# U n i t e d S t a t e s C o u r t o f A pp e a l s For the Eig hth Circu it

_ _ _ _ __ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _

No . 1 8 -1 9 49

_ _ _ _ __ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _
C.S. M cCro s s an In c.

ll l l l l l l l l l l l l l l l l l l l Pl a in t i

f f - Ap p el l an t

v

.

Fed eral In s u ran ce Co m

p an y

l l l l l l l l l ll l l l l l l l l l l Def

en da n t - Ap

p el l ee

_ __ _ _ __ _ __ _ _ Ap p eal fro m

Un i t ed St at es Di s t ri ct Co u rt fo r t h e Di s t ri ct o f M i n nes o t a - M in n eap o l i s

_ __ _ _ __ _ __ _ _
Su b m i t ted : M arch 1 4 , 2 0 1 9 Fi l ed : Au g u s t 6 , 2 0 1 9

_ __ _ _ __ _ __ _ _
Befo re GRUENDER, BENTON, an d GRASZ, Ci rcu i t J u d ges

.

_ __ _ _ __ _ __ _ _
BENTON, Ci rcu i t J u d g e.

C.S. M cCro ss an In c. s u ed Fed eral In su ran ce Co m p an y fo r c o v erag e u n d er a cri m e i ns u ran ce p o l i cy

. Bo t h m o v ed fo r s u m m ary ju d g m e n t

. Th e di s t ri ct co u rt 1

g ran t ed t h e Co m

p an y ’ s m o t i o n

. C.S. M

cCr o s s a n Inc. v. Fed

er a l I ns . Co

. , 2 0 1 8 W L

1 Th e Ho no rab l e J o an N. Eri ck s en , Un i t ed St at es Di s t ri ct J u d g e fo r t h e Di s t ri ct

o f M i nn es o t a.2 1 8 0 2 5 6 (D. M i nn

. M ar. 2 9
, 20 1 8 ). M cCro s s an ap p eal s

. Hav i n g ju ri s di ct io n u n d er

2 8 U.S.C. § 1 2 9 1
, t h is co u rt affi rm s

.

I.

T he C o m p an y i s su ed M cCro s san an i n s u ran ce p o l i cy f or “ E m ploy e e T he f

t” a nd

“ Fo rg ery ”:

(A) Th e Co m

p an y s hal l p ay t h e Pa rent Org ani za ti o n fo r d irect l o s s

o f M o n ey , Securi ti es , o r Pro perty s us t ai n ed b y an I ns ured

res u l t i n g fro m Theft o r Fo rg ery c o m m i t t ed b y an Em pl o y ee act i n g al o n e o r i n co l l u s i o n wi t h o t h ers

.

. . . .
(D) Th e Co m

pan y s h al l p ay t h e Pa rent Org a ni za ti o n fo r d i rect l o s s

s u s tai n ed b y an Ins ured res u l t i ng fro m Fo rg ery o r al t erat i o n o f

a Fi na nci a l I ns trum ent co m m i t ted b y a Thi rd Pa rty

.

(b o l d ed wo rd s in o ri g i n al

, d efi n ed i n p o l i cy ). T h e po l i cy ex cl u d ed fro m co v erag e

cert ai n lo s s “ co m

m i t t ed b y an y au th o ri zed rep res en t at i v e o f an I ns ured .” An In s u red

u n d er t h e p o l i cy

i n cl ud ed M cCro s s an an d i t s s ub s id i ari es

.

Bl ak el ey Pro p ert i es , LLC an d St ewart Pro p ert i es , LLC own co m m erci al ren t al

p ro p ert i es

. Bro o k s t o n e, In c. an d Val h al l a In v es t m en t s, I n c

. w e r e Bl ak el ey ’ s an d
St e w a r t ’ s res p ect i v e ag en t s t o “ m an ag e, o p erat e, co n t ro l

, ren t an d l eas e” s ev eral

p ro p ert i es

.

-2

-Bo t h h i red Bal d ers o n M an ag em en t , In c. to m an ag e t h es e pro p ert i es

. Bl ak el ey

s ep arat el y

h i red Bal d ers o n as wel l

.

Bal d ers on ’ s o wn er an d p ri n ci pal

, Cy n th i a Bal d ers o n, m an ag ed p ro p ert i es wi th

t h e h el p o f an “ ad m i n i s t rat i ve p ers o n,” as rel ev an t here, her d au g ht er St e p h a n i e Cas ti l l o

. Cas t i l lo was t h e p ri m ary u s er o f Bal d ers o n ’ s p ro pert y m an ag em en t s y s t em , t h e s o le co p y o f wh i ch was o n h er co m pu t er. Un l i ke Cy n t h i a, h er d u ti es (an d

au t h o ri t y ) d i d n o t i n cl u d e s i g n i n g ch eck s fro m an y acco u n ts

.

Cas t il l o s to l e aro u n d $ 5 7 0 ,0 0 0 fro m Bl ak el ey an d $ 2 5 0 ,0 00 fro m St ewart o v er

t h e co u rs e o f s ev eral y ears

. Sh e creat ed fak e in v o i ces i n t h e p ro p e rt y m an ag em en t

s y s t em , p ri n ted ch eck s (fro m Bl ak el ey ’ s an d St ewart ’ s acco u n t s ) p ay ab l e t o h ers el f

o r fo r her b en efi t , m an i p u l at ed t h e s y s t em t o sh o w p ay m en t t o a v en do r, an d fo rg ed Cy n t h i a’ s s i g n at u re o n each ch eck

. Sh e pl ed g u i l t y to ei g h t co u n t s o f t h eft b y s wi n d l e

an d was s en t en ced t o 80 m o nt hs ’ i m p ri s o n m en t

. St

a t e v . S te p ha ni e La nt

g en Ca s t i l l o , No

. 27 -CR-1 5 -5 0 3 (M i n n

. Di s t

. Ct

. Hen n ep i n Ct y

. No v. 2 3, 2 01 5 ) (s en t en ci n g o rd er).

M cCro s san s u b m i t t e d a c l ai m t o t h e Co m p an y , seek i n g co v erag e u n d er t h e

“ Fo rg ery ” an d “ E m

p l o y ee Th eft ” i n su ri n g cl au s es

. Th e Co m p an y d en i ed th e cl ai m

. M cCro ss an s u ed fo r b reach o f t h e i n s u ran ce p ol i cy

. Bo t h p art i es m o v ed fo r s u m m ary ju d g m en t

. Th e d is t ri ct co u rt g ran t ed s um m ary j u d gm en t to t h e Co m p an y. It

co n cl u d ed St ewart was no t an In s ured u n d er t h e p o l i cy ; Cas t i l l o was an au t h o ri zed

rep res en t at i v e of Bl ak el ey , p recl u d i ng co verag e u n d e r “ F o rg ery ;” an d Cas t i l l o was

n o t Bl ak el ey ’ s em

p l o y ee, p recl ud i n g co v erag e u n der “ Em p l o y ee Th eft .” M cCro s s an
ap p eal s

.

II.

Th i s co u rt rev i ews d e n o v o “ t h e d i st ri ct co u rt ’ s g ran t o f s u m m ary ju d g m en t an d
i t s i n t erp ret at i o n o f s t at e i n s u ran c e l a w

. ” Gr i nnel l M ut

. Rei ns ur a nce Co

. v.

-3

-Schwi eg er , 6 8 5 F.3 d 6 9 7
, 7 0 0 (8 t h Ci r. 2 0 1 2). “ Th e q u es t i o n i s wh et h er t h e reco rd

,

v i ewed m o s t fav o rab ly t o t h e n o n -m o v i n g part y , s h ows n o g en u in e i ss u e o f m at eri al
fact an d t h at t h e m ov i n g p art y i s en t i t l ed t o j u d gm en t as a m at t er of l aw.” V o l k v. Ace
Am . I ns . Co

. , 7 4 8 F.3 d 8 2 7 , 8 2 8 (8 th Ci r. 2 0 14 ).

In t h i s di v ers i t y act i on , Mi n n es ot a substa n tive la w c ontro l s t h i s co u rt ’ s an al y s i s

o f t h e i n s u ran ce p o l i cy

. J er r y’s Ent er s ., I nc. v. U.S. Sp eci al

t y I ns . C o . , 8 4 5 F.3 d
8 8 3
, 8 8 7 (8 t h Ci r. 2 0 17 ). T h i s co u rt i s “ bo u n d b y t h e d eci s i o n s o f t h e M i n n es o t a Su p rem e Co urt ” wh en in t erp ret i n g M i n n es ot a l aw. I nt eg r i t y Fl o o r co ver i ng

, I nc. v.
Br o a n-Nut

o ne, LLC
, 5 2 1 F.3 d 9 1 4
, 9 1 7 (8 t h Ci r. 2 0 0 8 ). “ If t h e M i n n es o t a Su p rem e Co u rt h as no t s p o k en o n a part i cu l ar i s s u e, [t h i s co u rt ] m u s t at t em p t t o p red i ct h o w
t h e M in n es o ta Su prem e Co u rt w o u l d deci d e an i s s ue an d m ay co n s i d er rel ev an t s t at e
p reced en t , an al o g ou s d eci s i o n s , co ns i d ered d i ct a

. . . an d an y o t h er rel i ab l e d at a.” I d.

“ Th e in t erp ret at i o n o f an i n s u ran ce co n t ract i s a q u es t i on o f l aw

. ” J e r r y’s
Ent er s . , 8 4 5 F.3 d at 8 8 7
, ci t i n g M i d w e s t Fa m i l

y M ut

. I ns . Co

. v. W

ol t er s , 8 3 1
N.W

. 2d 6 2 8
, 63 6 (M i n n

. 2 0 1 3). M i n n es o t a co u rt s u s e “ g en eral pri n ci p l es o f co n t ract
l aw” t o i n t erp ret a n i n s u r a n ce p o l icy

. M i d wes t Fa m i l

y , 8 31 N.W .2 d at 6 3 6
, ci t i n g Tho m m es v. M

i l wa uk ee I ns . Co

. , 6 4 1 N.W .2 d 8 77
, 8 7 9 (M i n n

. 20 0 2 ). Th e p o l i cy

“ m u s t b e co n s t ru ed as a wh o le, an d u n am b ig u o u s l an g uag e m

u s t be g iv en i t s p l a i n

an d o rd in ary m ean i n g .” I d.
, qu o t i n g Henni ng Nel s o n Co ns tr

. Co

. v. Fi r em a n’s
Fund Am

. Li

fe I ns . Co

. , 3 8 3 N.W .2 d 64 5
, 6 52 (M in n

. 1 9 8 6 ). “ Pro v is i on s i n an i n s u ran ce p o l i cy are t o b e in terp ret ed acco rd i n g t o b o t h ‘p l ai n , o rd i n ary s en s e’ an d

‘ w h at a reas on ab l e p ers o n i n t h e p os i ti o n o f t h e i n s u red wo u l d h av e u n d ers t o o d t h e

wo rd s t o m ean .’ ” I

d

. , q u o t i ng Fa r m er

s Ho m e M

ut

. I ns . Co

. v. L i l

l
, 3 3 2 N .W .2 d 6 3 5,
6 3 7 (M i n n

. 1 98 3 ). Ex cl u s i on s are “ co ns t ru ed s tri ct l y ag ai n st t he i n s u rer.” Syfco v. Enco m p as s Ind em . Co

. , 7 6 1 F.3 d 8 6 7
, 87 1

– 72 (8 t h Ci r. 2 0 1 4 ), ci t i n g Tho m m es , 6 4 1
N.W

. 2d at 8 8 0

. “ An i n s u red p art y b ears t h e i n it i al b u rd en o f d em o n s t rat i n g co v erag e,

an d t h e i n s u rer t hen b ears t h e b u rd e n o f e s t ab li s h i n g an ap p l i cab l e ex cl u s i o n.”

-4

-Res ta ur ant Recycl i ng , LLC v. Em

p l o yer M ut

. Ca s . Co

. , 9 2 2 F.3 d 4 14
, 4 17 (8 t h Ci r. 2 0 1 9 ), ci t i ng M

i d wes t Fa m i l y , 8 3 1 N.W .2 d at 6 3 6

.

A.

M cCro s san s eek s reco v ery fo r Bl ak el ey ’ s an d St ewart ’s l o s s es

. Th e p o l i cy

co v ers l o s s t o an In su red . Th e Co m p an y ad m it s Bl ak el ey

i s an In s u red

.

St ewart , h o wev er , i s n o t

. An In s u red i n cl u d es M cCro s s an an d “ an y Subs i di ary .” Su b s i d i ary i s d efi n ed i n t h e p ol i cy , as , i n rel ev an t p art :

an y en t it y wh i le m o re t h an fi ft y p ercen t (5 0 %) o f t h e o u t s t a n d i n g

s ecu ri t i es rep res en t i ng t h e p res en t ri gh t t o v ot e fo r el ect i o n o f or t o ap p o i n t di rect o rs , t ru s t ees , m an ag ers , m em b ers o f t h e Bo ard o f M an ag ers o r eq u iv al en t p o s i ti o n s o f su ch en t i t y are o wn ed

, o r

co n t ro ll ed

, b y th e Pa rent Org a ni za ti o n , d i rect ly o r t h ro u g h o ne o r m o re Subs i di a ri es

.

W h i l e t h e p o l i cy was i n effect

, St ewart was wh ol l y -o wn ed b y a M cCro s s an i n d i v i d u al

. W i t h o u t ci t i n g au t h o r ity

, M c C r ossa n a r g u es St ewart i s an In s ured b ecau s e i t w as n o t i n a “ m at eri al ly d i fferen t p o s i t i o n ” t han o t h er M cCro ss an -rel at ed en t i ti es

t h e Co m pan y a d m i t s are co v ered

. Th e po l i cy ’ s l an g u ag e cal l s fo r o wn ers h i p o r

co n tro l b y M cCro s s an

. Own ers hi p an d co m m o n m an ag em en t b y M c C r o s s an i n d i v i d u al s , ev en M cCro s s an b o ard m e m b ers , d o es n o t m eet t h i s t es t. Becau s e St ewart d o es n o t m eet th e p o l i cy ’ s d efi n i t i o n o f Su b s i d iary

, i t i s n o t an In s u red

. See

D e p o s it o r s I ns . Co

. v. Do l

l a ns k y , 91 9 N.W .2 d 6 84
, 6 9 1 (M i n n

. 2 0 1 8 ) (“ We
d et erm i n e wh et h er an i ns u ran ce p o l icy pro v i des co v erag e by l o o k i n g t o t he l an g u ag e

o f t h e i n s u ran ce p o l i cy i t s el f.”). Th e d i s t ri ct c o u rt p ro p erl y g ran t ed s u m m ary ju d g m en t t o t h e Co m

p an y o n M cCro s s an ’ s cl ai m s fo r St ewart ’ s l o ss

.

-5

-B.

As fo r Bl ak el ey ’ s l o s s , M cCro s s an cl ai m s co v er a g e u n d er t h e “ Fo rg ery ” an d

“ Em p l o y ee Th eft ” i n su ri n g cl au s es

.

T he C om pa n y a dm its M c C r os san m et i t s i n i t i al b u rd en t o d em o n st rate c ove r a ge

u n d er t h e “ Fo rg ery ” cl au s e. Th e Co m p an y arg u es , h o wev er, t h at th e “ A u t h o r i z e d Rep res en t at i v e” ex cl us i on ap p l i es , wh i ch ex cl u d es fro m co v erag e:

l o s s o r dam ag e du e t o The f t
, F o rg ery , C o m puter F ra ud
, F unds Tra ns fer Fra ud
, Mo ney Orders And Co unterfei t Currency Fra ud
, Credi t Ca rd Fra ud o r o t h er frau d u len t , d i s h o n es t o r cri m i n al act (o t h er t h an Ro bbery o r Sa fe Burg l a ry ) co m m i t t ed b y an y au t h ori zed
rep res en t at i v e o f an I ns ured
, wh et h er act i n g al o n e o r in co ll u s i o n w i t h

o t h ers , p ro v i d ed t hat t h is Ex cl us i o n (A)(1 4 ) s h al l no t ap p l y t o o t h erwi s e

co v ered l o s s u n d er In s u ri n g Cl au ses (A), Em p lo y ee Th eft Co v erag e, o r (I), Cl i en t Co v erag e, res u l t i n g fro m Theft o r Fo rg ery co m m i t ted b y an Em pl o y ee act i n g i n co l l u s io n wi t h s u ch au th o ri zed rep res en t at i v e.

Th e p art i es d is p ut e wh et h er Cas t i l l o was an “ au t h o ri zed rep res en t at i v e” o f Bl ak el ey , a t erm n o t d efi n ed i n t he p o l i cy

.

Th e m o st rel ev an t cas e i s Na t io n a l Ci ty Ba n k o f Mi n n ea p o l i s v. S t . Pa u l

Fi r e & Ma r in e In s

. Co

. , 4 4 7 N .W .2 d 1 71 (M i n n

. 1 9 8 9 )

. Th e r e , an i n su red b an k s o u g ht

co v erag e u n d er a b o n d aft er m ak i n g a l o an i n rel i an ce o n fak e s to ck cert i fi cat es

. I d.

at 1 7 3

. At i s s u e w as w h et h er t he i n s u red ban k co m pl i ed wi t h th e b o n d ’ s req u i rem en t

t h at “ t h e In s u red

, i t s co rres p o n d en t b an k o r o th er au t h o ri zed rep res en t at i ve”

p h y s i cal l y p o s s es s t h e cert i fi cat e s b efo re m ak i n g th e lo an

. I d. at 1 7 4. Th e i n s u red
b an k recei v ed th e cert i fi cat es aft er m ak i n g t h e l oan ; an o t h er b an k had t h em wh i l e t h e i n s u red ban k n eg o t i at ed i t

. I d

. Th e co urt co n cl u d ed t h e l ack o f ag en cy rel at i o n s h ip

p recl u d ed t h e ot h er ban k fro m b ei n g an “ au t h o ri zed rep res en t at i v e” o f t h e i n s u red
b an k u n d er t he b o n d. S

ee i d

. at 1 7 6

. “ It was a m ere co i n ci d en ce” th at t h e o t h er b an k

-6

-h ad t he cert i fi cat es wh i l e t h e i n s u red b an k neg o t i at ed th e l o an

. I d

. “ [T] h u s t h ere was

n o act m ak in g [t h e o t h er b an k ] an ‘ au t ho ri zed rep res en t at i v e’ o f [t h e i n s u red b an k ] .”

I d

. (ag reei n g wi t h t he tri al co u rt t h at t h e o t h er, p o s s es s in g ban k “ d i d no t s erv e as an

au t h o ri zed rep res en t at i v e of [t h e i n su red b an k ] i n t h is t ran s act i on fo r t he p u rp o s es o f

p o s s es s i n g t h e cert i fi cat es as co n t em p l at ed u n d er t h e [b ] o nd ”).

Th i s co u rt i s b ou n d b y t he M i n n es ot a Su p rem e Co u rt ’ s i n s t ru ct i o n t h at “ b ei n g

an ‘ au t h ori zed rep res en t at i v e’ h as an ag en cy req u i rem en t.” I d

. Here, i t i s u n d i s p u t ed

t h at Bl ak el ey m ad e Bal d ers o n i t s ag en t fo r p ro p ert y m an ag em en t , Bl ak el ey k n ew Cas ti l l o w o rk ed a t B a l d e r s o n o n i ts acco u n t s , an d Bl ak el ey d id n o t o b ject t o h er

wo rk i n g t h ere. Th e d is t ri ct co u rt t h u s co rrect l y ap p l i ed ag en cy p ri n ci p l es t o co n cl u d e

t h at Cas ti l l o m et Na t i on a l Ba nk ’ s ag en cy req u i rem en t

. S ee Sem i ng

so n v. St o ck ya r d s Na t l. Ba nk
, 2 0 3 N .W. 4 1 2, 4 1 3 (M i n n

. 1 92 5 ) (“ If an ag en t em p l o y s a s u b ag en t fo r h i s p ri nci p al

, b y a u t h ori t y of t h e p ri n ci p al

, ex pres s o r i m p l i ed

, t h e s u b ag en t i s t h e
ag en t o f th e pri n ci p al .”); Ha rt fo r d Fi r e I

ns . Co

. v. Cl

a rk
, 7 27 F. Su p p

. 2 d 7 6 5
, 7 7 5 (D. M i n n

. 2 0 1 0 ), q u o ti n g R es ta tem ent (Thi rd) Of Ag ency § 3

. 1 5 cm t

. c (2 0 0 6 ) (“ Im pl i ed co n s en t t o ap p o in t s u b ag en t s i s

. . . p res en t wh en an ag en t i s i t s el f a p ers o n

t h at i s n o t an i n d i v i d u al

, s u ch as a co rp o rat i o n .”), a nd § 3.1 5 cm t

. b (“ W h en an ag en t
i s i t s el f a co rp o rat io n or o t h er l eg al p ers o n , i t s o ffi cers , em pl oy ees , p art n er s , o r

m em b ers wh o are d es i g n at ed t o wo rk o n t h e p ri n ci p al ’ s acco u n t are s ub ag en t s .”). Cf

. W o l fs o n v . B e r i

s , 2 9 5 N.W .2 d 5 6 2
, 5 6 5 (M i n n. 1 98 0 ) (t ri al co u rt co rrect l y ap p l i ed

ag en cy p r i n c i p l es t o fi n d t h at real es t at e ag en t was s u b ag en t o f s el l er, ev en t h o u g h

s el l er d id n o t “ k n o w o f” o r “ au t h o ri ze” ag en t ’ s act i o n s , b ecau se ag en t “ act ed o n [t h e

s el l er’ s ] p art i n acco rd wi t h t h e cu s to m of t h e i n d u st ry ”), ci t i ng Res ta tem ent (Seco nd) o f Ag ency § 5 (1 ) (1 9 5 8 ).

Tru e, as M cCro ss an co n t en d s, Na t i on a l Ci t y d o e s n o t s ay t h at ag en cy i s t h e

o n l y req u i rem en t t o b e an au t h o ri zed rep res en t at i v e. Ho wev e r , t h e au t h o ri zed

rep res en t at i v e e x c l u s i o n u n a m b i g u o u s l y ap p l i es h ere, wh ere Bl ak el ey ’ s

-7

-em

po werm en t o f Cas t i l lo t o act o n i t s b eh al f en ab led h er c ri m e. 2 S ee Ba ncI ns ur e,
I nc. v. Hi g hl a nd Ba nk
, 2 0 1 2 W L 6 21 7 37 5
, at *6

– 7 (D. Mi n n

. Dec. 4
, 2 0 1 2 ) ( c o n c l u d i n g t h at o n e b an k was t he “ au t h ori zed rep res en t at i v e” o f an o th er b an k
be cau s e t hei r “ i n t en t i o n al rel at i o n s h i p ” m et Na t i o n al Ci t y ’ s ag en cy r e quir e m e nt)

. Se e

a l s o V o l k , 7 4 8 F.3 d at 8 2 8

– 2 9 (“ M i nn es o ta co urt s rel y o n d ict i on ari es fo r t h e p l ai n

a n d o r d in ary m ean i n g o f an u nd efi n ed t erm .”); St o p & Sho p Co s ., I nc. v. Fed

er a l

I ns . Co

. , 1 3 6 F.3 d 7 1, 7 4 (1 s t Ci r. 1 99 8 ) (co n s u l t i n g Bl ack ’ s Law D i c t i o n a r y an d

W eb s t er’ s Th ird N ew In t ern at i o n al Di ct io n ary t o co n cl u d e “ au t h o ri zed

rep res en t at i v e” u nam

bi g u o us l y co v ers “ a p ers o n or co m p an y em p o w ered t o act o n an

en t i t y ’ s b eh al f”); Tel

a m on Co r

p . v. Cha r t

er Oa k Fi re I

ns . Co

. , 8 5 0 F.3 d 8 6 6
, 8 7 1 (7 t h Ci r. 20 1 7) (ad o p ti n g S t o p & S h o p ’ s d efi n i t i o n); St

a nfo r d Uni v. Ho sp . v. Fed er al

I ns . Co

. , 1 7 4 F.3 d 1 0 7 7
, 1 08 5 (9 t h Ci r. 1 9 9 9 ) (co n s t ru i n g “ t he ‘ au t h o ri zed

rep res en t at i v e’ l an g u ag e

. . . n arro wl y s i n ce i t i s in an ex cl u si o n cl au s e” an d ag reei n g wi t h S to p & S ho p ).

Bl ak el ey au t h o ri zed Bal d ers o n t o act o n i t s b eh al f fo r p ro pert y m an ag em en t

. Bal d ers o n ’ s d u t ies i n cl u ded m an ag i n g b an k acco u n t s , al l acco u n t i n g (ren tal b i l l i n g, d ep os i t s , d i s t ri b u t i on s , an d di s b u rs em en ts ), ap pro v i ng in v o i ces , an d m ai n t ai n i n g
p ro p ert y m an ag em en t s o ft ware. (Th e s co pe o f t h e d u t i es Bl ak el ey g ran t ed Bal d ers o n

an d res erv ed fo r i t s el f is d et ai l ed b y t h e d i st ri ct c o u r t

. C

. S

. McCr os s a n , 2 0 1 8 W L
2 1 8 0 2 5 6
, a t * 3– 4 .) Bl ak el ey k n ew t hat Bal d ers on p erfo rm ed i t s d u t i es t h ro u g h Cy n t h i a an d Cas t i l l o

. See Ro m m el v. New Br uns wi ck

Fi r e I ns . Co

. , 8 N.W .2 d 2 8,
3 2 (M i n n. 1 9 4 3 ) (“ [A co rp o rat i o n ] m u s t act t h ro u g h o r b y m ean s o f h u m an d i rect i o n .”). Bl ak e l e y ’ s g ran t o f au t h o ri t y t o Bal d ers o n th u s em p owered t h em to

2 M cCro s s an arg u es t h at eq u at i n g “ au t h ori zed rep res en t at i ve” wi t h “ ag en t ” i s i n co n s i s t en t wi t h o t h er p ro v i s i o n s in t h e i n s uran ce p o li cy

. It d oes n o t o b ject to d efi n i n g “ au t h o ri z e d r e p res en tat i v e” t o co v er “ a p ers o n o r co m p an y em p o wered to

a c t o n an en t i t y ’ s b eh al f.” Th i s co u rt n eed n o t ad d res s wh et h er M cCro s s a n ’s
p ro p os ed d efi n i t i o n req u i ri n g “ au t h o ri t y to b i n d ” i s reas o n ab l e, m ak i n g “ au t h o ri zed
rep res en t at i v e” am

b i gu o u s

. M cCro s s a n i t s el f d o es no t v i ew t h e fo rm u l at i o n s “ as

m ean i n g fu l [l y ] d i fferen t.”

-8

-wo rk o n it s b eh al f. S ee St anfo r d Uni v. , 1 7 4 F.3 d at 1 08 5 (“ T here wo u l d b e n o fo rce

o r effect t o th e e x c l u s i o n ary cl au s e i f t h e t erm ‘ au th o ri zed rep res en t at i ve’ d i d n ot
i n cl u d e em

p l o y ees an d o ffi cers o f t h e au t h o ri zed co m p an y

. ”); St

o p & Sho p , 1 3 6 F.3 d

at 7 4

– 7 5 (n o t in g an au th o ri zed co m p an y “ m ay carry o ut it s o b l ig at i o n s

. . . o n l y
t h ro u g h t h e act s o f i t s o ffi cers an d em pl oy ees ,” an d reject i n g t h a t a c t s b y t h e

au t h o ri zed co m

p an y ’ s o ff

i cers co u l d n o t fal l u n d er an “ au t h o ri zed rep res en t at i ve”

ex cl u s i o n ).

No t ev ery i n d i v i d u al wo rk i n g fo r an au t h o ri zed rep r e s e n t a t i v e i s al s o an

au t h o ri zed rep res en t at i v e. T h e fact s o f each cas e d et erm i n e wh et her t h e i n d i v i d u al
i s em p o wered t o act o n t h e p r i n ci p al ’ s b eh al f. Co n t rary t o M cCro s s an ’ s arg u m en t

t h at Cas t i l l o l ac ked au t h o ri t y , h er (u n d i s p ut ed ) d u t i es

— d o n e o n b eh al f o f
Bl ak el ey

— i n cl u d ed : b o o k k eep i n g (i n cl u d i ng p ro ces s i n g i n v o i ces an d p ri n t i n g ch eck s ), i n p u t t i ng v en d or i n fo rm at i o n, co l l ect i n g ren t s , f o l l o wi ng u p o n p ro p ert y

ren t al l ead s , m ak i n g co l d cal l s , an d h an d l in g t en an t req u es t s

. Th e s o l e co py o f t h e
pr o p ert y m an ag em ent sy ste m

— ne c e s sa r y to C a stillo’ s sc h e m e

—

w a s on he r c om

pute r ,

an d Cy nt h ia rarel y acces s ed i t

. Cy n t h i a tes t ifi ed t h at s h e p l an n ed t o h av e Cas ti l lo

t ak e o v er Bal d ers o n o n c e sh e ret i red

, an d

, i n co nn ect i o n w i t h t h at , Cas t i l l o was
g et t i n g m o re in v o l v ed i n t en an t i s s u es

. J an e M cCro s s an , Bl ak el ey ’ s m an ag er,

t es t i fi ed th at s h e k n e w an d was n o t s u rp ri s ed th at i n d ep en d en t au d it o rs d eci d ed to
i n t erv i ew Cas t il l o ab ou t frau d as a s t an d ard part o f t wo of M cCro s s an ’ s an n u al au d i t s

. Th o ug h Cas t i l l o ’ s p o s i t i o n was an “ ad m i n i s t rat i v e pers o n , ” M cCro s s an s wo re i n i t s
p ro o f o f l o ss t hat “ Cas t i l l o was res p o ns i b le fo r co -m an ag i n g t h e M cCro s s an Su b s id i ari es ’ pro p ert i es an d l eas i n g t h o s e p ro p ert i es o u t .” Cas t i l l o ’ s ro l e at
Bal d ers o n au t ho ri zed h er t o co n d u ct t h e act i v i t ies t h at l ed t o h er c r i m es , t h u s t h e

au t h o ri zed rep res en t at i v e ex cl us i o n ap p li es

. S ee Co ls o n Ser vs . Co r

p . v. I ns ur a nce Co

. o f N. Am

. , 8 7 4 F. Su p p

. 6 5
, 6 9 (S.D.N.Y. 1 9 9 4 ) (co n cl u d i n g co m p an y was
p l ai n t i ff’ s au t h o ri zed rep res en tat i v e w h ere it was g i ven au t h o ri t y t o act as p l ai n t i ff’ s
ag en t i n ch o o s i n g i nv es t m en t s an d p lai n t i ff “ co u l d h av e ch o s en t o m o n it o r [i t ] m o re cl o s el y t o en su re t h at i t was ex erci s i n g i t s au t h o ri ty ap p ro pri at el y , b u t ch o s e n o t t o d o

s o ”). Cf

. Tel a m on , 85 0 F

. 3 d a t 8 7 1 (co n s u l t an t was co rp o rat i o n ’ s au t h o ri zed

-9

-rep res en t a t i v e wh ere, d es p i t e a lack o f ex p res s au t h o ri zat i o n in h er em p l o y m en t

ag reem en t s “ t o d o t h e s

peci fi c act iv i t y th at gav e ri se t o t h e th eft

, ” h e r “ act u al ro l e
g rew o ver t i m e t o reach m at t ers far b ey o n d th e [a] greem en t s ’ t erm s ,” an d h er d u ti es

au t h o ri zed h er “ t o co n du ct t h e v ery act i v i t y t h at l ed t o h er cri m e”).

I n l i g h t o f t hes e fact s , Cas t i l l o ’ s lack o f ch eck -s i g ni ng au t h o ri t y d o es n o t

p recl u d e h er fro m bei n g an “ au t h o ri zed rep res en t at i v e,” as M cCro s san arg u es

. Th e

t erm ’ s u n am

bi g u o u s m ean i n g d o es n o t i m p o se s u ch a req u i rem en t

. S ee St o r m s , I nc.

v. M at hy Co ns t

. Co

. , 8 8 3 N.W .2 d 7 72
, 7 7 6 (M i n n

. 2 0 1 6 ) ( “ W hen a co n t ract u al

p ro v is i o n i s u n am

bi g u o u s , we do n o t ‘ rewri t e, m o d i fy

, o r l i m it it s effect by a s t rai n ed

co n st ru ct i o n .’ ”), qu ot i n g V a l sp a r Refi ni

s h, I nc. v. G a yl o r d ’s , I nc. , 7 6 4 N .W .2 d 3 5 9,
3 6 4

– 6 5 (M i n n

. 2 0 0 9 ). No r d oes t h e ex cl u s i o n ’ s p lai n l an g u ag e. As th e d is t ri ct co u rt

n o t ed

, i t reach es a ran g e o f act s u n co n n ect ed t o ch ec k -s i g n i n g au t h o ri t y

. Th e

ex cl u s i o n ap p l i es t o act s co m m i t ted b y “ an y au th ori zed rep re s e n t a t i v e,” n o t ju s t

au t h o ri zed rep res en t at i v es w i t h au t h o ri ty t o si g n ch eck s

. S ee Kub o t a Cr ed i t Co rp ., U.S.A. v. Fed

er a l I ns . C o . , 2 01 2 W L 1 2 0 3 3 8 7 6, at * 5– 7 (C.D. Cal

. Ap r. 2
, 2 0 1 2 ) (co n s t ru i n g t h e sam e ex cl u s i o n at i s s u e h ere, n ot i n g “ th e p l ai n m ean i n g o f ‘ au t h o ri zed

rep res en t at i v e[] ’

. . . o nl y req u i res a g ran t o f ‘ a u t h o ri ty ,’ n ot n eces s ari l y a g ran t o f

‘ fi s cal au t h o ri t y ’ ”).

W h i l e ex cl u si o ns are c o n s t ru ed narro w l y ag ai n s t t h e i n s urer, vi ewi n g t h e

reco rd m o s t fav o rab l y t o M cCro s s an , th e au t h o ri zed rep res en t at i v e ex cl u s i o n

u n am b i g u o u s l y ex cl ud es co v erag e here b ecau se Cas t i l l o act ed as Bl ak el ey ’ s

au t h o ri zed rep res en t at iv e. S ee L a t t er el l v. Pr o gr es s ive N. I

ns . Co

. , 8 0 1 N.W .2 d 9 1 7,
9 2 1 (M i n n

. 2 0 1 1 ) (Co urt s “ m u s t fas t i d i o u s l y g u ard ag ai n st t h e i n v i t at i o n t o creat e

am bi g ui t i es w h ere n o n e ex i st .”), q u o t i n g Co l um b i a Hei g ht s M o to r s , I nc. v. Al l s t a t e
I ns . Co

. , 2 7 5 N.W .2 d 3 2, 3 6 (M i n n . 1 9 7 9 ).

As fo r co v era g e u n d er “ Em p l o y ee Th eft ,” M cCro s san arg u es t h at i f Cas ti l lo

was B l a k e l ey ’ s au t h ori zed rep res en t at i v e, s h e m u s t h av e b een i ts em

pl o y ee. As

-1 0

-rel ev an t h ere, an “ Em p l o y ee” m ean s an y “ Co n t ract ual In d ep en d en t Co n t ract o r.” Th e
p o l i cy d efi n es t h at t erm

as :

an y n at u ral p ers on i n d ep en d en t co n t ract o r wh i l e in t h e r e g u l ar s erv i ce

o f an Org a ni za ti o n i n t h e o rd i n ary co u rs e o f s uch O r g a ni za ti on’s b u s i n es s , pu rs u an t t o a w r itte n c ontr a c t b et ween s u ch Org a ni za ti o n , an d ei t h er (A) s u ch n at u ral p ers o n i n d ep en den t co n t ract o r, or (B) an y o t h er

en t i t y act i n g o n b eh al f o f s u ch n at u ral p ers o n i n d e p e n d e n t co n tract o r, fo r s erv i ces

.

M cCro ss an / Bl ak el ey di d n o t h av e a wri tt en co n t ract fo r s e r v i ces wi t h Cas t i l l o. Bl ak el ey d id h av e a co n t ract w i t h Bal d ers o n

. Vi ewi n g th e reco rd m o s t fav o rab l y to
M cCro ss an , Bal d ers on was n o t act i n g o n b eh al f o f Cas ti l l o

.

Th e p art i es ag ree t h at act i n g “ o n beh al f o f” m ean s “ in t h e i n t eres t of,” “ as t h e
rep res en t at i v e o f,” o r “ fo r t h e b en efi t o f.” Ha r l eys vi l l e I ns . Co

. v. Phys i ca l Di

s t ri b.
Ser vs ., I nc. , 7 1 6 F.3 d 4 5 1
, 46 0 (8 t h Ci r. 2 0 1 3 ), q uo t i ng W ebs ter’s Thi rd New

I nterna ti o na l Di cti o na ry 1 98 (1 9 9 3 ). M cCro s s an arg u es Bal d ers o n act ed fo r t h e b en efi t o f Cas t i l l o , rel y i n g s ol el y o n Co lo n y T i r e Co r p. v. Fed er a l In s

. Co

. , 2 1 7 F.
Su p p

. 3d 8 6 0 ( E

. D .N.C. 2 0 1 6 ). Th ere, a p l ai n t i ff so u gh t co v erag e u n d er t h e s am e

em pl o y ee-t h eft cl au se at is s u e here aft er t wo al l eg ed “ co n t ract u al i n d ep en d en t

c ontr a c t or s” f

r a udu len t l y u s ed t h ei r p ay ro l l -an d -t ax -s erv i ces co rp o rat i o n t o em b ezzl e

t h e p l ai n t i ff’ s fu n d s. S

ee Co l o ny Ti r e , 2 1 7 F. Su p p . 3 d at 8 6 3, 8 6 6. An al y zi n g t h e

s am e l an g u ag e at i ss ue h ere i n l i g h t o f No rt h Caro l i n a l aw, t hat co u rt co n cl u d ed t h e

co rp o rat i o n act ed o n b eh al f o f i t s two o wn ers “ wh en i t co n tract ed wi t h p l ai n t i ff fo r

t h e p u rp o s e of faci l i t at i n g t h e [o wn ers ’ ] em b ezzl em en t .” I

d

. at 8 6 7

. Th e co u rt n o t ed

“ t h e p u rp o s e o f [t h e co rp o rat i o n ’ s] ex i s t en ce was t o faci l i t at e th e [ o wn ers ’ ]

em bezzl em en t ,” an d “ t h ere i s n o ev i d en ce i n t h e reco rd t h at an y o n e b en efi t t ed fro m [i ts ] op erat i o ns o t her t han t h e [o wn ers ] .” I d

. Co l o n y Ti r e i s i n ap p o s i te h ere. Fi rs t , Bal d ers o n ’ s co n t ract u al rel at i on s h i p wi t h Bl ak el ey s t art e d b e f o re Cas t il l o jo i n ed
Bal d ers o n

. Th o u gh s h e wo rk ed t h ere wh en Bl ak el ey h i red Bal d e rs o n di rect l y , t h at

co n tract w as reco m

m en ded wh en t he co m

pan i es ’ rel at i o n s h i p s t art ed (ag ai n , b efo re

-1 1

-s h e jo in ed Bal d ers on ). S e c o n d

, Cy n t h ia o w n ed Bal d ers o n , n o t Cas t i l l o , an d t h e

p u rp os e o f i t s ex i st en ce was n ot t o faci l i tat e Cas ti l l o ’ s cri m e.

St i l l rel y i n g o n Co l o n

y Ti r e , M cCro s s an cal ls i t an “ ab s urd res u l t ” t h at
Cas ti l l o ’ s act i o n s are n o t co v ered

— d e s p i t e M cCro s s an n o t g iv i n g her au t h o ri t y to

s i gn ch eck s— wh i l e a cri m e co m m i t t ed b y Cy n t h i a— an au t h o ri zed s i g n er— wo u l d b e

co v ered a s e m

p l o y ee t h eft

. An al y zi n g Cy n t h i a’ s act s u n d er Co l o n y Ti r e p res en t s d i fferen t fact s an d l aw t h an pres en t here. Cas t i l l o ’ s act s are n o t co v ered b y t h e p l ai n

an d o rd in ary m ean i n g o f t h e i n s u ran ce p o l i cy h ere. S ee E n g i neer i ng & Co ns t

. I nno va t io ns , I nc. v. L .H. Bo l

d uc Co

. , 82 5 N. W. 2 d 6 9 5
, 7 0 5 (M i n n

. 2 0 1 3) (“ [W ] e

w i l l n o t ‘ read an am

b i gu i t y i n t o t h e p l ai n l an gu ag e o f a p o l i cy i n o rd er t o p ro v i d e

co v erag e.’ ”), qu ot i n g

Fa r k a s v. Ha r t

fo rd Acci d ent & I nd em . Co

. , 1 7 3 N.W .2 d 2 1,
2 4 (M i n n . 1 9 6 9).

Th e d i s tri ct co u rt p ro p erl y g ran t ed t h e Co m p an y su m

m a r y j u d g m en t o n M cCro ss an ’ s cl ai m s fo r Bl ak el ey ’ s l o s s

.

* * * * * * *

Th e ju d g m en t i s affi rm ed

.

__ _ _ _ _ __ _ _ __ _ _ __ _ __ _ _ _ _ _ __ _ _ _ _

-1 2

-