In Leicht Transfer & Storage Co. v. Pallet Central Enterprises, Inc. (2019 WI 61), the Wisconsin Supreme Court held that amounts paid in response to forged delivery tickets are not covered losses under a crime insurance policy.

The underlying claim in the case arose when Pallet Central forged delivery tickets to Leicht. The companies used delivery tickets, which accompanied shipments, for inventory and billing purposes. The delivery tickets ultimately were part of an invoice package, and Leicht paid the invoices. Leicht paid $505,000 in response to the forged delivery tickets. When Leicht discovered the delivery tickets were for pallets it had never ordered or received, it filed a claim for its losses to its insurer, Hiscox Insurance Company, under its forgery coverage policy.

Hiscox denied coverage, arguing the delivery tickets were not a type of covered forged document under Leicht’s crime insurance policy. Leicht argued that the forged delivery tickets should be considered a “direction to pay” under the covered losses in the Hiscox policy.

The Supreme Court ruled in favor of Hiscox. The 6-1 decision stated that the delivery tickets were not covered “directions to pay” under the crime insurance policy because they do not reference any payment or amount due; instead, the delivery tickets simply gave details on the pallets delivered. While the companies used the delivery tickets in function as a direction to pay, the tickets are not actually a direction to pay under the policy.

In a dissent, Justice Ann Walsh Bradley sides with Leicht, arguing that, reading the policy from the perspective of a reasonable insured, the companies’ habitual practices related to the delivery tickets make them a direction to pay covered under the Hiscox policy. According to the dissent, the delivery tickets also fulfill other coverage requirements under the policy, including that they are similar to the listed covered forged documents under the policy and that the forged signatures on the delivery tickets were “purported to have been” made by Leicht employees.