                 United States Court of Appeals
                            For the Eighth Circuit
                        ___________________________

                                No. 18-1949
                        ___________________________

                                C.S. McCrossan Inc.

                        lllllllllllllllllllllPlaintiff - Appellant

                                           v.

                            Federal Insurance Company

                       lllllllllllllllllllllDefendant - Appellee
                                      ____________

                    Appeal from United States District Court
                   for the District of Minnesota - Minneapolis
                                  ____________

                            Submitted: March 14, 2019
                              Filed: August 6, 2019
                                  ____________

Before GRUENDER, BENTON, and GRASZ, Circuit Judges.
                         ____________

BENTON, Circuit Judge.

      C.S. McCrossan Inc. sued Federal Insurance Company for coverage under a
crime insurance policy. Both moved for summary judgment. The district court1
granted the Company’s motion. C.S. McCrossan Inc. v. Federal Ins. Co., 2018 WL

      1
      The Honorable Joan N. Ericksen, United States District Judge for the District
of Minnesota.
2180256 (D. Minn. Mar. 29, 2018). McCrossan appeals. Having jurisdiction under
28 U.S.C. § 1291, this court affirms.

                                        I.

      The Company issued McCrossan an insurance policy for “Employee Theft” and
“Forgery”:

      (A)    The Company shall pay the Parent Organization for direct loss
             of Money, Securities, or Property sustained by an Insured
             resulting from Theft or Forgery committed by an Employee
             acting alone or in collusion with others.

      ....

      (D)    The Company shall pay the Parent Organization for direct loss
             sustained by an Insured resulting from Forgery or alteration of
             a Financial Instrument committed by a Third Party.

(bolded words in original, defined in policy). The policy excluded from coverage
certain loss “committed by any authorized representative of an Insured.” An Insured
under the policy included McCrossan and its subsidiaries.

      Blakeley Properties, LLC and Stewart Properties, LLC own commercial rental
properties. Brookstone, Inc. and Valhalla Investments, Inc. were Blakeley’s and
Stewart’s respective agents to “manage, operate, control, rent and lease” several
properties.




                                        -2-
Both hired Balderson Management, Inc. to manage these properties. Blakeley
separately hired Balderson as well.

       Balderson’s owner and principal, Cynthia Balderson, managed properties with
the help of an “administrative person,” as relevant here, her daughter Stephanie
Castillo. Castillo was the primary user of Balderson’s property management system,
the sole copy of which was on her computer. Unlike Cynthia, her duties (and
authority) did not include signing checks from any accounts.

       Castillo stole around $570,000 from Blakeley and $250,000 from Stewart over
the course of several years. She created fake invoices in the property management
system, printed checks (from Blakeley’s and Stewart’s accounts) payable to herself
or for her benefit, manipulated the system to show payment to a vendor, and forged
Cynthia’s signature on each check. She pled guilty to eight counts of theft by swindle
and was sentenced to 80 months’ imprisonment. State v. Stephanie Lantgen Castillo,
No. 27-CR-15-503 (Minn. Dist. Ct. Hennepin Cty. Nov. 23, 2015) (sentencing order).

      McCrossan submitted a claim to the Company, seeking coverage under the
“Forgery” and “Employee Theft” insuring clauses. The Company denied the claim.
McCrossan sued for breach of the insurance policy. Both parties moved for summary
judgment. The district court granted summary judgment to the Company. It
concluded Stewart was not an Insured under the policy; Castillo was an authorized
representative of Blakeley, precluding coverage under “Forgery;” and Castillo was
not Blakeley’s employee, precluding coverage under “Employee Theft.” McCrossan
appeals.

                                         II.

       This court reviews de novo “the district court’s grant of summary judgment and
its interpretation of state insurance law.” Grinnell Mut. Reinsurance Co. v.

                                         -3-
Schwieger, 685 F.3d 697, 700 (8th Cir. 2012). “The question is whether the record,
viewed most favorably to the non-moving party, shows no genuine issue of material
fact and that the moving party is entitled to judgment as a matter of law.” Volk v. Ace
Am. Ins. Co., 748 F.3d 827, 828 (8th Cir. 2014).

       In this diversity action, Minnesota substantive law controls this court’s analysis
of the insurance policy. Jerry’s Enters., Inc. v. U.S. Specialty Ins. Co., 845 F.3d
883, 887 (8th Cir. 2017). This court is “bound by the decisions of the Minnesota
Supreme Court” when interpreting Minnesota law. Integrity Floorcovering, Inc. v.
Broan-Nutone, LLC, 521 F.3d 914, 917 (8th Cir. 2008). “If the Minnesota Supreme
Court has not spoken on a particular issue, [this court] must attempt to predict how
the Minnesota Supreme Court would decide an issue and may consider relevant state
precedent, analogous decisions, considered dicta . . . and any other reliable data.” Id.

      “The interpretation of an insurance contract is a question of law.” Jerry’s
Enters., 845 F.3d at 887, citing Midwest Family Mut. Ins. Co. v. Wolters, 831
N.W.2d 628, 636 (Minn. 2013). Minnesota courts use “general principles of contract
law” to interpret an insurance policy. Midwest Family, 831 N.W.2d at 636, citing
Thommes v. Milwaukee Ins. Co., 641 N.W.2d 877, 879 (Minn. 2002). The policy
“must be construed as a whole, and unambiguous language must be given its plain
and ordinary meaning.” Id., quoting Henning Nelson Constr. Co. v. Fireman’s
Fund Am. Life Ins. Co., 383 N.W.2d 645, 652 (Minn. 1986). “Provisions in an
insurance policy are to be interpreted according to both ‘plain, ordinary sense’ and
‘what a reasonable person in the position of the insured would have understood the
words to mean.’” Id., quoting Farmers Home Mut. Ins. Co. v. Lill, 332 N.W.2d 635,
637 (Minn. 1983). Exclusions are “construed strictly against the insurer.” Syfco v.
Encompass Indem. Co., 761 F.3d 867, 871–72 (8th Cir. 2014), citing Thommes, 641
N.W.2d at 880. “An insured party bears the initial burden of demonstrating coverage,
and the insurer then bears the burden of establishing an applicable exclusion.”


                                          -4-
Restaurant Recycling, LLC v. Employer Mut. Cas. Co., 922 F.3d 414, 417 (8th Cir.
2019), citing Midwest Family, 831 N.W.2d at 636.

                                         A.

      McCrossan seeks recovery for Blakeley’s and Stewart’s losses. The policy
covers loss to an Insured. The Company admits Blakeley is an Insured.

     Stewart, however, is not. An Insured includes McCrossan and “any
Subsidiary.” Subsidiary is defined in the policy, as, in relevant part:

      any entity while more than fifty percent (50%) of the outstanding
      securities representing the present right to vote for election of or to
      appoint directors, trustees, managers, members of the Board of
      Managers or equivalent positions of such entity are owned, or
      controlled, by the Parent Organization, directly or through one or more
      Subsidiaries.

While the policy was in effect, Stewart was wholly-owned by a McCrossan
individual. Without citing authority, McCrossan argues Stewart is an Insured because
it was not in a “materially different position” than other McCrossan-related entities
the Company admits are covered. The policy’s language calls for ownership or
control by McCrossan. Ownership and common management by McCrossan
individuals, even McCrossan board members, does not meet this test. Because
Stewart does not meet the policy’s definition of Subsidiary, it is not an Insured. See
Depositors Ins. Co. v. Dollansky, 919 N.W.2d 684, 691 (Minn. 2018) (“We
determine whether an insurance policy provides coverage by looking to the language
of the insurance policy itself.”). The district court properly granted summary
judgment to the Company on McCrossan’s claims for Stewart’s loss.




                                         -5-
                                         B.

     As for Blakeley’s loss, McCrossan claims coverage under the “Forgery” and
“Employee Theft” insuring clauses.

      The Company admits McCrossan met its initial burden to demonstrate coverage
under the “Forgery” clause. The Company argues, however, that the “Authorized
Representative” exclusion applies, which excludes from coverage:

      loss or damage due to Theft, Forgery, Computer Fraud, Funds
      Transfer Fraud, Money Orders And Counterfeit Currency Fraud,
      Credit Card Fraud or other fraudulent, dishonest or criminal act (other
      than Robbery or Safe Burglary) committed by any authorized
      representative of an Insured, whether acting alone or in collusion with
      others, provided that this Exclusion (A)(14) shall not apply to otherwise
      covered loss under Insuring Clauses (A), Employee Theft Coverage, or
      (I), Client Coverage, resulting from Theft or Forgery committed by an
      Employee acting in collusion with such authorized representative.

The parties dispute whether Castillo was an “authorized representative” of Blakeley,
a term not defined in the policy.

       The most relevant case is National City Bank of Minneapolis v. St. Paul Fire
& Marine Ins. Co., 447 N.W.2d 171 (Minn. 1989). There, an insured bank sought
coverage under a bond after making a loan in reliance on fake stock certificates. Id.
at 173. At issue was whether the insured bank complied with the bond’s requirement
that “the Insured, its correspondent bank or other authorized representative”
physically possess the certificates before making the loan. Id. at 174. The insured
bank received the certificates after making the loan; another bank had them while the
insured bank negotiated it. Id. The court concluded the lack of agency relationship
precluded the other bank from being an “authorized representative” of the insured
bank under the bond. See id. at 176. “It was a mere coincidence” that the other bank

                                         -6-
had the certificates while the insured bank negotiated the loan. Id. “[T]hus there was
no act making [the other bank] an ‘authorized representative’ of [the insured bank].”
Id. (agreeing with the trial court that the other, possessing bank “did not serve as an
authorized representative of [the insured bank] in this transaction for the purposes of
possessing the certificates as contemplated under the [b]ond”).

        This court is bound by the Minnesota Supreme Court’s instruction that “being
an ‘authorized representative’ has an agency requirement.” Id. Here, it is undisputed
that Blakeley made Balderson its agent for property management, Blakeley knew
Castillo worked at Balderson on its accounts, and Blakeley did not object to her
working there. The district court thus correctly applied agency principles to conclude
that Castillo met National Bank’s agency requirement. See Semingson v. Stockyards
Natl. Bank, 203 N.W. 412, 413 (Minn. 1925) (“If an agent employs a subagent for
his principal, by authority of the principal, express or implied, the subagent is the
agent of the principal.”); Hartford Fire Ins. Co. v. Clark, 727 F. Supp. 2d 765, 775
(D. Minn. 2010), quoting Restatement (Third) Of Agency § 3.15 cmt. c (2006)
(“Implied consent to appoint subagents is . . . present when an agent is itself a person
that is not an individual, such as a corporation.”), and § 3.15 cmt. b (“When an agent
is itself a corporation or other legal person, its officers, employees, partners, or
members who are designated to work on the principal’s account are subagents.”). Cf.
Wolfson v. Beris, 295 N.W.2d 562, 565 (Minn. 1980) (trial court correctly applied
agency principles to find that real estate agent was subagent of seller, even though
seller did not “know of” or “authorize” agent’s actions, because agent “acted on [the
seller’s] part in accord with the custom of the industry”), citing Restatement
(Second) of Agency § 5(1) (1958).

      True, as McCrossan contends, National City does not say that agency is the
only requirement to be an authorized representative. However, the authorized
representative exclusion unambiguously applies here, where Blakeley’s



                                          -7-
empowerment of Castillo to act on its behalf enabled her crime.2 See BancInsure,
Inc. v. Highland Bank, 2012 WL 6217375, at *6–7 (D. Minn. Dec. 4, 2012)
(concluding that one bank was the “authorized representative” of another bank
because their “intentional relationship” met National City’s agency requirement). See
also Volk, 748 F.3d at 828–29 (“Minnesota courts rely on dictionaries for the plain
and ordinary meaning of an undefined term.”); Stop & Shop Cos., Inc. v. Federal
Ins. Co., 136 F.3d 71, 74 (1st Cir. 1998) (consulting Black’s Law Dictionary and
Webster’s Third New International Dictionary to conclude “authorized
representative” unambiguously covers “a person or company empowered to act on an
entity’s behalf”); Telamon Corp. v. Charter Oak Fire Ins. Co., 850 F.3d 866, 871
(7th Cir. 2017) (adopting Stop & Shop’s definition); Stanford Univ. Hosp. v. Federal
Ins. Co., 174 F.3d 1077, 1085 (9th Cir. 1999) (construing “the ‘authorized
representative’ language . . . narrowly since it is in an exclusion clause” and agreeing
with Stop & Shop).

       Blakeley authorized Balderson to act on its behalf for property management.
Balderson’s duties included managing bank accounts, all accounting (rental billing,
deposits, distributions, and disbursements), approving invoices, and maintaining
property management software. (The scope of the duties Blakeley granted Balderson
and reserved for itself is detailed by the district court. C.S. McCrossan, 2018 WL
2180256, at *3–4.) Blakeley knew that Balderson performed its duties through
Cynthia and Castillo. See Rommel v. New Brunswick Fire Ins. Co., 8 N.W.2d 28,
32 (Minn. 1943) (“[A corporation] must act through or by means of human
direction.”). Blakeley’s grant of authority to Balderson thus empowered them to

      2
       McCrossan argues that equating “authorized representative” with “agent” is
inconsistent with other provisions in the insurance policy. It does not object to
defining “authorized representative” to cover “a person or company empowered to
act on an entity’s behalf.” This court need not address whether McCrossan’s
proposed definition requiring “authority to bind” is reasonable, making “authorized
representative” ambiguous. McCrossan itself does not view the formulations “as
meaningful[ly] different.”

                                          -8-
work on its behalf. See Stanford Univ., 174 F.3d at 1085 (“There would be no force
or effect to the exclusionary clause if the term ‘authorized representative’ did not
include employees and officers of the authorized company.”); Stop & Shop, 136 F.3d
at 74–75 (noting an authorized company “may carry out its obligations . . . only
through the acts of its officers and employees,” and rejecting that acts by the
authorized company’s officers could not fall under an “authorized representative”
exclusion).

        Not every individual working for an authorized representative is also an
authorized representative. The facts of each case determine whether the individual
is empowered to act on the principal’s behalf. Contrary to McCrossan’s argument
that Castillo lacked authority, her (undisputed) duties—done on behalf of
Blakeley—included: bookkeeping (including processing invoices and printing
checks), inputting vendor information, collecting rents, following up on property-
rental leads, making cold calls, and handling tenant requests. The sole copy of the
property management system—necessary to Castillo’s scheme—was on her computer,
and Cynthia rarely accessed it. Cynthia testified that she planned to have Castillo
take over Balderson once she retired, and, in connection with that, Castillo was
getting more involved in tenant issues. Jane McCrossan, Blakeley’s manager,
testified that she knew and was not surprised that independent auditors decided to
interview Castillo about fraud as a standard part of two of McCrossan’s annual audits.
Though Castillo’s position was an “administrative person,” McCrossan swore in its
proof of loss that “Castillo was responsible for co-managing the McCrossan
Subsidiaries’ properties and leasing those properties out.” Castillo’s role at
Balderson authorized her to conduct the activities that led to her crimes, thus the
authorized representative exclusion applies. See Colson Servs. Corp. v. Insurance
Co. of N. Am., 874 F. Supp. 65, 69 (S.D.N.Y. 1994) (concluding company was
plaintiff’s authorized representative where it was given authority to act as plaintiff’s
agent in choosing investments and plaintiff “could have chosen to monitor [it] more
closely to ensure that it was exercising its authority appropriately, but chose not to do
so”). Cf. Telamon, 850 F.3d at 871 (consultant was corporation’s authorized

                                          -9-
representative where, despite a lack of express authorization in her employment
agreements “to do the specific activity that gave rise to the theft,” her “actual role
grew over time to reach matters far beyond the [a]greements’ terms,” and her duties
authorized her “to conduct the very activity that led to her crime”).

       In light of these facts, Castillo’s lack of check-signing authority does not
preclude her from being an “authorized representative,” as McCrossan argues. The
term’s unambiguous meaning does not impose such a requirement. See Storms, Inc.
v. Mathy Const. Co., 883 N.W.2d 772, 776 (Minn. 2016) (“When a contractual
provision is unambiguous, we do not ‘rewrite, modify, or limit its effect by a strained
construction.’”), quoting Valspar Refinish, Inc. v. Gaylord’s, Inc., 764 N.W.2d 359,
364–65 (Minn. 2009). Nor does the exclusion’s plain language. As the district court
noted, it reaches a range of acts unconnected to check-signing authority. The
exclusion applies to acts committed by “any authorized representative,” not just
authorized representatives with authority to sign checks. See Kubota Credit Corp.,
U.S.A. v. Federal Ins. Co., 2012 WL 12033876, at *5–7 (C.D. Cal. Apr. 2, 2012)
(construing the same exclusion at issue here, noting “the plain meaning of ‘authorized
representative[]’ . . . only requires a grant of ‘authority,’ not necessarily a grant of
‘fiscal authority’”).

      While exclusions are construed narrowly against the insurer, viewing the
record most favorably to McCrossan, the authorized representative exclusion
unambiguously excludes coverage here because Castillo acted as Blakeley’s
authorized representative. See Latterell v. Progressive N. Ins. Co., 801 N.W.2d 917,
921 (Minn. 2011) (Courts “must fastidiously guard against the invitation to create
ambiguities where none exist.”), quoting Columbia Heights Motors, Inc. v. Allstate
Ins. Co., 275 N.W.2d 32, 36 (Minn. 1979).

     As for coverage under “Employee Theft,” McCrossan argues that if Castillo
was Blakeley’s authorized representative, she must have been its employee. As


                                         -10-
relevant here, an “Employee” means any “Contractual Independent Contractor.” The
policy defines that term as:

      any natural person independent contractor while in the regular service
      of an Organization in the ordinary course of such Organization’s
      business, pursuant to a written contract between such Organization, and
      either (A) such natural person independent contractor, or (B) any other
      entity acting on behalf of such natural person independent contractor,
      for services.

McCrossan/Blakeley did not have a written contract for services with Castillo.
Blakeley did have a contract with Balderson. Viewing the record most favorably to
McCrossan, Balderson was not acting on behalf of Castillo.

      The parties agree that acting “on behalf of” means “in the interest of,” “as the
representative of,” or “for the benefit of.” Harleysville Ins. Co. v. Physical Distrib.
Servs., Inc., 716 F.3d 451, 460 (8th Cir. 2013), quoting Webster’s Third New
International Dictionary 198 (1993). McCrossan argues Balderson acted for the
benefit of Castillo, relying solely on Colony Tire Corp. v. Federal Ins. Co., 217 F.
Supp. 3d 860 (E.D.N.C. 2016). There, a plaintiff sought coverage under the same
employee-theft clause at issue here after two alleged “contractual independent
contractors” fraudulently used their payroll-and-tax-services corporation to embezzle
the plaintiff’s funds. See Colony Tire, 217 F. Supp. 3d at 863, 866. Analyzing the
same language at issue here in light of North Carolina law, that court concluded the
corporation acted on behalf of its two owners “when it contracted with plaintiff for
the purpose of facilitating the [owners’] embezzlement.” Id. at 867. The court noted
“the purpose of [the corporation’s] existence was to facilitate the [owners’]
embezzlement,” and “there is no evidence in the record that anyone benefitted from
[its] operations other than the [owners].” Id. Colony Tire is inapposite here. First,
Balderson’s contractual relationship with Blakeley started before Castillo joined
Balderson. Though she worked there when Blakeley hired Balderson directly, that
contract was recommended when the companies’ relationship started (again, before

                                         -11-
she joined Balderson). Second, Cynthia owned Balderson, not Castillo, and the
purpose of its existence was not to facilitate Castillo’s crime.

       Still relying on Colony Tire, McCrossan calls it an “absurd result” that
Castillo’s actions are not covered—despite McCrossan not giving her authority to
sign checks—while a crime committed by Cynthia—an authorized signer—would be
covered as employee theft. Analyzing Cynthia’s acts under Colony Tire presents
different facts and law than present here. Castillo’s acts are not covered by the plain
and ordinary meaning of the insurance policy here. See Engineering & Const.
Innovations, Inc. v. L.H. Bolduc Co., 825 N.W.2d 695, 705 (Minn. 2013) (“[W]e
will not ‘read an ambiguity into the plain language of a policy in order to provide
coverage.’”), quoting Farkas v. Hartford Accident & Indem. Co., 173 N.W.2d 21,
24 (Minn. 1969).

    The district court properly granted the Company summary judgment on
McCrossan’s claims for Blakeley’s loss.

                                    *******

      The judgment is affirmed.
                     ______________________________




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