Tesoro Refining & Marketing Co. v. National Union Fire Insurance
2016 U.S. App. LEXIS 13838
| 5th Cir. | 2016Background
- Tesoro sold fuel on credit to Enmex; Enmex’s balance grew from a $25M limit to ~$90M by Dec 2008.
- Calvin Leavell, Tesoro’s Credit Director, is alleged (forensically) to have created forged letters of credit and a fake security agreement stored in his password‑protected server area and circulated them internally and to auditors.
- When Tesoro later presented the documents to Bank of America the letters proved invalid; Tesoro stopped sales, sued Enmex (settled), and submitted a $15M proof of loss to National Union under a commercial crime policy.
- Tesoro sought coverage under the policy’s “Employee Theft” insuring agreement (which defines “theft” as the “unlawful taking” and contains the clause "'theft' shall also include forgery"); National Union denied coverage and both parties moved for summary judgment.
- The district court granted summary judgment to National Union, holding (1) the Employee Theft provision requires an unlawful taking and (2) Tesoro failed to raise a genuine fact issue that Leavell committed an unlawful taking (including theft by deception). The Fifth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Does the Employee Theft insuring agreement cover employee forgery standing alone or only forgery that amounts to "theft"? | The clause "'theft' shall also include forgery" expands coverage to any employee forgery independent of an "unlawful taking." | The clause means forgery is covered only when it falls within the defined term "theft" (i.e., theft/unlawful taking); it clarifies, not expands, coverage. | The policy is unambiguous: forgery is covered only to the extent it constitutes "theft" (an unlawful taking). |
| 2. If the policy requires an "unlawful taking," did Tesoro raise a fact issue that one occurred (e.g., theft by deception)? | Leavell’s forgeries induced Tesoro to continue extending credit/selling fuel, satisfying theft‑by‑deception under Texas law. | Tesoro produced no evidence that the forged documents were a substantial or material factor inducing decision‑makers to continue sales; many sales occurred despite known unsecured status. | No genuine dispute: Tesoro failed to show inducement or other evidence that an unlawful taking (theft by deception) occurred. |
| 3. Whether the Employee Theft clause renders other policy provisions (Forgery/Alteration or employee acts exclusion) meaningless if read for broad forgery coverage | Broad reading necessary to avoid excluding all employee forgery from Forgery/Alteration coverage. | The limited reading avoids nullifying the Forgery/Alteration insuring agreement and the Acts of Employees exclusion. | Limited reading is reasonable and avoids rendering other provisions meaningless. |
| 4. Standard of review for contract interpretation and summary judgment | N/A (procedural) | N/A (procedural) | Contract interpretation reviewed de novo; summary judgment appropriate where no genuine dispute of material fact. |
Key Cases Cited
- American Nat’l Gen. Ins. Co. v. Ryan, 274 F.3d 319 (5th Cir. 2001) (standards for de novo review of insurance interpretation and summary judgment)
- Schaefer, American Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154 (Tex. 2003) (Texas rules for interpreting insurance contracts)
- RSUI Indem. Co. v. Lynd Co., 466 S.W.3d 113 (Tex. 2015) (use of contract labels and context in interpretation)
- Prudential Ins. Co. of Am. v. Lucas, 456 S.W.2d 429 (Tex. Civ. App.—Austin 1970) ("include" clauses may be illustrative and not necessarily expansive)
- Farmer Enters., Inc. v. Gulf States Ins. Co., 940 S.W.2d 103 (Tex. App.—Dallas 1996) (interpretation of "include" in coverage clauses)
- Fernandez v. State, 479 S.W.3d 835 (Tex. Crim. App. 2016) (theft by deception requires victim induced to consent by deception)
- Demond v. State, 452 S.W.3d 435 (Tex. Ct. App.—Austin 2014) (insufficient inducement where decision‑makers might not have acted differently)