Any ambiguity in the contract language is construed against the insurer. See e.g., Century Bank v. St. Paul Fire Marine Insurance Co., 4 Cal.3d 319, 321, 482 P.2d 193, 194, 93 Cal.Rptr. 569, 570 (1971); Continental Bank v. Phoenix Insurance Co., 24 Cal.App.3d 909, 913, 101 Cal.Rptr. 392, 394 (1972); Jones v. Fireman's Fund Insurance Co., 270 Cal.App.2d 779, 76 Cal.Rptr. 97, 100 (1969). In construing the contract, the court looks to the reasonable expectations of the insured.
The "on the faith of" requirement refers to an insured's "complete confidence, belief or trust" in the documents. Continental Bank v. Phoenix Ins. Co., 24 Cal. App. 3d 909, 913 (1972). NU contends that Chicago Title's employees did not take any steps to verify the signatures.
The maxim `de minimis non curiat lex' seems to control here. (See Zumbrun v. University of Southern California (1972) 25 Cal.App.3d 1, 11 [ 101 Cal.Rptr. 499, 51 A.L.R.3d 991]; Continental Bank v. Phoenix Ins. Co. (1972) 24 Cal.App.3d 909, 912 [ 101 Cal.Rptr. 392].)" ( Halford v. Alexis, supra, 126 Cal.App.3d at p. 1032.) However, in Haman v. County of Humboldt (1973) 8 Cal.3d 922 [ 106 Cal.Rptr. 617, 506 P.2d 993], the court rejected the legislative classification that discriminated between residents owning fishing boats registered in California and residents owning fishing boats registered in other states.
The maxim "de minimis non curiat lex" seems to control here. (See Zumbrun v. University of Southern California (1972) 25 Cal.App.3d 1, 11 [ 101 Cal.Rptr. 499, 51 A.L.R.3d 991]; Continental Bank v. Phoenix Ins. Co. (1972) 24 Cal.App.3d 909, 912 [ 101 Cal.Rptr. 392].) We agree with the observations of the trial court to the effect that "[t]hese inequities were not arbitrary or unreasonable when considered as part of the total year-round registration plan and its objectives . . . which benefited the entire California motoring public."
St. Paul also relies on United States National Bank in Johnstown v. Reliance Insurance Co., 348 Pa.Super. 30, 501 A.2d 283 (1985), and Continental Bank v. Phoenix Insurance Co., 24 Cal.App.3d 909, 101 Cal.Rptr. 392 (1972), which upheld findings that a bank had not relied on a forgery, but those decisions involved a different procedural posture. Both United States National Bank and Continental Bank held that evidence submitted at a trial was sufficient to support a factual finding that a lender did not rely on a forged guaranty.
Bank of Manitowoc, 485 F.3d at 978 (footnote omitted) makes clear that banks have no obligation under that Bond provision to investigate the authenticity of documents: Republic Nat'l Bank of Miami v. Fid. & Deposit Co. of Md., 894 F.2d 1255 (11th Cir.1990) and Continental Bank v. Phoenix Ins. Co., 24 Cal.App.3d 909, 101 Cal.Rptr. 392 (1972), both cited by RLI, are simply inapposite. We have stated that “ ‘good faith’ usually establishes a subjective standard,” and pointed out that “[m]any negligent acts are committed with pure hearts and empty heads,” State Bank of the Lakes v. Kan. Bankers Sur. Co., 328 F.3d 906, 909 (7th Cir.2003).
But mere negligence does not defeat coverage under Insuring Agreement E.Bank of Manitowoc, 485 F.3d at 978 (footnote omitted) makes clear that banks have no obligation under that Bond provision to investigate the authenticity of documents: Republic Nat'l Bank of Miami v. Fid. & Deposit Co. of Md., 894 F.2d 1255 (11th Cir. 1990) and Continental Bank v. Phoenix Ins. Co., 101 Cal. Rptr. 392 (Cal. Ct. App. 1972), both cited by RLI, are simply inapposite. We have stated that "'good faith' usually establishes a subjective standard," and pointed out that "[m]any negligent acts are committed with pure hearts and empty heads," State Bank of the Lakes v. Kan. Bankers Sur. Co., 328 F.3d 906, 909 (7th Cir. 2003).
In construing section (E) of the bankers blanket bond, we note that "[t]he phrase, `on the faith of,' clearly signifies something done `in reliance upon.'" Continental Bank v. Phoenix Ins. Co., 24 Cal.App.3d 909, 913, 101 Cal.Rptr. 392, 394 (1972). In the May 24, 1979, transaction, the plaintiff sold five checks to the Kents; it neither gave value nor extended credit in reliance upon these checks.
Similarly, under Insuring Agreement (E)(1)(e), there is coverage only when the insured extends credit "on the faith of" some evidence of debt. Courts have interpreted the language, "on the faith of," as signifying reliance. See, e.g., Republic Nat'l Bank of Miami v. Fidelity Deposit Co. of Maryland, 894 F.2d 1255, 1263 (11th Cir. 1990); United States Nat'l Bank in Johnstown v. Reliance Ins. Co., 501 A.2d 283, 285 (Pa. Super. Ct. 1985); Continental Bank v. Phoenix Ins. Co., 101 Cal.Rptr. 392 (Cal. Ct. App. 1972). Hence, in order for there to be coverage under Insuring Agreement (D)(2) or (E)(1)(e), the insured must demonstrate that it actually relied upon the instructions or advices or the evidence of debt.
Clause E of the policy is a standard clause that is regularly used. See Fields, Bankers Blanket Bonds: What They Cover andWhat They Do Not, Ins.Counsel J. 318; Posey, Recent Trends inClause E Cases — Bankers Blanket Bonds, 33 Ins.Counsel J. 87. See also, Continental Bank v. Phoenix Insurance Co., 24 Cal.App.3d 909, 101 Cal.Rptr. 392 (1972); St. Paul Fire and MarineInsurance v. Leflore Bank and Trust Company, 181 So.2d 913, 254 Miss. 598 (1966). Despite the clause's popularity, the particular problem before us today is unique to Pennsylvania courts.