Is money “tangible property”? What about checks? These questions recently were answered in the negative by a New Jersey Appellate Court in Estate of Keppel v. Angela’s Angels Home Healthcare, LLC, 2019 WL 2060285 (May 9, 2019).
Donna Thomas was a home health aide employed by Angela’s Angels Home Healthcare. She was no angel, however. While working for Louis Keppel over a period of two years, she wrote checks on Mr. Keppel’s account totaling $225,000. The checks were made payable to herself, her son, her son’s girlfriend, “cash,” and a company she set up. The theft of funds was not discovered until after Mr. Keppel’s death.
During the time that the thefts occurred, Angela’s Angels was insured under a comprehensive general liability policy issued by Nautilus Insurance Company. The policy provided coverage for “property damage,” which was defined to include both “[p]hysical injury to tangible property, including all resulting loss of use of the property” and “loss of use of tangible property that is not physically injured.” Nautilus denied coverage for the claim made by Angela’s Angels on the basis that money and checks are not “tangible property.”
Mr. Keppel’s estate subsequently sued Angela’s Angels, Ms. Thomas, and Nautilus. Ms. Thomas never entered an appearance in the action, and the estate settled with Angela’s Angels for a nominal sum. In exchange, Angela’s Angels assigned its rights under the Nautilus policy to the estate. After conducting discovery, the estate moved for summary judgment and Nautilus cross-moved. The trial judge granted summary judgment in favor of Nautilus, and that decision was later affirmed on appeal.
The Appellate Division began its analysis by noting that the term “tangible property” was not defined in the policy. Thus, the court held that, under well-established rules of insurance policy interpretation, it had to apply the plain and ordinary meaning of the term. In making this determination, the court looked to decisions from New Jersey and elsewhere defining “tangible property” in the insurance and other contexts and to dictionary definitions.
Based on those decisions and definitions, the court concluded that “‘tangible property’ is physical property that can be perceived by the senses and has genuine monetary value.” Id. at *3. The court went on to note:
Checks represent money in a bank that exists in digital form in a computer database in the name of the account holder. Checks are a representation of money held by a bank and are simply a medium of exchange. A medium of exchange, such as coins or dollar bills, is not tangible property. Thus, the checks misappropriated by Thomas and then cashed without permission are not property damage as defined in the Nautilus policies.
Id. The court further noted:
The loss of use of a check does not equate with the loss of money. Here, there is no injury to the checks, and the loss of use relates to the money misappropriated. Therefore, there is no property damage claim under the Nautilus policies.
As issue in Keppel were checks stolen by Ms. Thomas that she later filled out and cashed, resulting in $225,000 in funds being withdrawn from Mr. Keppel’s bank accounts. It appears, however, that the result would have been the same even if Ms. Thomas had stolen money directly from Mr. Keppel’s home. The court noted that “[t]he loss of stolen money does not constitute ‘property damage’ because money, or the checks representing money, is not ‘tangible property.’” Id. Unlike checks, money “can be perceived by the senses and has genuine monetary value.” Nonetheless, the Keppel court and courts in other jurisdictions have held that money itself is not tangible property.
Putting aside the court’s holding, the lesson to be learned here is that one has to be very cautious when settling with a tortfeasor for little or no money in exchange for an assignment of any rights the tortfeasor has under its insurance policy. In the event the denial of coverage is upheld, the injured party can end up walking away with little or no recovery while the party primarily responsible for the injuries (i.e., the tortfeasor) avoids potential liability.
© William D. Wilson and NJInsuranceBlog.com, 2019. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to William D. Wilson or NJInsuranceBlog.com with appropriate and specific direction to the original content.