VAM Check Cashing Corp. operated three check cashing stores in Brooklyn. On the date of the loss, a VAM cashier, while on the phone with the wife of the owner of the company, received a frantic call from a cashier at another VAM store indicating a state tax collector was on site looking for payment and needed cash. The owner’s wife instructed the cashier to give $120,000 to “Mr. Windfrey,” and that he would deliver the cash to the second location. Soon thereafter, Mr. Windfrey arrived with the secret code, and the cashier handed him the $120,000. But after speaking with the owner later in the day, the cashier realized she had been duped, and that both of the callers and Mr. Windfrey were all criminal imposters.

VAM submitted a claim to Federal under its Crime Insurance Policy, which covered, among other things, Robbery. But VAM denied the claim, asserting that this loss did not meet the policy definition of Robbery, which was defined as “the unlawful taking of insured property from an Insured … by violence, threat of violence or other overt felonious act committed in the presence and cognizance of such person.”

VAM filed suit against Federal in the Eastern District of New York, and filed a motion for summary judgment. Federal took the position that “overt felonious act” meant that the employee needed to be aware that a crime was being committed, and that, for example, a larceny by trick was not covered under the definition. Federal also took the view that in “the presence and cognizance” of the cashier meant that she not only needed to be physically present when a felonious act took place, but she must have also known that something criminal was occurring.

The Court, in awarding summary judgment to VAM, found the language of the policy was ambiguous. Looking to the criminal law, it found that “overt” meant any substantial act that furthers the goals of the conspirators. The Court looked to various dictionary definitions of “cognizance” and determined that in this context, it meant the employee needed to have power or control over the item taken.

Frankly, while these definitions cast by the Court seem a bit tenuous, the more persuasive point made in the decision was that Federal’s position would have rendered the robbery by non-violence coverage in the policy definition superfluous.

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