State Street Bank & Trust Co. v. United States Fidelity & Guaranty Co.

JUSTICE LUND,

specially concurring:

THE ISSUE

It is my opinion that the plaintiff seeks to extend coverage of the “Bankers Blanket Bond” beyond what it clearly intended. After providing for the losses covered by the bond, there is a provision allowing indemnity for attorney fees incurred “on account of any loss, claim or damage which, if established against the insured would constitute a valid and collectible loss sustained by the insured under the terms of this bond, in event of such loss.” The issue is whether case No. 75 — L—57 stated a cause of action which, if established, would result in a loss covered by the terms of the bond.

RULES OF CONSTRUCTION

The rules of construction applicable to bonds are generally consistent with those applying to insurance contracts. (10 Am. Jur. 2d Banks §84 (1963).) Generally, an insurance contract, in case of doubt as to meaning thereof, shall be interpreted against the party who has drawn it, which, as in this case, is usually the insurance company. (43 Am. Jur. 2d Insurance §283 (1982).) This rule does not conflict with the rule that insurance contracts should be construed to carry out the true intention of the parties. (43 Am. Jur. 2d Insurance §285 (1982).) Where the policy is specific as to subject matter or coverage, it cannot be extended by implication. 43 Am. Jur. 2d Insurance §281 (1982).

THE BOND LOSS COVERAGE

A careful examination of the bond indicates the specific coverage intended. The loss coverage is described under the heading “INSURING AGREEMENTS.” Paragraph (A) is entitled “FIDELITY” and refers to the “[l]oss through any dishonest or fraudulent act of any of the Employees.” Paragraph (B) covers “[l]oss of Property *** through robbery, burglary *** larceny *** misplacement, mysterious unexplained disappearance.” Paragraph (C) covers those losses listed in paragraph (B) happening when property is in transit. Paragraph (D) covers “Moss through FORGERY OR ALTERATION.” Paragraph (E) covers loss of securities. Paragraph (F) covers loss related to redeeming forged United States savings bonds. Paragraph (G) covers loss to the bank resulting from counterfeit currency. None of the coverage relates, in any way, to bank business decisions or taking action relating to loan collections.

PROPER INTERPRETATION OF THE COVERAGE

Paragraph (A), as stated, is entitled “FIDELITY.”

“Fidelity insurance is that form of insurance in which the insurer undertakes to guaranty the fidelity of an officer, agent, or employee of the assured, or rather to indemnity the latter for losses caused by dishonesty or a want of fidelity on the part of such a person. People v. Rose, 147 Ill. 310, 51 N.E. 246, 44 L.R.A. 124.” Black’s Law Dictionary 943 (4th ed. rev. 1968).

The case No. 75 — L—57 complaint used terms such as “wilful,” “wanton,” “intentional,” “malicious,” “reckless,” “negligent,” “careless,” and “bad faith,” but the action was based on a bank employee calling and collecting loans on behalf of the bank. This cause of action is somewhat similar to those in Wait v. First Midwest Bank/Danville (1986), 142 Ill. App. 3d 703, 491 N.E.2d 795, McClellan v. Banc Midwest (1987), 164 Ill. App. 3d 304, 517 N.E.2d 762, and Champaign National Bank v. Landers Seed (1988), 165 Ill. App. 3d 1090, 519 N.E.2d 957. The conduct alleged necessarily involved business decisions on behalf of the banks, were not alleged to be ultra vires, and had no relationship to direct losses to the bank caused by an employee’s dishonest or fraudulent action.

The plaintiff would extend coverage of the bond to alleged wrongful actions of employees performing their duties for the bank. These alleged actions could even financially benefit the banks, i.e., preventing greater loan losses. The bond’s “INSURING AGREEMENTS” read, as a whole, leave no doubt as to the intended coverage. It does not include business decisions made on behalf of the bank by the bank’s agents, regardless of approval by high level officials of the bank. Any other decision improperly allows coverage implications and conflicts with the obvious intention of the parties. The policy is specific as to the subject matter and coverage.