Permanent Loss of Cash Not Covered Under CGL Policy's 'Loss of Use' Provision


In Advanced Network, Inc. v. Peerless Ins. Co., 190 Cal.App.4th 1054 (December 10, 2010), the California Court of Appeal for the Fourth District held that an underlying suit against Advanced Network (ANI) for the replacement of cash stolen by an ANI employee was not covered under ANI’s commercial general liability (CGL) policy because the underlying suit alleged damages in connection with the replacement value of the stolen cash rather than damages for the “loss of use” of the cash.

ANI had contracted with Mission Federal Credit Union to service the cash distribution machines at the credit union’s branches. It was discovered that an ANI employee had stolen approximately $2 million in cash from Mission Federal. After the theft was uncovered, ANI submitted a claim to its fidelity insurer, which agreed to pay nearly $2 million for the loss. The fidelity insurer then sued ANI in federal court for equitable subrogation, breach of contract and negligence. ANI tendered its defense to its CGL carrier, Peerless Insurance Company, but Peerless denied the tender. Thereafter, ANI sued Peerless for breach of contract based on the denial. Following a trial, Peerless was ordered to pay ANI nearly $2 million in damages for failure to indemnify, punitive damages and other awards.

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