C.S. McCrossan Inc. Plaintiff - Appellant
Federal Insurance Company Defendant-Appellee
Submitted: March 14, 2019
from United States District Court for the District of
Minnesota - Minneapolis
GRUENDER, BENTON, and GRASZ, Circuit Judges.
BENTON, Circuit Judge.
McCrossan Inc. sued Federal Insurance Company for coverage
under a crime insurance policy. Both moved for summary
judgment. The district court granted the Company's motion.
C.S. McCrossan Inc. v. Federal Ins. Co., 2018 WL
2180256 (D. Minn. Mar. 29, 2018). McCrossan appeals. Having
jurisdiction under 28 U.S.C. § 1291, this court affirms.
Company issued McCrossan an insurance policy for
"Employee Theft" and "Forgery":
(A) The Company shall pay the Parent
Organization for direct loss of
Money, Securities, or
Property sustained by an
Insured resulting from
Theft or Forgery committed
by an Employee acting alone or in collusion
(D) The Company shall pay the Parent
Organization for direct loss sustained by an
Insured resulting from
Forgery or alteration of a Financial
Instrument committed by a Third
(bolded words in original, defined in policy). The policy
excluded from coverage certain loss "committed by any
authorized representative of an
Insured." An Insured under the policy
included McCrossan and its subsidiaries.
Properties, LLC and Stewart Properties, LLC own commercial
rental properties. Brookstone, Inc. and Valhalla Investments,
Inc. were Blakeley's and Stewart's respective agents
to "manage, operate, control, rent and lease"
several properties. (Image Omitted) Both hired Balderson
Management, Inc. to manage these properties. Blakeley
separately hired Balderson as well.
owner and principal, Cynthia Balderson, managed properties
with the help of an "administrative person," as
relevant here, her daughter Stephanie Castillo. Castillo was
the primary user of Balderson's property management
system, the sole copy of which was on her computer. Unlike
Cynthia, her duties (and authority) did not include signing
checks from any accounts.
stole around $570, 000 from Blakeley and $250, 000 from
Stewart over the course of several years. She created fake
invoices in the property management system, printed checks
(from Blakeley's and Stewart's accounts) payable to
herself or for her benefit, manipulated the system to show
payment to a vendor, and forged Cynthia's signature on
each check. She pled guilty to eight counts of theft by
swindle and was sentenced to 80 months' imprisonment.
State v. Stephanie Lantgen Castillo, No.
27-CR-15-503 (Minn. Dist. Ct. Hennepin Cty. Nov. 23, 2015)
submitted a claim to the Company, seeking coverage under the
"Forgery" and "Employee Theft" insuring
clauses. The Company denied the claim. McCrossan sued for
breach of the insurance policy. Both parties moved for
summary judgment. The district court granted summary judgment
to the Company. It concluded Stewart was not an Insured under
the policy; Castillo was an authorized representative of
Blakeley, precluding coverage under "Forgery;" and