Lee, Black, Hart & Rouse PC v. The Travelers Indemnity Co.

A law firm could not recover on its claim for $143.5K in forged checks, which a dishonest employee deposited into the firm's escrow account as part of her check kiting scheme, because the firm sustained no loss for those transactions.

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After an employee of Lee, Black, Hart & Rouse, P.C. the “firm”, allegedly stole money from the law firm’s escrow account, the firm recovered a portion of the loss from The Travelers Indemnity Company “Travelers”, which provided insurance coverage for losses caused by “employee dishonesty.” The firm sued Travelers, seeking to recover additional payment. The parties filed cross-motions for summary judgment, and the trial court granted Travelers’ motion and denied the firm’s motion. The firm appeals. Finding no error, we affirm. A trial court properly grants summary judgment when there is no genuine issue of material fact and the moving party has shown entitlement to judgment as a matter of law.1 In reviewing the trial court’s grant or denial of a motion for summary judgment, we conduct a de novo review of the law and the evidence.2

Viewed in this manner, the evidence shows that the firm, which specialized in real estate closings, purchased a commercial insurance policy from Travelers that provided coverage for, among other things, “employee dishonesty.”3 The policy, which was in effect from July 14, 2003 through July 14, 2004, would pay up to $250,000 for losses, including those resulting from employee dishonesty. In January 2004, the firm discovered that Sharon Hendricks, an employee with the firm, had stolen approximately $350,000 to $400,000 from its escrow account from 1998 through 2004. In a check-kiting scheme that the president of the firm described as “staggeringly complex,” Hendricks would shuffle money between three files, creating an artificial float and siphoning off funds.

Lee, Black, Hart & Rouse PC v. The Travelers Indemnity Co.

A law firm could not recover on its claim for $143.5K in forged checks, which a dishonest employee deposited into the firm's escrow account as part of her check kiting scheme, because the firm sustained no loss for those transactions.

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