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Leicht Transfer & Storage Co. v. Pallet Central Enterprises, Inc.

Supreme Court of Wisconsin

May 31, 2019

Leicht Transfer & Storage Company, Plaintiff-Appellant-Petitioner,
v.
Pallet Central Enterprises, Inc., Defendant, Travelers Property Casualty Company, Acuity, A Mutual Insurance Company and Hiscox Insurance Company Inc., Defendants-Respondents.

          Submitted on Briefs: Oral Argument: February 1, 2019

          REVIEW of a decision of the Court of Appeals. L.C. No. 2015CV878 Affirmed.

          For the plaintiff-appellant-petitioner, there were briefs filed by George Burnett and Conway, Olejniczak & Jerry, S.C., Green Bay. There was an oral argument by George Burnett.

          For the defendant-respondent Hiscox Insurance Company, Inc., there was a brief filed by Kris Bartos, and Jeffrey Leavell, S.C., Racine. There was an oral argument by Jeffrey Leavell.

          DANIEL KELLY, J.

         ¶1 Pallet Central Enterprises, Inc., ("Pallet Central") forged certain delivery tickets and used them to bill Leicht Transfer & Storage Company ("Leicht") for the sale and delivery of pallets that Pallet Central never sold or delivered. This case followed, and in the piece of it we address today, Leicht sought coverage for its losses under the Commercial Crime Insurance Policy issued to it by Hiscox Insurance Company, Inc. ("Hiscox"). Specifically, Leicht asserts that the forged delivery tickets comprise "directions to pay" within the meaning of the "Forgery or Alteration" insuring agreement of the Hiscox policy. We disagree, and so we affirm the court of appeals.[1]

         I. BACKGROUND

         ¶2 Leicht provides warehousing services in the Green Bay area. It uses pallets to assist in the storage and shipment of warehoused items. Between January 2013 and February 2015, Leicht purchased pallets from Pallet Central. The companies followed a standard practice for documenting these transactions for the purpose of inventory control and billing. Part of that standard practice involved Pallet Central's preparation of a delivery ticket describing the shipment, including the type of pallets, the number to be delivered, the delivery date, and the identification number of the trailer conveying them. The delivery ticket would accompany the truck driver making the shipment. Upon delivery, a Leicht employee would verify the shipment and sign the delivery ticket. The truck driver would then return a copy of the delivery ticket to Pallet Central, after which Pallet Central would prepare an invoice package. The package comprised an invoice, a copy of the signed delivery ticket, and a voucher.[2] Pallet Central would then submit the invoice package to Leicht for payment. Leicht would pay the invoice only if the package contained a copy of the signed delivery ticket. Leicht would then bill its customers for, inter alia, the pallets it used in storing and shipping their goods.

         ¶3 Eventually, Leicht became aware that the number of invoice packages Pallet Central was submitting had dramatically increased. Leicht's internal investigation revealed that many of the delivery tickets bore the apparent signatures of Leicht employees who could not possibly have executed the documents. Ultimately, Leicht concluded that the signatures were forged, and that it had consequently paid Pallet Central for pallets it never received.[3] Leicht says Pallet Central submitted fraudulent invoice packages worth approximately $751, 000.00, of which it paid approximately $505, 000.00.

         ¶4 Leicht submitted its loss to Hiscox pursuant to the terms of its Commercial Crime Insurance Policy (the "Policy"). The relevant language, found in the "Forgery or Alteration" insuring agreement, states the following:

(1) Checks
We will pay for loss resulting directly from Forgery or alteration of checks, drafts, promissory notes, convenience checks, HELOC checks, or similar written promises, orders or directions to pay a sum certain in Money that are:
(i) Made or drawn by or drawn upon You; or
(ii) Made or drawn by one acting as Your agent; or that are purported to have been so made or drawn. [4]

(Emphasis added). Hiscox denied coverage, and Leicht sued. It alleged Hiscox breached its contract, and asked the circuit court to declare that the Policy covers its losses from the forged delivery tickets.[5]

         ¶5 Hiscox moved for summary judgment, arguing that the Policy's "Forgery or Alteration" insuring agreement did not provide coverage because the forged delivery tickets were neither "checks" nor any of the other types of documents identified by the Policy. Hiscox also argued that the forged delivery tickets were not "drawn upon" Leicht, which it said is a prerequisite to coverage. Leicht disagreed. It said the Policy covers the delivery tickets because Pallet Central used them as a means of directing payment. Therefore, it concluded, the Policy covers the delivery tickets as "directions to pay a sum certain in Money."[6]

         ¶6 The circuit court granted Hiscox's motion, concluding that the Policy's "Forgery or Alteration" insuring agreement did not provide coverage. The court of appeals affirmed, explaining that the Policy "enumerate[s] specific covered instruments, including checks, drafts and promissory notes, and 'similar written promises, orders or directions to pay a sum certain' in money" and that "[t]he delivery tickets Leicht relies upon were not written promises, orders or directions to pay 'similar' to the enumerated documents covered under the polic[y]." Leicht Transfer & Storage Co. v. Pallet Cent. Enter., No. 2016AP2334, unpublished slip op., ¶11 (Wis. Ct. App. Apr. 25, 2018) (per curiam). The court of appeals said the forged delivery tickets "were merely evidence of a claim that pallets were delivered by Pallet Central to Leicht." Id., ¶¶12-13.

         ¶7 Leicht's petition for review asserted that the Policy's coverage of "similar written promises, orders or directions to pay a sum certain" is a "recipe for ambiguity" because "[n]othing in the policy alerts the policyholder how or why other forged documents might be similar." We granted Leicht's petition and now hold that the Policy does not afford the coverage Leicht seeks because Pallet Central's delivery tickets are not "written . . . directions to pay a sum certain in Money."

         II. STANDARD OF REVIEW

         ¶8 We review the disposition of a motion for summary judgment de novo, applying the same methodology the circuit courts apply. Green Spring Farms v. Kersten, 136 Wis.2d 304, 315, 401 N.W.2d 816 (1987) . While our review is independent from the circuit court and court of appeals, we benefit from their analyses. See Preisler v. Gen. Cas. Ins. Co., 2014 WI 135, ¶16, 360 Wis.2d 129, 857 N.W.2d 136. Summary judgment is appropriate only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Wis.Stat. § 802.08(2) (2017-18); see also Columbia Propane, L.P. v. Wis. Gas Co., 2003 WI 38, ¶11, 261 Wis.2d 70, 661 N.W.2d 776 (quoting and applying Wis.Stat. § 802.08(2) (2001-02)).

         ¶9 The interpretation of an insurance policy presents a question of law. Water Well Sols. Serv. Grp. Inc. v. Consol. Ins. Co., 2016 WI 54, ¶12, 369 Wis.2d 607, 881 N.W.2d 285. We review such questions de novo. Id.

         III. ANALYSIS

         ¶10 The Policy contains three relevant requirements that Leicht must satisfy before it is entitled to coverage for its losses. First, it must demonstrate that a "delivery ticket" is the type of document encompassed by the Policy's insuring agreement. Second, it must show that the delivery tickets were" [m] ade or drawn by or drawn upon [Leicht]; or [m] ade or drawn by one acting as [Leicht's] agent; or that are purported to have been so made or drawn." And third, it must establish that the payments it made to Pallet Central constitute a "loss resulting directly" from the forgery. To evaluate these requirements, we must discern the meaning of the Policy's insuring agreement, and how its terms apply to the facts of this case.

         ¶11 Our goal in interpreting and applying an insurance policy's terms is the same as it is in addressing any other contract: To "effectuate the intent of the contracting parties." Estate of Sustache v. Am. Family Mut. Ins. Co., 2008 WI 87, ¶19, 311 Wis.2d 548, 751 N.W.2d 845 (citations omitted). In doing so, we construe insurance contracts "as they would be understood by a reasonable person in the position of the insured[, ]" yet we will "not interpret insurance policies to provide coverage for risks that the insurer did not contemplate or underwrite and for which it has not received a premium." Am. Family Mut. Ins. Co. v. Am. Girl, Inc., 2004 WI 2, ¶23, 268 Wis.2d 16, 673 N.W.2d 65 (citations omitted) . We will interpret undefined words and phrases as they would be understood by a reasonable insured, Bethke v. Auto-Owners Ins. Co., 2013 WI 16, ¶22, 345 Wis.2d 533, 825 N.W.2d 482, and "[w]e give undefined words and phrases their common and ordinary meaning." Day v. Allstate Indem. Co., 2011 WI 24, ¶28, 332 Wis.2d 571, 798 N.W.2d 199. "If the undefined language is ambiguous, we will construe it in favor of the insured to afford coverage." Bethke, 345 Wis.2d 533, ¶22. A term or phrase is ambiguous only if it is "'fairly susceptible to more than one reasonable interpretation.'" Wilson Mut. Ins. Co. v. Falk, 2014 WI 136, ¶24, 360 Wis.2d 67, 857 N.W.2d 156 (citation omitted).

         ¶12 We begin our analysis with Leicht's position that "delivery tickets," when combined with corresponding invoices, are included in the type of documents the Policy covers. The insuring agreement describes covered documents as "checks, drafts, promissory notes, convenience checks, HELOC checks, or similar written promises, orders or directions to pay a sum certain in Money." Because Leicht says the delivery tickets are covered as "directions to pay a sum certain in Money," this part of the inquiry actually involves two steps. First, we must determine whether a delivery ticket is, in fact, a direction to pay a sum certain in money (alone or in conjunction with an invoice) . If it is, then we must consider whether it ...


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