Based on the holding in Shaw, the Court concludes that the Colorado Supreme Court would interpret the fidelity bond's coverage of loss resulting from "dishonest or fraudulent acts" to cover only actual fraud. Moreover, as numerous courts have held, "willfulness and an intent to deceive are necessary elements for an employee's acts to be 'dishonest and fraudulent'" under a fidelity bond. Eglin Nat'l Bank v. Home Indem. Co., 583 F.2d 1281, 1285 (5th Cir. 1978); see also Gen. Analytics Corp. v. CNA Ins. Cos., 86 F.3d 51, 53 (4th Cir. 1996) ("[e]stablishing intent is central to proving coverage under employee dishonesty policies"); Irvin Jacobs & Co. v. Fidelity & Deposit Co. of Md., 202 F.2d 794, 798 (7th Cir. 1953) (holding that, while "[t]he words 'dishonest' and 'fraudulent'" in a fidelity bond "are to be given a broad meaning[,]" fidelity bonds do not cover "mere negligence, mistake, or error in judgment"); Oriental Fin. Group v. Federal Ins. Co., 309 F. Supp. 2d 216, 219-20 (D.P.R. 2004) (in the fidelity bond context, "dishonest or fraudulent acts must be made willfully or intentionally"). For this reason, at least two courts considering this precise question have found that liability under a fidelity bond "is not imposed on an insurer for the consequences of . . . constructively or technically fraudulent acts innocently done, even though they constitute a breach of obligation by the person whose fidelity is insured to the beneficiary." First Nat'l Bank of S. Md. v. U.S. Fidelity & Guaranty Co., 340 A.2d 275, 284 (Md. App. 1975); Foster v. Bowen, 41 N.E. 2d 181, 183 (Mass. 1942) (a fidelity bond does not cover acts that were "merely constructively or technically a 'fraud,' or 'fraudulent'"); 11 Steven Plitt et al., Couch on Insurance § 161:2 (3d ed. 2008) (same).

According to NU, once FNF discovered Nieto's dishonesty, the bond terminated as to all related conduct. Oriental Fin. Grp. v. Fed. Ins. Co., 309 F.Supp.2d 216, 229 (D. P.R. 2004). In any event, NU notes that other parts of Felton's reports show that he analyzed the 2005-2006 bond as well.

The movant may carry this initial burden either by submitting “affirmative evidence that negates an essential element of the nonmoving party's claim” or by “demonstrat[ing] to the court that the nonmoving party's evidence is insufficient to establish an essential element of its claim.” Oriental Financial Group v. Fed. Ins. Co., 309 F.Supp.2d 216, 218 (D.P.R.2004). Here, PCH has done neither of these things.

The parties do not dispute that Plaintiffs' loss was caused by Hoffman.See also Rothschild Inv., 2006 WL 12361248 at *9; Oriental Fin. Group v. Fed. Ins. Co., 309 F. Supp. 2d 216, 222 (D.P.R. 2004); Fireman's Fund Ins. Co. v. Special Olympics Intl., Inc., 249 F. Supp. 2d 19, 27 (D. Mass. 2003); Lynch Prop., Inc. v. Potomac Ins. Co. of Ill., 962 F. Supp. 956, 961-62 (N.D. Tex. 1996). The parties have not addressed the issue of whether amounts received from Hoffman as restitution would be applied to offset any of Plaintiffs' insured loss.

Trial by affidavit is no substitute for trial by jury which so long has been the hallmark of even handed justice.Oriental Financial Group v. Federal Ins. Co., 309 F.Supp.2d 216, 220 (D.P.R. 2004) (internal quotations omitted). In sum, the Court finds there are issues of fact precluding summary judgment and thus adopts the Magistrate Judge's recommendation and denies summary judgment regarding Deliz' hostile work environment claim.

Although there is no Illinois case addressing "direct loss" in the context of fidelity insurance, the law, as extrapolated from other jurisdictions, is resoundingly uniform on this issue. Language in a fidelity bond, to the effect that the insured is covered for "losses directly resulting from," signifies a "direct loss" or the actual depletion of bank funds caused by the employee's dishonest acts. Federal Deposit Insurance Corp. v. United Pacific Insurance Co., 20 F.3d 1070, 1080 (10th Cir. 1994); Oriental Financial Group v. Federal Insurance Co., 309 F. Supp. 2d 216, 222 (D.P.R. 2004). If an employee's dishonesty causes losses to a third party, which then leads to litigation concluding in a judgment or settlement, the insured has not incurred a "direct loss" under a fidelity bond; the insured's loss is "indirect" and the third party's loss is "direct." Aetna Casualty Surety Co. v. Kidder, Peabody Co., 246 A.D.2d 202, 210, 676 N.Y.S.2d 559, 566 (1998); Auto Lenders Acceptance Corp. v. Gentilini Ford, Inc., 358 N.J. Super. 28, 36-37, 816 A.2d 1068, 1074 (2003) (Auto Lenders); City of Burlington v. Western Surety Co., 599 N.W.2d 469, 472 (Iowa 1999); Commercial Bank of Bluefield v. St. Paul Fire Marine Insurance Co., 175 W. Va. 588, 596, 336 S.E.2d 552, 556 (1985).