Opinion ID: 29586
Heading Depth: 1
Heading Rank: 3

Heading: Forgery or Alteration

Text: 10 We will pay for loss resulting directly from Forgery or alteration of, on or in Covered Instruments that are: 1. Made or drawn by or drawn upon you; or 11 2. Made or drawn by one acting as your agent; 12 or that are purported to have been so made or drawn 13 .... 14 Covered Instruments means checks, drafts, promissory notes or similar written promises, orders or directions to pay a sum certain in Money. 15 Forgery means the signing of the name of another person or organization with intent to deceive, it does not mean a signature which consists in whole or in part of one's own name signed with or without authority, in any capacity for any purpose. The Aetna policy reads:
16 We will pay for loss involving Covered Instruments resulting directly from the Covered Causes of Loss. 17 1. Covered Instruments: Checks, drafts, promissory notes, or similar written promises, orders or directions to pay a sum certain in money that are: 18
19 b. Made or drawn by one acting as your agent; or that are purported to have been so made or drawn. 20 2. Covered Causes of Loss: Forgery or alteration of, on or in any Covered Instrument. 21 The district court ruled that in light of the surrounding circumstances the terms covered instruments and drawn upon were ambiguous. The district court rejected Travelers' assertion that the definition of covered instruments included only negotiable instruments because the contract did not expressly use the term negotiable. Since the forged invoices clearly were not made or drawn by or drawn upon BHS or its agents nor purported to have been so made or drawn, we do not have to consider whether the definition of covered instruments must expressly use the term negotiable to exclude non-negotiable instruments. 22 The district court found the phrase drawn upon you ambiguous and read it to include the forged invoices. The court relied upon Omnisource Corp. v. CNA/Transcon. Ins. Co., 949 F.Supp. 681 (N.D.Ind.1996), to find that a reasonable interpretation of the phrase [`drawn upon you'] is to trace the payment on the forged instruments to the ultimate source of liability for any money paid in reliance on the forged instruments. To reach such a conclusion, the district court adopted Omnisource 's use of the dictionary definition of drawn rather than the more limited legal and commercial usage of the term. See id. at 689 ([T]he phrase `draw upon' is susceptible to at least two interpretations. `Draw' is defined as, inter alia, `[t]he act of a drawer in creating a draft. To draw a bill of exchange, check, or draft, is to write (or cause it to be written) and sign it; to make, as a note.' Black's Law Dictionary (6th ed.1996). The term also, however, means the following: `[t]o withdraw money; i.e., to take out money from a bank, treasury, or other depository in the exercise of a lawful right and in a lawful manner,' id. ; `[t]o use or call upon part of a fund or store. Used with on or upon,' American Heritage Dictionary of the English Language 397 (Family ed.1979).). 23 Since the district court ruling, we have rejected Omnisource 's expansive reading of the term drawn as used in insurance contract clauses nearly identical to the one in the Travelers and Aetna policies. See Parkans Int'l LLC v. Zurich Ins. Co., 299 F.3d 514, 517 (5th Cir.2002). Like the policy in Parkans International, the Travelers policy uses the term `drawn' in the context of the specific listed instruments and `similar ... promises, orders or directions to pay.' In the commercial paper context the phrases `drawn by' and `drawn upon' are not ambiguous and have a definite legal meaning. A contract term that can be given a definite or certain legal meaning is not ambiguous. We will not therefore interpose multiple dictionary usages. Id. (internal citation omitted). 24 The forged invoices were not made, drawn by, or drawn upon BHS as those terms are used in the commercial paper context or under the Uniform Commercial Code. The addition of forged signatures to the invoices did not create instruments on which a party could demand payment from a bank. In the commercial context, BHS is not a maker or drawer of the forged invoices. 1 25 It is true that BHS's bank took funds from BHS's account to pay the checks written to Shepherd in amounts indicated in the forged invoices. However, the checks were not forged and do not fall within the contract provision. We could only conclude that the checks fall within the provision or that the invoices were drawn upon BHS if we determined that the checks and forged invoices should be treated as one instrument instead of as separate instruments. Courts have occasionally bundled documents in situations in which the bank demanded all involved documentation to extend credit or honor a draft. See, e.g., Omnisource, 949 F.Supp. at 686-688; Community State Bank of Galva v. Hartford Ins. Co., 187 Ill.App.3d 110, 134 Ill.Dec. 810, 542 N.E.2d 1317, 1320 (1989) (viewing as a single instrument all of the documents on which a bank relied in extending credit). Even if we were to recognize the legitimacy of bundling in such contexts, we would distinguish the invoices forged by Shepherd. To pay the checks drawn upon BHS, the bank did not have to receive the invoices; the bank demanded no supporting documents to honor the checks. We decline to treat the checks and forged invoices as one instrument. The invoices were only prerequisites insofar as internal BHS procedure made them such. They were not required by law or the bank.