3M Company, a Delaware corporation; 3M Employees Welfare Benefits Associates, a Minnesota corporation; Employee Retirement Income Plan of Minnesota Mining and Manufacturing Company, a citizen of New York Plaintiffs - Appellants
National Union Fire Insurance Company of Pittsburgh, PA, a Pennsylvania corporation; Great American Insurance Company, an Ohio corporation; St. Paul Fire & Marine Insurance Company, a Connecticut corporation; Federal Insurance Company, a New Jersey corporation; Zurich American Insurance Company, a New York corporation Defendants - Appellees
Submitted: October 18, 2016
from United States District Court for the District of
Minnesota - Minneapolis
LOKEN, SMITH,  and COLLOTON, Circuit Judges.
Company ("3M") incurred losses on a number of
investments due to fraud perpetrated by its own investment
advisors. 3M purchased a "Blanket Crime Policy"
("the Policy") issued by National Union Fire
Insurance Company of Pittsburgh, PA, Great American Insurance
Company, St. Paul Fire & Marine Insurance Company,
Federal Insurance Company, and Zurich American Insurance
Company (collectively, "the Insurers"). 3M claimed
that it earned returns on investments that were subsequently
lost due to its advisors' malfeasance. 3M filed an
insurance claim to recover the loss of the returns. The
Insurers denied the claim, and 3M filed suit in Minnesota
state court, seeking a declaration that the Policy covered
3M's losses resulting from the theft of 3M's alleged
earnings. The Insurers removed the case to federal court and
filed for summary judgment. 3M filed a cross-motion for
partial summary judgment. The district court granted the
Insurers' motion and denied 3M's motion, holding that
the stolen earnings are not covered under 3M's insurance
policy because "3M does not meet the conditions of
coverage set forth in the 'ownership' provision"
of the Policy. We affirm.
1999, 3M began investing its employee-benefit-plan assets in
WG Trading Company LP ("WG Trading"). 3M structured
this investment as a limited-partnership interest in WG
Trading. Stephen Walsh and Paul Greenwood founded and served
as general managing partners of WG Trading and two related
entities, Westridge Capital Management, Inc.
("Westridge") and WG Trading Investors, LP
("WG Investors"). Westridge provided marketing
services for WG Trading, and WG Investors was a limited
partner in WG Trading. WG Trading was regulated and audited,
but WG Investors was not.
3M learned that Walsh and Greenwood fraudulently diverted
hundreds of millions of dollars from WG Trading and WG
Investors. Walsh and Greenwood ultimately pleaded guilty to
federal criminal charges. The United States Commodity Futures
Trading Commission and the Securities and Exchange Commission
initiated civil lawsuits against Walsh, Greenwood, Westridge,
WG Trading, WG Investors, and other related entities
("the defendants"). The United States District
Court for the Southern District of New York seized the
defendants' assets and placed the assets into
receivership. The receiver distributed the assets among the
defrauded claimants, including 3M, who recovered the capital
contribution that it invested in WG Trading. Although 3M
recovered its capital contribution, 3M contends that it
should also be entitled to recover lost earnings from the
investments that WG Trading made in legitimate investment
products that produced legitimate earnings.
employee-benefit plans are insured under Endorsement 3 of the
Policy (the "ERISA Rider" provision). 3M sought
coverage for the stolen earnings under the "Employee
Dishonesty" provision, which (as amended by Endorsement
1. Insuring Agreement 1, EMPLOYEE DISHONESTY, of the attached
policy is hereby deleted in its entirety and replaced with
The [Insurers] shall be liable for direct losses of
Money, Securities or other property caused
by Theft or forgery by any Employee of any Insured acting
alone or in collusion with others.
2. Section 3., DEFINITIONS, is hereby amended to include the
Theft means the unlawful taking of Money, Securities
or other property to the deprivation of the Insured.
3. Nothing herein contained shall be held to vary, alter,
waive or extend any of the terms, conditions, limitations or
provisions of the ...