Tuesday, December 11, 2012

US District Court holds that for forgery coverage an email promising compensation is not similar to a check, draft or promissory note

Kenneth Engleman alleged that CustomMade and its CFO induced him to leave a lucrative job to work for CustomMade as a partner and co-owner of the company, but then did not follow through with the promises.  

During the course of the underlying suit, CustomMade's CFO realized that a critical email allegedly sent by him to Engleman had been altered.  At least in part as a result, the court dismissed Engelman's complaint.

CustomMade asserted that it was entitled to defense costs under forgery coverage in an insurance policy issued to it by Sentinel.  Sentinel denied coverage for the claim.

In CustomMade Ventures Corp. v. Sentinel Ins. Co., Ltd., 2012 WL 4321060 (D. Mass.), the United States District Court for the District of Massachusetts granted summary judgment to Sentinel.  The court noted that the forgery coverage came within a special property coverage form, and that for it to apply the loss must involve covered property. The  policy defined covered property as "checks, drafts, promissory notes, or similar written promises, orders or directions to pay a sum certain."

CustomMade argued that the email was  a written promise to pay a sum certain and therefore came within the forgery coverage.  The court held that the email was not a "similar written promise" to checks, drafts, or promissory notes. 

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