## Facts

- St. Francis de Sales Federal Credit Union and several other credit unions (the Credit Unions) accepted deposits of restrictively endorsed checks and hired Maine Armored Car Service (Maine) to pick up and transport the checks for processing.
- A locked metal box was installed on the exterior wall of the St. Francis de Sales building, and the Credit Unions deposited checks into the box each business day for Maine to collect.
- Maine obtained an armored-car transportation insurance policy issued by Sun Insurance Company of New York (Sun).
- The policy excluded losses from theft from a safe, vault, or locked receptacle unless the loss involved forced entry with visible tool marks and, when protected by a combination/time/key lock, the entry was by use of a specified key (including a master key, dial rim-lock key, or guard key) or by manipulation of a combination/time lock.
- Each year, Sun (through an insurance broker) issued certificates of insurance to the Credit Unions confirming the existence of the policy.
- The certificates stated that the policy covered liability for loss or damage “from any cause whatsoever” to customers’ property while in Maine’s care, custody, or control, and the certificates did not mention exclusions relating to theft from the lock box.
- A thief broke into the exterior lock box and stole checks.
- Maine submitted a claim to Sun, and Sun denied coverage based on the policy exclusion because access to the lock box was not gained by one of the specified keys or by manipulation of a combination.
- The Credit Unions obtained judgments against Maine for their losses but could not collect on them.
- The Credit Unions sued Sun for fraud and misrepresentation, alleging they relied on Sun’s certificates (and the omission of the lock box theft exclusion) in believing the checks were insured while awaiting pickup.
- A jury returned compensatory verdicts for fraud and misrepresentation and also awarded punitive damages.
- The trial court left the compensatory judgments in place but entered judgment as a matter of law for Sun on punitive damages; Sun appealed and the Credit Unions cross-appealed.

## Issues

1. Whether the evidence was sufficient to allow the jury to find fraud or misrepresentation by Sun based on the certificates of insurance and the Credit Unions’ claimed reliance.
2. Whether the trial court committed reversible error by restricting Sun’s evidence bearing on whether the Credit Unions reasonably relied on the certificates, including evidence concerning other insurance and related matters.
3. Whether the evidence permitted punitive damages under Maine law, or whether judgment as a matter of law for Sun on punitive damages was proper.

## Decision

- The court affirmed the entry of judgment as a matter of law for Sun on punitive damages.
- The court vacated the compensatory judgments for fraud and misrepresentation and remanded for further proceedings because the trial court improperly limited Sun’s evidence on the reasonableness of the Credit Unions’ reliance on the certificates.

## Legal Principles

- Fraud and negligent/intentional misrepresentation require proof that the plaintiff actually relied on the defendant’s representation and that the reliance was justifiable (reasonable) under the circumstances.
- When reliance is a required element, a defendant must be allowed to present relevant evidence that bears on whether reliance occurred and whether it was reasonable; excluding such evidence can warrant vacating a verdict and ordering a new trial.
- Certificates of insurance may be evidence of representations about coverage; if the certificate’s language conflicts with the policy or omits material limitations, those statements and omissions can support misrepresentation theories, subject to proof of reliance and other elements.
- Punitive damages in Maine require more than the showing needed for compensatory fraud; the plaintiff must present evidence of conduct driven by ill will or conduct so outrageous that malice may be implied, and courts may remove punitive damages from the jury when that standard is not met.

## Conclusion

The court left intact the trial court’s judgment for Sun on punitive damages because the record did not meet Maine’s malice standard, but it vacated the compensatory fraud and misrepresentation judgments and sent the case back for further proceedings after finding that the jury’s evaluation of reasonable reliance was affected by the improper exclusion of Sun’s reliance-related evidence.


St. Francis de Sales Federal Credit Union v. Sun Insurance Co. of New York, 818 A.2d 995 (2002)