Dillon Gage v. Certain Underwriters, 992 F.3d 401

Dillon Gage, a precious-metals dealer, shipped two orders of gold coins (total ~$1.204M) after receiving what appeared to be valid checks and customer information for Kenneth and Laurie Bramlett.
A criminal had stolen the Bramletts’ identities and intercepted their personal checks from the mail, then placed the orders and provided a reroute instruction so UPS would hold the packages.
UPS allegedly rerouted shipments without Dillon Gage’s consent and the packages were retrieved at a UPS facility without proper signature; both shipments were stolen.
Dillon Gage received the funds from the (fraudulent) checks, lost the coins, and submitted an insurance claim under a policy that covers transit losses but excludes losses “sustained ... consequent upon handing over such Insured property to any third party against payment by” a fraudulent check.
Insurers denied coverage except for a $12,500 limited payment under a narrow exception; Dillon Gage sued. The district court granted summary judgment for the underwriters on stipulated facts.
On appeal the Fifth Circuit certified two dispositive Texas-law questions to the Texas Supreme Court: (1) the meaning/scope of “consequent upon” in the exclusion, and (2) if the exclusion applies, whether UPS’s alleged errors constitute an independent cause under Texas law.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the losses were "sustained consequent upon" handing property to UPS against fraudulent checks (so exclusion applies)	"Consequent upon" requires more than mere but-for causation; UPS’s intervening errors were the proximate/substantial cause, so exclusion does not apply	"Consequent upon" should be read as but-for causation; loss would not have occurred but for acceptance/shipment on fraudulent checks, so exclusion applies	Certified to the Texas Supreme Court for authoritative construction of "consequent upon" (no decision on merits)
If exclusion applies, whether UPS’s alleged errors are an independent cause that restores coverage	UPS errors are independent, separable causes, so exclusion should not bar coverage	UPS errors are concurrent/inseparable with the fraudulent payment cause, so exclusion bars coverage	Certified to the Texas Supreme Court contingent on answer to first question (no decision on merits)

Guar. Nat’l Ins. Co. v. Vic Mfg. Co., 143 F.3d 192 (5th Cir. 1998) (insured must show potential coverage; insurer bears burden to prove an exclusion)
JAW The Pointe, L.L.C. v. Lexington Ins. Co., 460 S.W.3d 597 (Tex. 2015) (distinguishes independent vs. concurrent causation for coverage/exclusions)
Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co., 811 S.W.2d 552 (Tex. 1991) (ambiguities in insurance contracts construed in favor of the insured)
Fiess v. State Farm Lloyds, 202 S.W.3d 744 (Tex. 2006) (policy provisions must be read in context; distinct phrases interpreted together)
City of Gladewater v. Pike, 727 S.W.2d 514 (Tex. 1987) (cause-in-fact requires substantial factor and but-for causation principles)