Star Title Partners of Palm Harbor, LLC v. Illinois Union Insurance Company

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-13343
Non-Argument Calendar
____________________
STAR TITLE PARTNERS OF PALM HARBOR, LLC,
a Florida limited liability company,
Plaintiff-Appellant,
versus
ILLINOIS UNION INSURANCE COMPANY,
an Illinois corporation,
Defendant-Appellee.
____________________
Appeal from the United States District Court
for the Middle District of Florida
D.C. Docket No. 8:20-cv-02155-JSM-AAS
____________________
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2 Opinion of the Court 21-13343
Before J ORDAN, J ILL PRYOR , and BRANCH, Circuit Judges.
PER CURIAM:
Star Title Partners of Palm Harbor, LLC sought coverage
under its Cyber Protection Insurance Policy after it was fraudu-
lently induced—by an unknown actor impersonating a mortgage
lender—to wire funds to an incorrect account. Illinois Union In-
surance Company denied coverage, asserting that Star Title failed
to meet the requirements under the applicable provision in the pol-
icy. The district court agreed that coverage did not exist under the
plain language of the policy, and granted summary judgment in fa-
vor of Illinois Union. After review of the parties’ briefs and the
record, we affirm.1
I
Star Title argues that the fraudulently induced wire transfer
qualifies as a covered loss under the Cybercrime Endorsement of
its Cyber Protection Policy. We briefly recount the events that led
to that wire transfer below, highlight the relevant provision in the
policy, and summarize the district court’s conclusions.
A
1 We assume the parties’ familiarity with the facts and procedural history and
set out only what is necessary to explain our decision. As to issues not dis-
cussed, we summarily affirm.
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21-13343 Opinion of the Court 3
Star Title, a settlement agent, was hired to close a residential
real estate transaction. For each sale, it typically divides the tasks
among two representatives: a processer who is responsible for
clearing title for the property, and a closer who is responsible for
distributing funds at closing. For the sale in question, Star Title
assigned Dee Osborne as the processer and Kathy Wellington as
the closer.
The seller of the home identified Capital Mortgage Services
of Texas as his lender and lienholder on the property. Ms. Osborne
confirmed that CMS did in fact have a lien on the home and re-
quested payoff information. Initially, she contacted CMS at the
phone number the seller provided and was able to speak to a rep-
resentative who told her to submit a request for the information to
payoffs@capitalmort.com. Ms. Osborne obliged and sent an email
requesting a “Mortgage Loan Payoff Letter.” She also provided the
name of the sellers/mortgagors, the address of the property, the
loan number, the closing date, and attached a copy of the seller’s
authorization form.
Ms. Osborne then received (what we now know) was a
fraudulent email from an unknown actor who claimed to be a CMS
payoff representative named “Kaitlyn Holt.” Ms. Osborne did not
suspect that the email was fraudulent and simply verified that it
correctly referenced the information she initially provided via
email. The email also contained a copy of the requested Payoff
Statement, along with instructions for how to transfer payoff
funds. Ms. Osborne verified that the Payoff Statement was
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4 Opinion of the Court 21-13343
generated by CMS, that it correctly identified the sellers/mortgag-
ors, the loan number, and the property address, and that the payoff
amount was consistent with what the seller represented.
In addition to this email, Star Title also received a second
copy of the Payoff Statement, via facsimile, purportedly sent by
CMS. Ms. Osborne reviewed this faxed copy of the Payoff State-
ment and verified that it matched the statement provided via email
earlier that day. Believing this Payoff Statement to be legitimate,
the amount listed in the statement was included in the sellers’ debit
column of the Final ALTA Settlement Statement presented to the
buyers and sellers at closing.
Ms. Osborne was aware that online banking fraud was
prominent in the real estate industry. She was therefore on high
alert for red flags of possible fraud. But in this case, she did not
suspect fraud and believed the Payoff Statement was authentic. If
she had “noticed any red flags or suspicious circumstances . . . [she]
would have taken additional steps to verify the authenticity of the
wire transfer instructions.” D.E. 23-1 at 3. Accordingly, she pro-
ceeded to initiate Star Title’s two-person authentication protocol.
She set up the wire transfer so that, upon the approval of the clos-
ing representative (Ms. Wellington in this case), the payoff funds
from Star Title’s escrow account would be transferred to the ac-
count provided in the Payoff Statement.
After Ms. Osborne set up the wire transfer, she inputted the
information into Star Title’s software system. She then emailed
Ms. Wellington to notify her that the wire was ready for her
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21-13343 Opinion of the Court 5
review. Ms. Wellington was tasked with cross-refencing the hard
copy of the wiring instructions, provided by Ms. Osborne, with the
information in the software system. Ms. Wellington was not obli-
gated to reach out to the lender to verify that the wiring instruc-
tions were accurate. In this case, Ms. Wellington found that the
wiring information in the hard copy matched the writing infor-
mation in Star Title’s system, and so she released the wire to the
(fraudulent) account.
It was later brought to Ms. Osborne’s attention by the
seller’s real estate agent that CMS had not received the payoff
funds. Ms. Osborne reached out to a representative at CMS, who
informed her that the wire information she had received via email
and fax was incorrect. Star Title then conducted an internal inves-
tigation to identify if “there [was] something [it] could’ve done dif-
ferently or could’ve done better.” D.E. 19-1 at 12 (deposition of Star
Title COO Shera Hunter). It concluded that there was not but con-
ceded that at the time of the wire transfer, Star Title did not have
policy in place to call the lender directly to verify the wire transfer
information.
See id.
B
Star Title submitted a claim to Illinois Union under its Cy-
bercrime Endorsement of its insurance policy. The Endorsement
includes a Deceptive Transfer Fraud insuring clause that provides
the following:
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6 Opinion of the Court 21-13343
We will pay for Your loss of Funds resulting directly
from Your having transferred, paid or delivered any
Funds from Your Account as the direct result of an
intentional misleading of Your employee, through a
misrepresentation of a material fact (“Deceptive
Transfer”) which is:
1. relied upon by an employee, and
2. sent via a telephone call, email, text, instant mes-
sage, social media related communication, or any
other electronic instruction, including a phishing,
spearphishing, social engineering, pretexting, di-
version, or other confidence scheme, and,
3. sent by a person purporting to be an employee,
customer, client or vendor; and,
4. the authenticity of such transfer request is verified
in accordance with Your internal procedures.
D.E. 19-7 at 32 (bold emphasis in original omitted). To secure cov-
erage under this provision, Star Title must show that its loss result-
ing from the intentional misleading of Ms. Osborne, was (1) relied
upon by Ms. Osborne; (2) sent via one of the delineated methods
of communication; (3) by a person purporting to be an employee,
customer, client or vendor; and (4) the authenticity of the wire
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21-13343 Opinion of the Court 7
transfer instructions was verified according to Star Title’s internal
procedures.2
Illinois Union denied coverage because (1) CMS was not an
employee, customer, client or vendor of Star Title, and (2) Star Ti-
tle failed to verify the transfer request according to its procedures.
See D.E. 1-1 at 51.
C
Star Title filed suit in state court against Illinois Union for
breach of contract, and Illinois Union removed the matter to fed-
eral court. Star Title filed a motion for partial summary judgment
asserting coverage under the Deceptive Transfer Fraud provision
of the Cybercrime Endorsement of its policy. Illinois Union re-
sponded with a cross-motion for summary judgment.
The district court denied Star Title’s Motion for partial sum-
mary judgment and granted Illinois Union’s cross motion for sum-
mary judgment. It explained that CMS was not an employee, cus-
tomer, client or vendor of Star Title under the plain meaning of
those terms.
See D.E. 27 at 9–10. It also concluded that Star Title
made “no attempt to verify the authenticity of CMS’s alleged wire
2 The Policy also excludes coverage for “any loss resulting from . . . any person
purporting to be a representative of any financial institution, asset manager,
broker-dealer, armored motor vehicle company, or any similar entity.” D.E.
19-7 at 32 (listing exclusions under the Cybercrime Endorsement). Because
we conclude that Star Title does not meet the requirements for coverage un-
der the Endorsement, we do not reach nor opine on this exclusion applies.
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8 Opinion of the Court 21-13343
transfer instructions pursuant to [its] internal procedures.”
Id. at
10.
Star Title timely appealed.
II
We review a district court’s grant of a motion for summary
judgment
de novo.
See Rojas v. Fla., 285 F.3d 1339, 1341 (11th Cir.
2002). In so doing, we view all the evidence and draw all reasona-
ble inferences in the light most favorable to the non-moving party.
Id. at 1341–42.
Under Florida law, the insured party generally bears the bur-
den of proving a covered loss.
See LaFarge Corp. v. Travelers In-
dem. Co., 118 F.3d 1511, 1516 (11th Cir. 1997). The Florida Su-
preme Court has held that an insurance policy provision should be
construed according to its plain meaning.
See Taurus Holdings,
Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d 528, 532 (Fla. 2005).
See
also Gen. Star Indem. Co. v. W. Fla. Village Inn, Inc., 874 So. 2d 26,
29 (Fla. Dist. Ct. App. 2004) (“Like other contracts, contracts of in-
surance should receive a construction that is reasonable, practical,
sensible, and just.”).
“If the relevant policy language is susceptible to more than
one reasonable interpretation, one providing coverage and the an-
other limiting coverage, the insurance policy is considered ambig-
uous.”
Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29, 34 (Fla.
2000). Ambiguous policy provisions are construed in favor of cov-
erage and against the insurer.
See Flores v. Allstate Ins. Co., 819
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21-13343 Opinion of the Court 9
So. 2d 740, 744 (Fla. 2002). But “[t]he mere fact that an insurance
contract is complex and requires some analysis to interpret it does
not, by itself, render the agreement ambiguous.”
State Farm Mut.
Auto. Ins. Co. v. Mashburn, 15 So. 3d 701, 704 (Fla. Dist. Ct. App.
2009). Absent ambiguity, we construe provisions “in accordance
with the plain language of the policies as bargained for by the par-
ties.”
Anderson, 756 So. 2d at 34. If terms in the policy are unde-
fined, they should be given their plain and ordinary meaning.
See
Botee v. S. Fid. Ins. Co., 162 So. 3d 183, 186 (Fla. Dist. Ct. App.
2015). We may look to legal and non-legal dictionaries to ascertain
those meanings.
See id.
III
Given the facts of this case, the requirements under the De-
ceptive Transfer Fraud clause, and the plain meaning of the terms
“employee,” “customer,” “client” and “vendor,” we agree with the
district court that Star Title has failed to show that it is entitled to
coverage under its insurance policy.3
As a reminder, the Deceptive Transfer Fraud clause requires
that the misleading communication—in this case the email and
fax—be “sent by a person purporting to be an employee, customer,
3 The district court, as noted, also ruled that Star Title had failed to show that
it had verified the authenticity of the wire transfer in accordance with its in-
ternal procedures. Because failure to meet any one of the requirements listed
in the Deceptive Transfer Fraud clause is sufficient to defeat a claim for cover-
age, we do not opine on whether Star Title did in fact fail authenticate the wire
information according to its procedures.
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client or vendor.” D.E. 19-7 at 32. The policy does not define those
terms, so we interpret them according to their plain meaning, us-
ing legal and non-legal dictionaries as references.
See Botee, 162
So. 3d at 186.
Black’s Law Dictionary defines the relevant terms as fol-
lows:
• Employee: Someone who works in the service of
another person (the employer) under an express
or implied contract of hire, under which the em-
ployer has the right to control the details of work
performance.
• Customer: A buyer or purchaser of goods or ser-
vices; esp[ecially] the frequent or occasional pa-
tron of a business establishment.
• Client: A person or entity that employs a profes-
sional for advice or help in that professional's line
of work [.]
• Vendor: A seller, usu[ally] of real property.
BLACK ' S LAW DICTIONARY 662, 485, 320, 1869 (11th ed. 2019). The
Shorter Oxford English Dictionary defines the terms similarly:
• Employee: A person who works for an employer
• Customer: A person who makes a purchase or
gives business, esp[ecially] habitually to any par-
ticular seller or establishment.
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• Client: A person using the services of any profes-
sional; a customer.
• Vendor: A person who sells something, esp[cially]
the seller in the sale of property or land.
1 S HORTER OXFORD ENGLISH DICTIONARY 817, 584, 426 (5th ed.
2002); 2 S HORTER OXFORD ENGLISH DICTIONARY at 3515.
Here, the fraudster who sent the email and subsequent fax
identified himself/herself as “Kaitlyn Holt,” a representative of
CMS. But CMS is a mortgage lender, not an employee, customer,
client, or vendor of Star Title. Star Title does not employ CMS for
any purpose or control CMS’ work performance in any manner.
Nor does Star Title sell CMS any particular product or provide it
any particular service. Star Title argues that in holding the payoff
funds in its escrow account and delivering those funds to CMS on
behalf of the seller, Star Title is providing a service to CMS.
See
Appellant’s Br. at 20. In the same vein, in receiving the payoff funds
and applying them to the seller’s account, CMS provided a service
to Star Title.
See id. But we are unconvinced by this creative re-
framing of the relationship between CMS and Star Title. As CMS’
Chief Executive Officer explained, CMS provides “services to
con-
sumers related to all elements of a mortgage transaction, including
the funding of loans[.]” D.E. 19-3 at 2 (emphasis added). In this
case, CMS’ consumer (i.e., customer or client) was the seller of the
residential home who had obtained the loan, not Star Title. Simi-
larly, Star Title’s client (and customer)—by explicit contract—was
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12 Opinion of the Court 21-13343
also the seller of the residential home. The reality is that CMS did
not have any sort of contract or agreement with Star Title.
See id.
at 4. CMS only owed an obligation to the seller, with whom it had
a lien on the subject property. Star Title was tasked
by the seller to
function as a settlement agent. Among its responsibilities was iden-
tifying any liens and executing payoff funds if necessary. Star Title
did just that (though it wired the payoff funds to the wrong ac-
count) on
behalf of the seller. We therefore cannot construe CMS
to be a customer, client, or vendor of Star Title.
Star Title argues that Florida law requires coverage clauses
to be construed as broadly as possible to provide the greatest
amount of coverage.
See Appellant’s Br. at 18. With that assump-
tion as a backdrop, it contends that the Deceptive Transfer Fraud
clause should be “understood” to include “persons and entities in-
volved in the real estate transaction.”
Id. at 18–19. As attractive as
that proposition may be, it is simply not what the clause provides.
It limits coverage to misleading communications “sent by a person
purporting to be an
employee, customer, client or vendor.” D.E.
19-7 at 32 (emphasis added). If we read the provision as broadly as
Star Title would like us to, we would essentially omit specific terms
included in the contract or expand them beyond recognition. We
are prohibited under Florida law from altering the terms bargained
to by parties to a contract.
See Excelsior Ins. Co. v. Pomona Park
Bar & Package Store, 369 So. 2d 938, 942 (Fla. 1979) (a court may
not “rewrite contracts, add meaning that is not present, or other-
wise reach results contrary to the intentions of the parties”).
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21-13343 Opinion of the Court 13
Although we understand that cybercrime is on the rise, and that it
makes sense to provide (and obtain) coverage for situations like this
one, the relevant provision does not provide coverage for this
fraudulent transfer.
IV
Star Title has failed to establish coverage under the terms of
its insurance policy. Accordingly, we affirm the district court’s
grant of summary judgment in favor of Illinois Union.
AFFIRMED.
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