Client Duped By Fraudster Wins Coverage Dispute
Tuesday, July 9th, 2019 Litigation PropertyIf your client ships goods to someone who turns out to be a fraudster and never gets paid as a result, is this covered by all-risks commercial insurance?
Lloyd’s Underwriters tried to argue one such loss is excluded, but the Ontario Superior Court of Justice disagreed.
In Heart Zap Services Inc. v. Lloyd’s Underwriters, released June 28, Justice Patrick Flynn ruled that Lloyd’s cannot deny a claim from Heart Zap, a North Bay firm that sells heart defibrillator units to hospitals.
In 2016, Heart Zap got an order for 25 defibrillator units worth $37,120.50. The order was from someone purporting to be a doctor at Ottawa General Hospital.
Heart Zap shipped the goods and invoice to the Brampton address from which the order originated. Heart Zap did not get paid, so Heart Zap mailed a second invoice. Once Heart Zap realized the order was fake, the North Bay police were called. Neither the fraudster nor the defibrillator units shipped to Brampton were ever found.
Heart Zap’s commercial property policy with Lloyd’s covers “all risks of direct physical loss of or damage to the property insured.” It includes merchandise for sale. Heart Zap’s claim was denied, so Heart Zap took Lloyd’s to court.
