City Trust & Savings Bank v. Underwriting M. of Lloyds

• Decision Date: 08 January 1940
• Docket Number: No. 7022.,7022.
• Citation: 109 F.2d 110
• Parties: CITY TRUST & SAVINGS BANK OF KANKAKEE, ILL., v. UNDERWRITING MEMBERS OF LLOYDS AT LONDON, ENGLAND.
• Court: U.S. Court of Appeals — Seventh Circuit

109 F.2d 110 (1940)

CITY TRUST & SAVINGS BANK OF KANKAKEE, ILL., v. UNDERWRITING MEMBERS OF LLOYDS AT LONDON, ENGLAND.

No. 7022.

Circuit Court of Appeals, Seventh Circuit.

January 8, 1940.

Louis L. Dent, George M. Weichelt, John P. Hampton, and Roger D. Doten, all of Chicago, Ill., for appellant.

John S. Lord, L. Duncan Lloyd, and Leonard F. Martin, all of Chicago, Ill., for appellee.

Before SPARKS, MAJOR, and KERNER, Circuit Judges.

SPARKS, Circuit Judge.

Appellant sued appellee upon a fidelity bond, or insurance policy, to recover for the loss sustained by appellant, caused by the theft of its clerk. The case was tried without a jury. The court made a finding of facts and entered its conclusions of law adversely to appellant, and rendered judgment for appellee for costs. From this judgment the appeal is prosecuted.

The facts which are not controverted are substantially as follows: On March 23, 1936, appellee issued its policy to appellant in the sum of $25,000, covering the period February 28, 1936, to February 28, 1937, by the terms of which it insured appellant against loss by reason of theft committed by any of its servants.¹ No policy of like nature was previously issued by appellee to appellant. The clause of the policy which refers to the recovery of any of the stolen property, or its value, is as follows:

"In case of recovery the Assured shall be entitled thereto until fully reimbursed, the excess (if any) to be paid to the underwriters, except that the underwriters shall be reimbursed from such recovery for actual expenses (if any) incurred by them in obtaining recovery."

During the period covered by the policy, one St. John, who was appellant's bookkeeper and teller, stole from appellant a total of $15,014.57. Prior to February 27, 1936, he had stolen other monies from appellant in the sum of $37,667.70 which was partly covered by a similar policy for $25,000, issued by another company, which policy expired March 15, 1936. Appellant received the full amount of this policy, but it lacked $12,667.70 of paying the loss sustained by appellant for that former period. It is conceded that any loss sustained by appellant by reason of such prior thefts was not covered by appellee's policy now in suit.

Of the $15,014.57 stolen during the period covered by the policy in suit, $3,600 was stolen by St. John in December, 1936, and placed by him in his safety deposit box. On January 28, 1937, appellant discovered his thefts, and at that time learned of the existence of the $3,600 in his safety deposit box and demanded that he return it. The box was thereupon opened by St. John in the presence of appellant's officers and the $3,600 was turned over by him to appellant which kept it and applied it in reduction of the loss which it had sustained by reason of St. John's thefts prior to the period covered by the policy in suit. The application was made without appellee's consent, and thereafter appellant demanded of appellee the total amount stolen by St. John during the period covered by the policy in suit. Appellee thereupon paid to appellant $11,414.57 of the $15,014.57, and refused to pay the $3,600.

It is contended by appellant that appellee's liability is the amount of the theft at the time it was committed during the period covered by the policy in suit, and that that amount can not be reduced by the amount recovered by it from St. John before a demand was made, and before this action was instituted. This contention is not tenable. In such cases recoveries from a defaulting employee prior to a demand and suit, are to be deducted in determining the amount of the assured's recoverable loss.²

These cases are clearly distinguishable from those relied upon by appellant,³ which either hold, or support the recognized general rule, that when the assured was deprived of its property by its criminal employee, it had suffered a...