Failure to Prove Theft Defeats Claim on Commercial Crime Policy

Post 5247

See the video at https://rumble.com/v7380mw-insured-did-not-carry-the-burden-to-prove-theft.html and at https://youtu.be/1FLQBIR6oCg

Embezzlement is not Direct Loss by Theft

In Continental Properties Company, Inc., et al v. Hiscox Insurance Company, Inc., No. 2024AP197, Court of Appeals of Wisconsin, District II (December 17, 2025) issued a per curiam opinion, it may not be cited in any court of this state as precedent or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3). In an appeal from the circuit court’s grant of summary judgment in favor of defendant Hiscox Insurance Company, Inc. plaintiffs asserted breach of contract and bad faith claims arising from denial of coverage under a commercial crime insurance policy.

KEY FACTS

Continental Properties (a Wisconsin real estate developer) employed Angelo Eguizabal as Vice President of Construction starting in 2007. Eguizabal had a prior relationship with David Albertelli. In 2013, they entered a secret “Commission Sales Agreement” (CSA) under which Albertelli’s company (Albertelli Construction, Inc. (ACI)) paid Eguizabal a 2% commission on contracts awarded by Continental, allowed him to retain excess change-order profits, and provided for potential profit sharing. After Continental stopped working with ACI in 2015, Albertelli affiliated with Westcore Construction; Eguizabal concealed this affiliation, allowing Westcore to secure Continental contracts that later incurred significant losses.

Continental discovered the scheme, terminated Eguizabal and Westcore, and sued Eguizabal, Albertelli, ACI, and Westcore in federal court (alleging fraud, theft, RICO, etc.). Eguizabal settled via a cooperation agreement, repaying Continental $1,645,881.27 (all commissions received under the CSA).

Continental submitted a proof of loss to Hiscox under its commercial crime policy for losses allegedly stemming from Eguizabal’s conduct. Hiscox denied coverage.

Continental identified four categories of alleged losses:

1. Inflated contract prices to fund Eguizabal’s 2% commissions.
2. Payments to Albertelli entities intended for subcontractors/vendors but retained by Albertelli (requiring duplicate payments).
3. Payments to Albertelli entities for work represented as complete but never performed (requiring additional payments).
4. All losses on Westcore projects attributable to Eguizabal’s concealment of Albertelli’s involvement.

POLICY LANGUAGE

Coverage: “We will pay for loss of or damage to Money, Securities and Other Property resulting directly from Theft and/or Forgery committed by an Employee, whether identified or not, acting alone or in collusion with other persons.” (emphasis in original)

“Theft” defined as “the unlawful taking of property to the deprivation of the Insured.”

LEGAL STANDARDS

Insurance policy interpretation is a question of law reviewed. Insured bears initial burden of proving coverage.

“Resulting directly from” theft by an employee requires direct causation not merely proximate or substantial cause. The Hiscox Policy is narrow because it covers only “theft,” and does not cover broader “dishonest or fraudulent acts” used by other insurers.

HOLDING

Affirmed summary judgment for Hiscox because the Plaintiffs failed to meet their burden of showing initial coverage under the policy for any category of alleged loss.

REASONING BY LOSS CATEGORY

Inflated Contracts (2% Commissions)

Even assuming Eguizabal’s conduct qualified as “theft,” no covered loss was proved by the plaintiff. Eguizabal fully repaid all commissions received. No evidence contracts would have been cheaper absent the scheme; Eguizabal’s bid-rigging likely resulted in lower (albeit inflated) bids than legitimate competitors. Plaintiffs’ damages expert did not quantify any loss tied specifically to the 2% inflation and the claimed loss was found to be speculative/theoretical.

Retained Subcontractor/Vendor Payments

Not covered: The loss resulted from Albertelli’s independent decision to pocket funds not directly from any theft by Eguizabal. The cause was too remote under a direct-causation rule.

Payments For Unperformed Work

Not covered: The loss resulted from Albertelli entities’ subsequent breach/failure to perform contractual obligations, not directly from Eguizabal’s theft. Again, too remote to be a loss covered by the policy or as a theft.

Westcore Project Losses

Concealment of Albertelli’s affiliation was not “theft” under the policy. Even if construed as theft, losses were not direct.

Outcome and Implications

Because no category of loss “result[ed] directly from Theft . . . committed by an Employee,” no initial coverage was shown by the Plaintiff.  Breach of contract and bad faith claims were properly dismissed on summary judgment.

The decision reinforces the strict interpretation of “direct loss” language in employee theft/fidelity coverage in Wisconsin, requiring tight causal link without intervening independent acts or contingencies.

The appellants failed to meet their burden of showing initial coverage for the alleged losses under the insurance policy. The Court of Appeal affirmed.

ZALMA OPINION

To prove it’s claims Continental needed to prove that there was a theft and that the theft caused it damage. The acts of Eguizabal was to take a percentage of each contract and he paid Continental every dollar he embezzled so even if what he took was a “theft” there was no loss. It is the obligation of an insured to prove a loss by theft. It failed to do so and the insurer owed nothing.

(c) 2025 Barry Zalma & ClaimSchool, Inc.

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