Bank of Brewton v. The Travelers Companies, Inc., 777 F.3d 1339

Bank of Brewton held a financial institution bond from Travelers covering losses from loans made in good faith on reliance of a “Counterfeit” certificated security, defined as “an imitation which is intended to deceive and to be taken as an original.”
Customer Jackson Hines pledged 360 shares of The Securance Group (TSG) stock to the Bank via two certificates: Certificate No. 2 (a color copy) and later Certificate No. 11 (a replacement issued by TSG after Hines reported the original lost).
TSG later discovered the original Certificate No. 2 had been delivered to another bank in 2007; TSG informed the Bank that Certificate No. 11 was void because it duplicated shares already assigned elsewhere.
The Bank consolidated and extended loans in December 2009 secured in part by the TSG shares; Hines later defaulted and declared bankruptcy, and the Bank claimed loss under the Bond.
Travelers denied coverage; the Bank sued for breach of contract. The District Court granted summary judgment for Travelers, finding (1) any loss was not caused by reliance on the copied Certificate No. 2, and (2) Certificate No. 11, though fraudulently procured, was an authentic document and not a “counterfeit” under the Bond.
The Eleventh Circuit affirmed, holding that the Bond’s “counterfeit” coverage does not extend to authentic but fraudulently procured documents that misrepresent facts (value/ownership) rather than authenticity.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a duly authorized but fraudulently procured stock certificate qualifies as a “counterfeit” under the Bond	Certificate No. 11 is functionally a counterfeit because Hines intended to deceive and the certificate appeared to be an original representing value	Certificate No. 11 was authentic (issued and signed by TSG) and therefore not a counterfeit under the Bond’s definition; the fraud was in the facts, not the document’s genuineness	Held: Not a counterfeit; bond covers only imitations purporting to be authentic originals, not authentic documents procured by fraud
Whether any loss flowed directly from good-faith reliance on Certificate No. 2	Bank argued loss resulted from reliance on the certificates it held as collateral	Travelers argued Bank knew Certificate No. 2 was a copy by April 2009 and thus could not have relied on it in December 2009	Held: No coverage for loss tied to Certificate No. 2 because Bank admitted it considered #2 void before making the December loans
Whether Travelers waived or was estopped from arguing Certificate No. 11 is not counterfeit	Bank asserted waiver/estoppel because Travelers raised the argument in reply	Travelers responded that Bank first advanced the Certificate No. 11 theory late and Travelers properly addressed it	Held: No waiver/estoppel; Travelers permissibly responded and district court correctly rejected Bank’s procedural contention

Fidelity & Casualty Co. v. Bank of Commerce, 234 So. 2d 871 (Ala. 1970) (state court favorably cites distinction between forged documents and false factual representations)
First Nat’l Bank of Memphis v. Aetna Cas. & Sur. Co., 309 F.2d 702 (6th Cir. 1962) (warehouse receipts were authentic; falsity lay in representations, so not covered as counterfeits)
Bank of the Southwest v. Nat’l Sur. Co., 477 F.2d 73 (5th Cir. 1973) (authentic title documents obtained by fraud are not “counterfeit” under bond definition)
Exch. Nat’l Bank of Olean v. Ins. Co. of N. Am., 341 F.2d 673 (2d Cir. 1965) (distinguishing imitation-based deception from fraudulent factual misrepresentations)