For Insurance Purposes, Cash is "In Transit" Even While it is Being Held in the Carrier's Vault

On March 11, 2014, the First Department issued a decision in CashZone Check Cashing Corp. v. Vigilant Insurance Co., 2014 NY Slip Op. 01565, finding that money embezzled from an armored car service's vault was nonetheless "in transit" for purposes of insurance coverage.

CashZone Check Cashing arose out of the embezzlement of money being delivered to the plaintiff's ATMs. Mount Vernon Money Center ("MVMC")—a non-party—would collect cash from the Federal Reserve on plaintiff's behalf and then take the cash to MVMC's vault, where it would be loaded into ATM cassettes, which would then be placed into the plaintiff's ATMs. Over time, MVMC embezzled around $450,000 of the plaintiff's money by commingling it with other funds while it was in the vault.

The defendant, which insured plaintiff's cash while it was "in transit," denied coverage, and the motion court agreed, awarding defendant summary judgment because "the money was not stolen while it was in an armored vehicle or while the vehicle was being loaded or unloaded, or during an incidental stop, but, rather, during a substantive interruption of the transit process, while the money was inside MVMC's premises for sorting and processing."

The First Department reversed and awarded summary judgment to the plaintiff, holding that the money was "in transit" even while it was in MVMC's vault, explaining:

In our view, MVMC's act of collecting money from the Federal Reserve Bank and transporting it to an MVMC vault, in order to place it in the form necessary for its transportation and delivery to the CashZone locations, was one continuous shipment process. The stop at MVMC's vault was expressly understood by all concerned as a necessary component of the act of delivery of cash by armored car from the Federal Reserve Bank to plaintiffs' locations. As long as the cash remained in the possession of the armored car service making the delivery, and the stop was in service to the delivery, we consider the property to have been 'in transit' until the contemplated delivery was completed.

The First Department rejected the motion court's narrower interpretation, writing:

We decline to adopt the proposed semantic distinction between 'substantive' and 'incidental' interruptions so as to require a different result for the stop at issue here. The interruption in the transit process for cash sorting and processing may be somewhat different from an interruption enabling the carrier's employees to eat or rest. Yet, it was part of, or 'incidental to,' the understood, contracted-for process by which the armored car carrier would do its job, namely, taking the cash from the site of the pickup and delivering it for use at plaintiff's business locations. Because the contemplated delivery process necessarily included the sorting and processing of the money, we consider the entire process to be included in the 'transit' of the cash.

This decision illustrates the general practice of New York courts to interpret policies in a way that finds coverage.