New York Applies Wide Definition of “In Transit:” Transit Insurance Covers Cash Stolen from Vault.

In CashZone Check Cashing Corp. et al. v. Vigilant Insurance Co. et al., Index Number 653245/11 the Appellate Division, First Department, reversed the trial court’s determination that cash that was stolen from the vault of an armored car service company was not “in transit” pursuant to the terms of the insurance contract. The facts of the case are as follows.

Plaintiff CashZone hired Mount Vernon Money Center, an armored car company, to transport currency from the Federal Reserve Bank of New York. Mount Vernon would pick up the money from the Fed and then take the money to its vault where it would be processed for delivery to CashZone locations. While at the facility, Mount Vernon’s principals embezzled $470,000 as part of a fraudulent scheme. Mount Vernon’s principals were indicted of bank fraud and pleaded guilty.

CashZone filed a claim with Vigilant under its insurance policy’s “in transit” provision. Vigilant denied coverage for the loss, claiming that the money was not “in transit” but rather was within Mount Vernon’s vault. The trial court agreed with Vigilant, finding that the stop at Mount Vernon’s vault was not an “incidental” stop but a substantive interruption of the transit process.

The First Department reversed, noting that New York courts apply a broad definition of the term “in transit” and refused to accept the cases cited by Vigilant from other jurisdictions.
The court ruled that the entire time Mount Vernon possessed the cash was “one continuous shipment process,” and that the stop at the vault “was expressly understood by all concerned as a necessary component of the act of delivery of cash by armored car from the Federal Reserve Bank to plaintiffs’ locations.” The court reasoned that as long as the cash remained in the possession of the armored car service making the delivery, and the stop at issue was in service to that delivery, the property was in transit until the downstream delivery was completed.
The court also rejected the Vigilant’s argument that the endorsement covered only thefts by a third party from the transportation company, and did not cover theft by the transportation company itself, finding that the endorsement provided for no such distinction.

CashZone shows that New York jurisprudence focuses on the purpose of a contract — not the process by which it is achieved. Specifically, the case stands for the proposition that “storage” — if incidental to the object of transport — will be covered by a transit endorsement. WCM believes that CashZone should be read in a larger context. By analogy, its logic reaches past armored car risks to other shipping contracts such as fine art and storage agreements.

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