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Motive Not Required for Dishonest Employee Recovery
The US 3rd Circuit Court of Appeals reversed a decision by Senior US District Judge John Fullam of the US District Court for the Eastern District of Pennsylvania that employer Scirex was not entitled to benefits after workers botched four clinical trials by fudging paperwork, according to a Legal Intellgencer story. Fullam ruled for the insurer, Federal Insurance.
The appeals judges said their
decision held even though the employees apparently
had nothing to gain and honestly believed they were doing
nothing wrong — because motive and intent are
“irrelevant to the concept of dishonesty,” the judges
ruled.
But, according to the Legal
Intelligencer, the court upheld Fullam’s decision
limiting coverage to $280,000 because the conduct by the
Scirex nurses was a series of related events that
amounted to a single “occurrence” for insurance
purposes.
Flawed Observations
Scirex’s lawyer Joseph Roda argued
that the nurses’ repeated failure to follow protocol and
accurately record their observations ruined four enormous
studies valued at $156,000 to $575,000, according to
court documents. As a result, Roda contended, Scirex was
entitled to recover up to the $280,000 policy limit for
each study, for a total of $880,786.
But Federal Insurance’s lawyer,
Alfred Putnam argued that even if the nurses’ conduct was
covered, it was not a series of separate acts but a
related course of conduct, according to court
documents.
Chief 3rd Circuit Judge Edward
Becker agreed, saying that the policy’s occurrence clause
was designed to limit liability and that, in the
insurance industry, the term “occurrence” is commonly
understood to mean all loss caused by a single act or
related events, the Legal Intelligencer said.
Becker said Scirex’s
interpretation “would lead us to grant a separate
recovery for each forged check passed as part of an
employee’s forgery scheme, a result that has been
squarely rejected.”
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