Argued: May 2, 2018
from the United States District Court for the Eastern
District of Michigan at Ann Arbor. No. 5:16-cv-12108-John
Corbett O'Meara, District Judge.
Douglas Young, WILSON YOUNG PLC, Southfield, Michigan, for
T. Wiegert, MEAGHER & GEER, P.L.L.P., Minneapolis,
Minnesota, for Appellee.
Douglas Young, WILSON YOUNG PLC, Southfield, Michigan, for
T. Wiegert, Anthony J. Alt, MEAGHER & GEER, P.L.L.P.,
Minneapolis, Minnesota, for Appellee.
Before: MOORE, CLAY, and KETHLEDGE, Circuit Judges.
NELSON MOORE, CIRCUIT JUDGE.
plaintiff, American Tooling Center, Inc. ("ATC"),
is a Michigan company that subcontracts some of its
manufacturing work to a vendor in China. Between October 1,
2014 and October 1, 2015, it was insured by the defendant,
Travelers Casualty and Surety Company of America
("Travelers"). During this time period, ATC
received a series of emails, purportedly from its Chinese
vendor, claiming that the vendor had changed its bank
accounts and ATC should wire transfer its payments to these
new accounts. After ATC had transferred approximately $834,
000, it learned that the emails were fraudulent and had been
sent by a wrongdoer impersonating its Chinese vendor. ATC
therefore sought coverage for its loss under its
"Wrap" business insurance policy ("the
Policy"), which it had purchased from Travelers.
Travelers denied the claim. ATC sued for breach of contract,
both parties moved for summary judgment, and the district
court granted summary judgment to Travelers. For the
following reasons, we REVERSE the district
court's grant of summary judgment to Travelers, grant
summary judgment to ATC, and REMAND for
further proceedings consistent with this opinion.
FACTS AND PROCEDURE
a tool and die manufacturer in Michigan that produces
stamping dies for the automotive industry. R. 21-3 (Gizinski
Dep. at 8) (Page ID #286). The company outsources some of its
manufacturing orders. Id. at 19 (Page ID #289).
Shanghai YiFeng Automotive Die Manufacture Co., Ltd.
("YiFeng"), a Chinese company, is one of ATC's
vendors. Id. ATC pays its vendors in four separate
payments, based on the manufacturing progress of the order.
Id. at 36-42 (Page ID #293-95). In order to be paid
for the work it has done, YiFeng emails ATC invoices.
Id. at 45 (Page ID #296). After receiving an invoice
from YiFeng, ATC goes through a multi-step process before it
will wire the money to YiFeng.
ATC employees verify that YiFeng has completed the necessary
steps required by the payment schedule for the next payment.
Id. at 48 (Page ID #296). Each week, ATC's Vice
President and Treasurer, Gary Gizinski, reviews a physical
spreadsheet of the outstanding accounts payable and
determines which bills need to be paid that week. R. 21-3
(Gizinski Dep. at 59-61) (Page ID #299-300). ATC pays YiFeng
and its other international vendors via wire transfer.
Id. at 62 (Page ID #300). To initiate a wire
transfer, Gizinski signs into a banking portal using software
on his computer. Id. at 70 (Page ID #302). He
manually enters the payee's name, banking information,
and the amount to be wired. Id. at 69, 140 (Page ID
#302, 319). After Gizinski submits the wire transfer request,
ATC's Assistant Comptroller must log into the banking
portal using his computer to approve it. Id. at 72
(Page ID #302).
the procedure for paying invoices that ATC employees followed
in the spring of 2015. On March 18, 2015, Gizinski emailed
YiFeng employee Jessie Chen requesting that Chen provide ATC
all outstanding invoices. R. 21-4 (Proof of Loss at 23) (Page
ID #351). An unidentified third party, through means unknown,
intercepted this email. Id. at 24 (Page ID #352).
This third party, impersonating Chen, then began a
correspondence with Gizinski about the outstanding invoices.
See, e.g., id. at 39-40 (Page ID #367-68).
On March 27, 2015, the impersonator emailed Gizinski and
claimed that, due to an audit, ATC should wire its payments
to a different account from usual. Id. at 45 (Page
ID #373). YiFeng had previously (and legitimately) informed
ATC it had changed its banking details, and ATC had no
process for verifying the changed information. R. 21-3
(Gizinski Dep. at 114, 117) (Page ID #313-14). Consequently,
Gizinski wired the money to the new account. Id. at
142 (Page ID #320).
April 3, the impersonator emailed Gizinski and informed him
that "due to some new bank rules in the province,"
the previous wire transfer was not credited to its account
and therefore it would return the payment. R. 21-4 (Proof of
Loss at 63) (Page ID #391). The impersonator requested that
Gizinski instead wire the money to a different bank account.
Id. Gizinski wired the money to this new account on
April 8, 2015. R. 23-10 (Apr. 8, 2015 Wire Transfer) (Page ID
#736). The impersonator ran this scam two more times and
Gizinski wired additional payments of $1575 and $482, 640.41
on April 9, 2015 and May 8, 2015. R. 21-4 (Proof of Loss at
3) (Page ID #331). When the real YiFeng demanded payment, ATC
realized it had wired the money to an imposter. R. 21-3
(Gizinski Dep. at 166) (Page ID #326). ATC paid YiFeng
approximately 50% of the outstanding debt, and agreed that
the remaining 50% would be contingent on ATC's insurance
claim. Id. at 126-27 (Page ID #316).
sought recovery for its loss from Travelers, arguing that it
fell within the "Computer Fraud" provision of the
Policy, but Travelers denied the claim. R. 21-5 (July 8, 2015
Denial Ltr.) (Page ID #459-61); R. 21-6 (Sept. 16, 2015
Appeal Ltr.) (Page ID #463-67); R. 21-7 (Oct. 23, 2015
Affirming Denial Ltr.) (Page ID #469-71). ATC subsequently
sued Travelers for breach of contract. R. 1 (Compl.) (Page ID
#1-16). After discovery, both parties moved for summary
judgment. R. 21 (Pl. Mot. for Summ. J.) (Page ID #170-98); R.
22 (Def. Mot. for Summ. J.) (Page ID #591-623). The district
court granted Travelers summary judgment, holding that
ATC's loss was not covered under the Policy. R. 33 (Dist.
Ct. Op. at 7-8) (Page ID #969- 70). ATC timely appealed. R.
35 (Notice of Appeal) (Page ID #972-73).
Standard of Review
review de novo a district court's grant of summary
judgment. Luna v. Bell, 887 F.3d 290, 297 (6th Cir.
2018). Summary judgment is proper if the moving party
"shows that there is no genuine dispute as to any
material fact." Fed.R.Civ.P. 56(a). "For this
determination, we review all facts in a light that is most
favorable to, and draw all reasonable inferences in favor of,
the nonmoving party." Byrd v. Tenn. Wine &
Spirits Retailers Ass'n, 883 F.3d 608, 613 (6th Cir.
2018) (quoting Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986)).
parties agree that Michigan law governs the interpretation of
the Policy. Appellant Br. at 4; Appellee Br. at 18. Under
Michigan law, the insured has the burden of proving coverage.
Pioneer State Mut. Ins. Co. v. Dells, 836 N.W.2d
257, 263 (Mich. Ct. App. 2013) (citing Solomon v. Royal
Maccabees Life Ins. Co., 622 N.W.2d 101, 103 (Mich. Ct.
App. 2000)). If the insured demonstrates that the policy
provides coverage, then the insurer has the burden of showing