Court Opinion

ID: 6226577
Source: CourtListenerOpinion
Date Created: 2022-02-17 01:00:28.68864+00
Date Added: 2024-06-11T08:57:40.046581
License: Public Domain

Case: 20-10262     Document: 00516205193        Page: 1    Date Filed: 02/16/2022

           United States Court of Appeals
                for the Fifth Circuit                                 United States Court of Appeals
                                                                               Fifth Circuit

                                                                             FILED
                                                                     February 16, 2022
                                 No. 20-10262
                                                                        Lyle W. Cayce
                                                                             Clerk
   Dillon Gage, Incorporated of Dallas,

                                                          Plaintiff—Appellant,

                                     versus

   Certain Underwriters at Lloyds Subscribing to Policy
   No EE1701590,

                                                          Defendant—Appellee.

                  Appeal from the United States District Court
                      for the Northern District of Texas
                           USDC No. 3:18-cv-01555

   Before Barksdale, Southwick, and Graves, Circuit Judges.
   James E. Graves, Jr., Circuit Judge:
         After incurring a million-plus-dollar loss for sending gold coins to a
   thief who forged check payments and intercepted the shipment of those
   coins, Dillon Gage, Inc., filed an insurance claim. The underwriters denied
   the claim pursuant to a coverage exclusion for losses incurred “consequent
   upon” handing over insured property to any third party against payment by
   a fraudulent check. Because the language in the policy had yet to be
   interpreted in Texas, we certified the issue to the Texas Supreme Court. In
   its answer, the Texas Supreme Court concluded the exclusion applied and
Case: 20-10262      Document: 00516205193            Page: 2   Date Filed: 02/16/2022

                                      No. 20-10262

   Dillon Gage was not entitled to coverage. Accordingly, we AFFIRM the
   district court’s order reaching the same conclusion.
                                           I.
          Dillon Gage deals in gold coins and other precious metals. In January
   2018, Dillon Gage received an order for $549,000 worth of gold coins. Dillon
   Gage thought the order was from Kenneth Bramlett, an orthopedic surgeon
   from Alabama. But unbeknownst to Dillon Gage, a criminal posing as
   Kenneth Bramlett placed the order and provided Bramlett’s correct home
   address, correct social security number, and a scan of an Alabama driver’s
   license of a person purporting to be Bramlett. This thief stole Bramlett’s
   identity and intercepted a box of his personal checks from the mail.
          After Dillon Gage received the order and the check (purportedly
   signed by Bramlett’s wife) cleared, Dillon Gage shipped the order via UPS
   and emailed the tracking information to the email address the thief provided.
   Shortly after the package arrived at UPS’s facility for shipping, the thief sent
   UPS an instruction to hold the package at a UPS facility instead of delivering
   it to Bramlett’s address. UPS, however, was not authorized by Dillon Gage
   to reroute the package without Dillon Gage’s consent. An unknown
   individual retrieved the package, without signing for it, only three minutes
   after it arrived at the UPS facility.
          Having successfully stolen the coins, the thief did the same thing with
   another order for $655,000 worth of coins. Once Bramlett discovered the
   fraud, Dillon Gage had neither the $1,204,000 worth of gold coins it had
   shipped nor the $1,204,000 it had received from Bramlett.
          Dillon Gage filed an insurance claim. The underwriters denied the
   claim pursuant to an exclusion for “any claim . . . where the loss has been
   sustained by the Insured consequent upon handing over such Insured property
   to any third party against payment by [fraudulent check].” (emphasis added).

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                                       No. 20-10262

   Dillon Gage then sued the underwriters for breach of contract and violations
   of the Texas Insurance Code.
          On cross motions for summary judgment, the district court concluded
   the losses were excluded from coverage because they were indeed
   consequent upon Dillon Gage accepting fraudulent checks and shipping the
   insured coins. Because the language “consequent upon” had yet to be
   interpreted by the Texas Supreme Court and the parties had opposing views
   regarding the scope of the policy’s exclusion, we certified the following
   questions to the Texas Supreme Court:
          1.     Whether Dillon Gage’s losses were sustained
                 consequent upon handing over insured property to UPS
                 against a fraudulent check, causing the policy exclusion
                 to apply.

          And if that answer is yes,

          2.     Whether UPS’s alleged errors are considered an
                 independent cause of the losses under Texas Law.

   See Dillon Gage, Inc. of Dallas v. Certain Underwriters at Lloyds Subscribing to
   Pol’y No EE1701590, 992 F.3d 401, 405–06 (5th Cir. 2021).

          The Texas Supreme Court concluded the ordinary meaning of
   “consequent upon” is but-for causation and therefore answered “yes” to the
   first question. See Dillon Gage Inc. of Dallas v. Certain Underwriters at Lloyds
   Subscribing to Pol’y No. EE1701590, 636 S.W.3d 640, 644–45 (Tex. 2021). On
   the second question, the Texas Supreme Court answered “no” by
   concluding UPS’s alleged negligence was a concurrent cause of loss,
   dependent upon Dillon Gage’s handing over of the gold coins against
   fraudulent checks. See id. at 645–46.

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                                    No. 20-10262

                                         II.
          In light of the answers from the Texas Supreme Court, we conclude
   the district court correctly determined Dillon Gage’s losses were excluded
   from coverage.
          The only unresolved issue is whether Dillon Gage’s extra-contractual
   claims under the Texas Insurance Code were also properly dismissed. “The
   general rule is that an insured cannot recover policy benefits for an insurer’s
   statutory violation if the insured does not have a right to those benefits under
   the policy.” USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479, 490 (Tex.
   2018). Indeed, “an insured cannot recover any damages based on an insurer’s
   statutory violation if the insured had no right to receive benefits under the
   policy and sustained no injury independent of a right to benefits.” Id. at 489.
   The district court concluded Dillon Gage’s extra-contractual claims were
   premised on its right to benefits under the policy. Having found no coverage
   under the policy pursuant to the “consequent upon” exclusion, the district
   court dismissed the extra-contractual claims.
          Because the Texas Supreme Court determined Dillon Gage’s losses
   were not covered, we likewise conclude the extra-contractual claims were
   properly dismissed. See id. at 491 (noting extra-contractual claims are negated
   if they are predicated on coverage under the policy and it is determined that
   there is no coverage).
                                         III.
          Pursuant to the Texas Supreme Court’s answer to the first of our two
   certified questions, Dillon Gage’s losses were consequent upon its handing
   over insured property to UPS against a fraudulent check. And UPS’s alleged
   mishandling of the shipment was a concurrent cause of loss, dependent upon
   Dillon Gage’s own conduct in handing over the gold coins against fraudulent
   checks. Dillon Gage is therefore not entitled to coverage under its policy from

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                                    No. 20-10262

   the underwriters. Because Dillon Gage’s extra-contractual claims are
   premised on its claim for coverage, those claims also fail.
          The district court’s judgment is AFFIRMED.

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