Omnibank Parker Road, N.A. v. Employers Ins. of Wausau
Decision Date | 21 April 1992 |
Docket Number | No. 91-1242,91-1242 |
Citation | 961 F.2d 1521 |
Parties | OMNIBANK PARKER ROAD, N.A., Plaintiff-Appellant, v. EMPLOYERS INSURANCE OF WAUSAU, a Mutual Company, Defendant-Appellee. |
Court | U.S. Court of Appeals — Tenth Circuit |
James V. Pearson, Lannie Y. Iwasaki, and Brian D. Milligan, of Iwasaki & Pearson, Denver, Colo., for plaintiff-appellant.
Bruce F. Fest and Dennis A. Hanson of Wood, Ris & Hames, Denver, Colo., and Charles D. Thomas and Dirk E. Ehlers of Peterson & Ross, Chicago, Ill., for defendant-appellee.
Before SEYMOUR and ANDERSON, Circuit Judges, and SAM, * District Judge.
In this diversity case, Plaintiff claims coverage under a Bankers Special Bond (Bond) issued by Defendant for losses sustained when credit card sales drafts deposited by Plaintiff's merchant customer proved to be uncollectible. The district court determined that the Bond excluded coverage for the loss and granted summary judgment for Defendant. We exercise jurisdiction under 28 U.S.C. § 1291 and affirm. 1
Plaintiff had agreed to process credit card payments for its merchant customer, E-Z Rest Adjustable Beds (E-Z Rest). Plaintiff credited immediately the amount of the credit card sales draft to E-Z Rest's account and permitted E-Z Rest to withdraw those amounts without delay. Plaintiff then submitted the credit card sales drafts to the Rocky Mountain Bankcard System (RMBCS) for payment. Without Plaintiff's knowledge, E-Z Rest's representatives obtained and deposited credit card sales drafts for beds that were not delivered. As a result, E-Z Rest's customers exercised their right to charge back the amounts for the undelivered beds, RMBCS debited Plaintiff's account for those chargebacks, and Plaintiff in turn debited E-Z Rest's account, causing an overdraft in E-Z Rest's account at Plaintiff bank. Plaintiff then sought payment from Defendant under the Bond.
whether the Insured's participation was procured in good faith or through trick artifice, fraud or false pretense, except to the extent that coverage for such loss is afforded under Coverage 1, 11 or 12.... 2
Bond at 16. Therefore, a loss is excluded from coverage if it is (1) caused by a nonpayment or default, (2) an agreement or evidence of debt, and (3) discounted or otherwise acquired by Plaintiff. Plaintiff denies the applicability of each of those provisions.
"We review the district court's grant of summary judgment de novo." Oestman v. National Farmers Union Ins. Co., 958 F.2d 303, 304 (10th Cir.1992). The parties agree that Colorado substantive law applies. An indemnity contract is to be construed pursuant to the general rules for construction of contracts. Trosper v. Wilkerson, 764 P.2d 375, 376 (Colo.Ct.App.1988). Absent a statement of contrary intent in the contract, its words are to be given their plain and ordinary meaning. Id. An indemnity contract "is not to be extended by construction to bring within its scope things other than those therein expressed, merely because the judicial mind may think that they, equally with those included, ought to have been provided for." Gardner Bros. & Glenn Constr. Co. v. American Surety Co., 95 Colo. 456, 37 P.2d 384, 386 (1934). Unambiguous contract provisions must be construed to give effect to their plain meaning, while ambiguous provisions are to be construed against the drafter and in favor of providing coverage. See American Family Mut. Ins. Co. v. Johnson, 816 P.2d 952, 953 (Colo.1991) ( ). Exclusionary clauses must be clear and specific. Id. The burden is on the insurer to establish that the exclusion applies and that the exclusion is not subject to any other reasonable interpretations. Id.
Plaintiff asserts that the language of Exclusion (e), "loss resulting directly or indirectly from the complete or partial nonpayment of or default" does not apply to this situation because there is no evidence that the credit card holders who ordered the beds failed to pay their credit card bills. Plaintiff argues that a chargeback is unrelated to a purchaser's payment or default on his or her credit card obligation. We disagree. We conclude that Plaintiff's loss resulted from the credit card holders' nonpayment of the credit card sales drafts, as contemplated by Exclusion (e).
Plaintiff next asserts that the credit card drafts were not "agreements" or "evidence of debt," so were not excluded from coverage by the Bond. Plaintiff maintains that because the term "draft" is used to describe the piece of paper on which the credit card transaction was recorded, the "draft" is an order to pay, rather than a promise to pay. Plaintiff does not dispute the language in the RMBCS Agreement that a credit card sales draft "represent[s] [a] bona fide obligation[ ] of a Charge Card holder ... for the...
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