did not intend Gentilini to suffer a loss because that result would be completely counterproductive to Carpenter s rational goal of maximizing his commissions. See Lustig, supra, 961 F.2d at 1166 (recognizing that [a]n employee may use fraudulent documents for loans, believing that they would be successfully paid, without manifest intent to cause . . . a loss ). Although Gentilini argues the loss was substantially certain to follow from Carpenter s actions because his pattern of conduct was so egregious and blatant that Carpenter knew Auto Lenders was bound to uncover his scheme, that conclusion rests on the assumption that Carpenter knew about the repurchase obligation of the Dealer Agreement (a fact not established in the present record) and also presents a question of fact for the jury s determination. Therefore, on the proofs presented, neither party was entitled to summary judgment on the issue of intent to harm Gentilini. Lastly, the proofs with respect to Carpenter s intent to benefit himself or a third party are also insufficient to warrant summary judgment. Ohio Casualty asserts that the only financial benefit Carpenter could have intended by his scheme would have been to earn increased compensation for the automobile sales, a benefit expressly excluded from coverage by the policy. See, e.g., Resolution Trust Corp., supra, 205 F.3d at 648 (noting courts considering issue of fraudulently-earned commissions have concluded exclusion applies, finding that the term earned encompasses financial benefits both fraudulently obtained and honestly earned from the employer ). Gentilini concedes that the present record does not disclose whether or not Carpenter obtained any benefit other than commission from the sale of the automobiles. It argues, however, that Carpenter s conduct satisfied the manifest-intent requirement because he provided benefits to the less-creditworthy purchasers by putting them behind the wheels of cars they would not have been able to own without Carpenter s fraudulent scheme. Although we doubt that Carpenter perceived of himself as a modern-day Robin Hood, taking from Gentilini and giving to non-creditworthy customers, a reasonable jury could conclude that Carpenter knew his conduct was substantially certain to result in a benefit to those purchasers. See footnote 2Moreover, the certification of Thomas Eidell, one of the twenty-seven purchasers using falsified application information, reveals that in at least one transaction Carpenter had a personal connection with a credit applicant; Eidell was put into contact with Carpenter by Terry Craig, a Gentilini salesperson and a long-time friend of Eidell. It would not be unreasonable for a jury to conclude that Carpenter acted with the manifest intent to benefit Craig by helping Eidell secure financing for a new automobile.See footnote 3 Thus, like the question of Carpenter s manifest intent to harm, whether Carpenter intended to benefit himself or a third party remains a question that must be resolved by a jury. v. GENTILINI FORD, INC., Defendant and Third Party Plaintiff-Appellant, v. PNC BANK NATIONAL ASSOCIATION, Et al., Third Party Defendants, and THE OHIO CASUALTY GROUP OF INSURANCE COMPANIES, et al., Third Party Defendants-Respondents. DECIDED August 16, 2004 Chief Justice Poritz PRESIDING OPINION BY Justice Zazzali CONCURRING OPINION BY DISSENTING OPINION BY