Where insurance Coverage was denied over a forged cashier’s check received by a plaintiff law firm, a motion to dismiss filed by the defendant insurance company should be allowed because the firm’s loss is excluded by a false pretenses exclusion.

“B&D is law firm in Boston, Massachusetts. … In 2021, B&D was retained by an individual who called himself Brian Rodriguez (‘Rodriguez’) to secure money owed to Rodriguez by his employer under the terms of a severance agreement. … Rodriguez then emailed the employer seeking payment of the amount owed to him to be sent to B&D within a week. … Shortly thereafter, B&D received a cashier’s check drawn upon Wells Fargo Bank, N.A. in the amount of $89,960 with a letter from the employer’s chief financial officer explaining the reason for payment. … On October 28, 2021, B&D deposited the cashier’s check into its IOLTA account at Cambridge Trust Bank. … On November 3, 2021, B&D transferred $88,385 to an account at Citibank NY, USA at Rodriguez’s instruction. … The following day, B&D received a letter from Wells Fargo Bank N.A. dishonoring the cashier’s check as an ‘Altered/Fictitious Item.’ …

“B&D purchased the Policy from Twin Cities for the term beginning April 1, 2021 and ending April 30, 2022. … The Policy covers various business-related losses that B&D might incur and consists of numerous documents, including the Special Property Coverage Form, the Super Stretch for Law Offices Endorsement, the Forgery Coverage Endorsement, Special Property Coverage Amendatory Endorsement. …

“As an initial matter, the Court notes that B&D appears to concede that the Amendatory Endorsement’s additional coverage for Forgery does not apply to this case. …

“B&D instead asserts that Super Stretch Endorsement … provides coverage for ‘forgery of covered instruments.’ …

“… Taking the factual allegations in the complaint as true, B&D received a forged cashier’s check from a third-party purporting to be Rodriguez’s employer. … As a cashier’s check, it was purportedly made or drawn by and drawn upon Wells Fargo, N.A. … Accordingly, B&D has not established that the plain language of the [forged or altered instruments coverage (FAIC)] applies here. …

“B&D also draws the Court’s attention to the definitions of ‘money’ and ‘counterfeit’ in the Special Property Coverage Form. … The Court takes this to suggest that B&D believes its loss falls within the Counterfeit Currency and Money Orders Coverage listed in the Forgery Coverage Form. …

“… A handful of courts have found that money orders should be treated like cashier’s checks in various contexts, because both are instruments which cannot be subsequently cancelled by the purchaser and must be honored by the bank or issuer if duly presented. …

“On the other hand, courts that have confronted the issue of whether an insurance policy provision referring to ‘money orders’ also covers cashier’s checks have construed such policy language to exclude cashier’s checks. …

“B&D appears to have some support for its position that ‘money order’ in the [counterfeit currency and money orders coverage (CCMOC)] is ambiguous, because it may reasonably be interpreted as either including or excluding cashier’s checks. … Under Massachusetts law, the Court would resolve any ambiguity in favor of the insured, B&D. … For present purposes, the Court assumes, without deciding, that the fraudulent cashier’s check is covered by the CCMOC. …

“Even assuming such coverage arguendo, B&D’s loss is excluded by Section B.3.f of the Amendatory Endorsement (the ‘False Pretenses Exclusion’). … This exclusion addresses a scenario where the insured willingly transfers funds to a third-party based on some false representation or receipt of a false check. … B&D’s loss falls into this exclusion. …

“Even assuming that B&D established coverage the CCMOC, its loss is unambiguously excluded by the False Pretenses Exclusion. Accepting all factual allegations as true and drawing all permissible inferences in B&D’s favor, the Court concludes that B&D has not plausibly alleged a claim for breach of the Policy or a right to indemnity under the Policy. Accordingly, Counts I (breach of contract) and III (declaratory judgment for right to indemnity under the Policy) are dismissed. …

“Because Twin Cities properly denied coverage under the Policy, B&D’s claim violations of Chapter 93A also fails. … As concluded above, Twin Cities properly denied coverage to B&D under the Policy. Accordingly, B&D’s claim for violation of Chapter 93A, Count II, is also dismissed.”

Brooks & Derensis, P.C. v. Twin Cities Fire Insurance Co. (Lawyers Weekly No. 02-418-23) (12 pages) (Casper, J.) (Docket No. 22-cv-11980-DJC) (Sept. 19, 2023).

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