DGG and CAR, Inc., d/b/a Metrol, (28) is an unpublished Arizona appellate court decision where the insured contended that the Employee Dishonesty coverage limits of $50,000 of Employees Mutual's policy applied to each of the 284 separate occasions of forged or altered checks occurring over a five year period totaling $584,000.
In June, 2002, the insured discovered that its employee had forged or altered checks on 284 occasions from 1997 to 2002.
Therefore, the Arizona appellate court concluded that the "series of acts" (all 284 occasions of forged or altered checks) constituted a single occurrence under Employers Mutual's policy.
For cancelled checks it could be handwritten check endorsements, multiple endorsements, unsigned checks, or altered checks
, Hall said.
It soon found that other stolen and altered checks
, as well as counterfeit checks, were being negotiated against the company's account.
The court concluded, however, that Travelers would not he entitled to reimbursement of amounts mistakenly paid for the six altered checks. The court held that it would be inequitable to reduce the amount owing the insured because, in reliance on Traveler's erroneous payment, the insured had no reason to give notice or to submit a proof of loss to USF&G.
Those rights also had also been prejudiced by the insured's failure to notify the bank of the altered checks, the court stated.
Insured's failure to notify banks of altered checks prejudiced surety's rights.