from the United States District Court No. 1:15-cv-04130-RWS
for the Northern District of Georgia
WILLIAM PRYOR, TJOFLAT, and GILMAN, [*] Circuit Judges.
WILLIAM PRYOR, CIRCUIT JUDGE
appeal requires us to decide whether a loss of more than $1.7
million to scammers was covered under a commercial crime
insurance policy. The loss stemmed from a sophisticated
phishing scheme in which a scammer posing as an executive of
Principle Solutions Group, LLC, persuaded an employee to wire
money to a foreign bank account. After Principle discovered
the fraud and determined that it could not recover the funds,
it sought coverage under the "fraudulent
instruction" provision of its policy with Ironshore
Indemnity, Inc., which then denied Principle's claim.
Ironshore asserted that the scammer's communications with
the employee did not meet the conditions for a fraudulent
instruction under the policy and that the loss did not result
directly from the alleged fraudulent instruction, as the
policy required. Principle filed a complaint against
Ironshore to enforce the policy. The district court concluded
that the policy covered the loss and granted summary judgment
to Principle. Because we also conclude that the policy
unambiguously covers Principle's claim, we affirm.
morning of July 8, 2015, Principle lost over $1.7 million in
a fraud scheme. It began at 9:10 a.m., when Loann Lien, the
controller for Principle, received an email purporting to be
from Josh Nazarian, a managing director of Principle. The
email informed Lien that Principle had been secretly working
on a "key acquisition" and asked her to wire money
"in line with the terms agreed . . . as soon as
possible." As for the details of the wire transfer, the
email told Lien to give her "full attention" to
"attorney Mark Leach," who would provide further
information. Because the purported deal was not public, Lien
was to "treat [the] matter with the upmost discretion
and deal solely with" Leach. Lien responded to
Nazarian's purported email that she would give her
"total attention" to Leach.
received an email five minutes later from someone purporting
to be Leach, a partner at the London-based law firm Bird
& Bird. After Lien confirmed that Principle could wire
the money, Leach sent Lien remittance details for a bank in
China. Leach later reiterated to Lien over the phone that
Nazarian approved the wire transfer.
worked with another Principle employee to create and approve
the transfer, but a fraud prevention service, Wells Fargo,
asked for verification that the wire transfer was legitimate.
Lien then confirmed with Leach that Nazarian had approved the
transaction. Lien relayed this information to Wells Fargo,
which released the hold. At 11:21 a.m., about two hours after
Lien received the first email, Principle wired more than $1.7
million to the scammers.
discovered that the request was fraudulent a day later when
she spoke with Nazarian, who told her that he was not even in
the office that day. Nazarian promptly called Wells Fargo to
report the fraud, but neither Principle nor law enforcement
could recover the funds.
sought coverage for the loss under its insurance policy with
Ironshore. The policy covered "[l]oss resulting directly
from a fraudulent instruction directing a financial
institution to debit [Principle's] transfer account and
transfer, pay or deliver money or securities from that
account." Ironshore denied coverage. It asserted that
Nazarian's purported email did not "direct a
financial institution to debit [Principle's] transfer
account" because it only told Lien to await instructions
from Leach. Ironshore also argued that the asserted loss did
not "result directly from" a fraudulent
instruction because Leach conveyed necessary details to Lien
after the initial email and Wells Fargo held the transaction,
both of which were intervening events between the instruction
and the loss.
filed a complaint against Ironshore in state court seeking
payment under the policy and alleging that Ironshore had
acted in bad faith. Ironshore removed the case to federal
court based on diversity jurisdiction. 28 U.S.C. §§
1332(a)(1), 1441(a). The parties filed competing motions for
summary judgment. Although the district court concluded that
the policy provision was ambiguous, it held that
Georgia's rule requiring construction of insurance
policies in favor of policyholders required it to grant
partial summary judgment to Principle on its coverage claim.
The district court also granted partial summary judgment to
Ironshore on Principle's claim of bad faith. Only
STANDARD OF REVIEW
review a summary judgment de novo. Regions Bank
v. Legal Outsource PA, 936 F.3d 1184, 1189 (11th Cir.
2019). Summary judgment is warranted "if the movant
shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of
law." Fed.R.Civ.P. 56(a).
Georgia law, which the parties agree governs, we use a
three-step approach to interpret insurance policies. As with
any contract, we first look to the text of the policy and, if
it is "explicit and unambiguous, [our] job is simply to
apply the terms of the contract as written, regardless of
whether doing so benefits the carrier or the insured."
Ga. Farm Bureau Mut. Ins. Co. v. Smith, 784 S.E.2d
422, 424 (Ga. 2016) (citation and internal quotation marks
omitted). But "if a provision of an insurance contract
is susceptible of two or more constructions, even when the
multiple constructions are all logical and reasonable, it is
ambiguous," and we must move to the second step of
applying Georgia's "statutory rules of contract
construction." Hurst v. Grange Mut. Cas. Co.,
470 S.E.2d 659, 663 (Ga. 1996). And if the ambiguity
"cannot be resolved through the rules of
construction," we may, at the third step, look to parol
evidence. Coppedge v. Coppedge, 783 S.E.2d 94, 97
n.3 (Ga. 2016) (citation and internal quotation marks
omitted). But "if the parol evidence is in conflict, the
question of what the parties intended becomes a factual issue
for the jury." Id. (citation and internal
quotation marks omitted); see also Ga. Code Ann.
§ 13-2-1 ("The construction of a contract is a
question of law for the court. Where any matter of fact is
involved, the jury should find the fact.").
repeats its twin justifications for denying coverage: no
communication between the scammers and Lien triggered the
fraudulent-instruction provision, and the loss did not
"result directly from" any alleged fraudulent
instruction. Both fail. We address each argument in turn.
The Loss Involved a Fraudulent Instruction Directing a
Financial Institution to Transfer Funds.
receive coverage, Principle had to identify a
"fraudulent instruction" that "direct[ed] a
financial institution to debit [Principle's] transfer
account and transfer, pay or deliver money or securities from
that account." As relevant here, the policy defines a
"fraudulent instruction" as an "electronic or
written instruction initially received by [Principle], which
instruction purports to have been issued by an employee, but
which in fact was fraudulently issued by someone else without
[Principle's] or the employee's knowledge or
consent." Ironshore contends that no communication
satisfied both conditions of the coverage provision, but we
Ironshore concedes, the email purporting to be from Nazarian,
which informed Lien of the need to wire money and told her to
await further instructions from Leach, qualifies as a
fraudulent instruction. It was, after all, a
"fraudulently issued" "electronic . . .
instruction" that "purport[ed] to have been issued
by an employee . . . without [Principle's] or the
employee's knowledge or consent." But Ironshore
asserts that the email instructed Lien only to work with
Leach to wire funds later in the day, not to wire a specific
amount of money to a specific recipient. So, it explains, the
email did not "direct" Principle to pay money out
of its accounts, as the coverage provision required.
argument is unpersuasive. As an initial matter, we are hard
pressed to construe the email as doing anything but
"directing a financial institution to debit
[Principle's] transfer account and transfer . . . money .
. . from that account." The email told Lien, "I
will need you to make the initial wire as soon as possible,
for which you have my full approval to execute." But
even if we assume that the email needed additional details
before we could fairly construe it as "directing" a
wire transfer, a later email from Leach identified the amount
of the wire transfer, the recipient bank, and the purported
beneficiary of the transfer. That email remedied any possible
lack of detail.
agrees that Leach's email was sufficiently detailed, but
it contends that the email was not a "fraudulent
instruction" under the policy because someone purporting
to be an outside attorney, not a Principle employee, sent it.
In other words, Ironshore contends that Leach's email,
though fraudulent and specific, was not a "fraudulent
instruction," and that Nazarian's purported email,
though a "fraudulent instruction," was not specific
enough to meet the provision's other requirements.
disagree with Ironshore's divide-and-conquer approach.
Nothing in the policy language warrants the assumption that
the two emails could not be part of the same fraudulent
instruction. Although the policy defines a fraudulent
instruction as a singular "electronic or written
instruction," Georgia adopts the longstanding rule of
construction that the "singular or plural number each
includes the other, unless the other is expressly
excluded." Ga. Code Ann. § 1-3-1(d)(6); see
also Antonin Scalia & Bryan A. Garner, Reading
Law: The Interpretation of Legal Texts § 14, at 130
(2012). And reading the emails together leaves no doubt that
they were part of the same fraudulent instruction.
Leach's email supplemented the email purporting to be
from Nazarian, which cloaked Leach with the authority to give
additional details. That email told Lien to "deal
solely" with Leach and to "give [Leach her] full
attention" to make sure "the wire goes out
today." And Leach's email informed Lien that the
additional remittance details were "requested by"
Nazarian. Viewing the emails together, the sole purpose of
Leach's email was to provide details to effectuate an
explicit instruction to make a wire transfer. So the
fraudulent instruction from the scammer purporting to be
Nazarian unambiguously falls within the coverage provision.
The Loss Resulted Directly from a Fraudulent
next contends that Principle's losses did not
"result directly from" a fraudulent instruction
as the policy required. Citing dictionary definitions, it
interprets the policy's use of "directly" to
require an "immediate" link between a fraudulent
instruction and a loss. Because the loss depended on
Lien's conversations with Leach and Wells Fargo, which
occurred after Nazarian's purported email told Lien to
wire money, Ironshore concludes that no immediate link
existed between the instruction and the loss.
again disagree with Ironshore. Georgia gives terms in
insurance contracts their ordinary meaning. See Ga.
Code Ann. § 13-2-2(2). And the ordinary meaning of the
phrase "resulting directly from" requires proximate
causation between a covered event and a loss, not an
"immediate" link. To be sure, the definitions that
Ironshore cites reveal that "directly" can
sometimes mean "immediately." See, e.g.,
Directly, Black's Law Dictionary (10th
ed. 2014) ("immediately"). But discerning the
ordinary meaning of a term requires more than uncritically
citing dictionaries. By isolating "directly" from
the surrounding language, Ironshore erroneously defined the
term "without accounting for its semantic nuances."
Scalia & Garner, Reading Law app. A, at 418.
"directly" within the phrase "resulting
directly from" reveals a different meaning. When used
with the preposition "from," "resulting"
means "to proceed, spring, or arise as a consequence,
effect or conclusion." Result/-ing,
Webster's Third New International Dictionary
(1993); see also Resulting, The American
Heritage Dictionary (5th ed. 2012) ("[t]o happen as
a consequence"). "'Results from' imposes,
in other words, a requirement of actual causality."
Burrage v. United States, 571 U.S. 204, 211 (2014);
see also Blockum v. Fieldale Farms Corp., 573 S.E.2d
36, 39 (Ga. 2002) (using "causes" and
"resulting from" interchangeably). So reading the
phrase "resulting directly from" as a whole
requires us to define "directly" within the context
of causation. And in that context, "directly" means
"proximately." See Directly,
Webster's Third New International Dictionary
("in close relational proximity"); Direct
Cause, Black's Law Dictionary (11th ed.
2019) ("proximate cause"); cf. Proximate
Cause, Webster's Third New International
Dictionary ("a cause that directly or with no
mediate agency produces an effect"). In short, the
ordinary meaning of "resulting directly from"
requires us to determine whether the fraudulent instruction
here proximately caused Principle's loss.
Georgia, a "[p]roximate cause is not necessarily the
last act or cause, or the nearest act to the injury."
Sprayberry Crossing P'ship v. Phenix Supply Co.,
617 S.E.2d 622, 624 (Ga.Ct.App. 2005) (citation and internal
quotation marks omitted). Instead, it encompasses "all
of the natural and probable consequences" of an action,
"unless there is a sufficient and independent
intervening cause." Cowart v. Widener,
697 S.E.2d 779, 784 (Ga. 2010) (emphasis added). An
intervening cause is not sufficient and independent if
"its probable or natural consequences could reasonably
have been anticipated, apprehended, or foreseen by the
original wrong-doer." Goldstein Garber & Salama,
LLC v. J.B., 797 S.E.2d 87, 89 (Ga. 2017) (citation
of the two "causes" that Ironshore asserts
intervened between Nazarian's purported email and
Principle's loss-Lien's communications with Leach and
Wells Fargo's involvement-can sever the causal chain.
Both were foreseeable consequences of the email.
Nazarian's purported email told Lien that Leach would
contact her and provide further details on the wire request.
And although Wells Fargo's involvement was not
inevitable, it was certainly foreseeable. The email
proactively sought to avoid third-party interference by
requiring Lien to "deal solely" with Leach. Because
of this instruction, the scammers could circumvent Wells
Fargo's fraud-prevention process; through a series of
phone calls and emails between Leach and Lien, they
fabricated the precise information that Wells Fargo required
to release the hold. So not only did the scammers foresee
that a fraud prevention service might get involved, they put
a system in place to circumvent that risk. Georgia courts
have held that intervening acts were foreseeable in more
attenuated circumstances. See, e.g., Imperial
Foods Supply, Inc. v. Purvis, 580 S.E.2d 342, 345
(Ga.Ct.App. 2003) (holding that it was foreseeable that the
driver of a borrowed car would try to fix a broken door latch
with a "makeshift, rigged mechanism" that did not
perform reliably and caused injury).
same reason, we are not persuaded by the dissent's
enumeration of eleven events that occurred between the
fraudulent instruction and loss, such as each call that Lien
made to Leach and Lien's approval of the wire transfer.
Each of these events was either a necessary action to
transfer the money or falls under one of the two ostensible
intervening causes that Ironshore proposes-Lien's
communication with the scammers and Wells Fargo's
involvement. Although the dissent parses the events more
finely than Ironshore, each of its eleven events was still a
foreseeable consequence of the fraudulent instruction.
cannot agree with the dissent that Rustin Stamp &
Coin Shop, Inc. v. Ray Brothers Roofing & Sheet Metal
Co., 332 S.E.2d 341 (Ga.Ct.App. 1985), controls this
appeal. Rustin held that no proximate causation
existed between a roofing company's negligent decision to
leave unmarked holes on a roof covered by fiberglass and rain
damage to the interior of the building. Id. at
342-44. The court found that the causal chain was severed by
the actions of an air-conditioning repairman, who exposed the
building's interior to rain by perforating the fiberglass
covering and failed to notify the roofing company about the
problem. Id. It concluded that the defendant could
not foresee that someone would both expose the interior of
the building to outside rain and fail to notify anyone else
about it. Id. at 344. But a fraudulent
instruction necessarily contemplates that an
unwitting employee will negligently transfer money. And
unlike the intervening act in Rustin, Wells Fargo
did not cause Principle's loss, which would have occurred
whether or not it became involved. Needless to say, something
that is not a cause of damage cannot be an intervening cause.
See Ga. Bank & Tr. v. Cin. Ins. Co., 538 S.E.2d
764, 765-66 (Ga.Ct.App. 2000) (holding that a financial loss
did not "result directly from" a forged signature
when the loss would have occurred "[e]ven if the
signature . . . was authentic").
we agree with the dissent's argument that the ostensibly
"suspicious nature of the entire transaction"
severed the causal chain because it gave Principle
"notice that the wire transfer may be fraudulent"
and the "opportunity to prevent the loss."
Dissenting Op. at 27. To start, the record does not support
the assumption that the entire transaction was
"suspicious." The scammers' interactions with
Lien revealed that they had a sophisticated knowledge of
Principle's operations and personnel. Without the benefit
of hindsight, we cannot say that the transaction was
inherently suspicious. And in any event, whether various red
flags "arguably should have triggered a deeper
investigation," id. at 28, is not the relevant
question. Instead, the relevant question is whether
Lien's failure to verify the transfer in the ways the