A Theft is a Taking of Property: A Decision Finding Theft Can Be a Taking of More than Money Costs National Union $22,114,883 Plus Interest.

AuthorZalma, Barry
Position[ON MY RADAR]

* Cargill, Inc.'s (Cargill) moved for judgment on the pleadings. Cargill seeks judgment in its favor as to the one disputed claim between the parties on the extent of theft coverage and as to the issue of prejudgment interest. Plaintiff National Union Fire Insurance Company of Pittsburg, Pa. (National Union) opposed the motion. In National Union Fire Insurance Company of Pittsburg, Pa., v. Cargill, Inc., No. 20-cv-0839 (WMW/JFD), United States District Court, D. Minnesota (August 24, 2021) the District Court found coverage applied.


National Union issued a commercial crime insurance policy to Cargill, effective October 1, 2014, through June 15, 2016 (Policy). The Policy provides up to $25 million in insurance coverage with a $10 million deductible. The employee theft clause of the Policy (Employee Theft Clause) provides that National Union, "will pay for loss of or damage to 'money' 'securities' and 'other property' resulting directly from 'theft' committed by an 'employee' whether identified or not, acting alone or in collusion with other persons." The Policy defines "theft" as, "unlawful taking of property to the deprivation of the Insured."

This dispute arose from the fraudulent actions of Cargill's former employee, Diane Backis. Cargill employed Backis as a "Merchant/Admin Leader" in Cargill's Albany, New York, grain facility. Cargill discovered uncharacteristically large accounts-receivable balances, which triggered a fraud investigation. Assisted by the Federal Bureau of Investigation (FBI), Cargill determined that between approximately December 2006 through June 2016, Backis misrepresented the prices that customers were willing to pay for corn and sorghum and made fraudulent entries in Cargill's accounting system to memorialize these fictitious higher prices. Backis's actions led Cargill to sell commodities at lower prices, leading Cargill to sustain approximately $32 million in losses, calculated as the "purchase price of corn and sorghum [that Cargill paid] less the cash receipts from corn and sorghum sales from June 1, 2007 through May 31, 2016." Backis subsequently pleaded guilty to one count of mail fraud and one count of filing a false tax return after admitting that she deposited at least $3,115,610.89 of Cargill's customers' payments into her personal bank accounts.

Cargill notified National Union of a purported employee-theft loss under the Policy. The parties jointly retained an independent "Investigative...

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