Rainforest Chocolate, LLC v. Sentinel Insurance Company, Ltd., 2018 VT 140

Summary

The Vermont Supreme Court reviewed a summary judgment ruling in an insurance dispute arising from an employee's fraudulent electronic funds transfer. The court held that the policy's False Pretense Exclusion was ambiguous because it applied to physical loss or damage while other provisions used broader loss terminology, and therefore construed the exclusion in favor of coverage. The court reversed and remanded for determination of whether the policy's Forgery and Money and Securities provisions covered the loss.

Holdings

1. The False Pretense Exclusion is ambiguous because the policy's use of both "physical loss or physical damage" and "loss or damage" permits at least two reasonable interpretations concerning whether electronically transferred bank funds can suffer physical loss. Construing the ambiguity in favor of the insured, the exclusion does not bar coverage for Rainforest's nonphysical loss.
2. The Computer Fraud provision did not cover Rainforest's loss because it provides coverage only for physical loss of or physical damage to money, and the court determined that Rainforest's loss was not physical.
3. The Supreme Court did not decide whether the Forgery or Money and Securities provisions covered Rainforest's loss and remanded that question to the trial court for determination in the first instance.

Questions Presented

1. Whether the policy's False Pretense Exclusion unambiguously excluded Rainforest's loss resulting from an employee's fraudulent electronic transfer of funds.
2. Whether the loss was covered under the policy's Forgery, Money and Securities, or Computer Fraud provisions.
3. Whether the trial court properly granted summary judgment to Sentinel.

Disposition

reversed_and_remanded