Companies sought multiple insurance payments for multiple embezzlement schemes


Capital Press

Two fruit packing companies in Washington state have failed to convince a federal appeals court that they deserve additional insurance payments to recover losses caused by a former employee's embezzlement schemes.

The 9th U.S. Circuit Court of Appeals rejected arguments by the Underwood Fruit & Warehouse Co. and the Washington Fruit & Produce Co., which claimed the Nationwide Agribusiness Insurance Co. should pay them nearly $600,000.

The insurance company had already paid out $250,000 to each fruit packer after an accounting employee, David Lenihan, was found to have stolen more than $1 million from the two companies, according to court documents.

The payments were based on a single occurrence of embezzlement at each firm, but Underwood and Washington Fruit claimed they should recover multiple payments because Lenihan used various schemes to steal the money.

In addition to working for the two companies, Lenihan ran his own orchard operation, North Star Farms, which sold apples to Washington Fruit.

He would forge company checks, advance money to the orchard operation and make the orchard's debts disappear, according to court documents.

The companies claimed each of Lenihan's schemes was an individual occurrence that warranted a separate insurance payment.

A federal judge in Washington disagreed with that argument, and the appeals court affirmed the decision on Oct. 9.

The schemes were "nearly identical" and amounted to a single occurrence of employee dishonesty under the insurance policy, the appeals court said.

In March, Lenihan was sentenced to five years in prison after pleading guilty to first-degree theft in a county court, the Yakima Herald-Republic reported earlier this year.

Lenihan also pled guilty to bank fraud in federal court and received a prison sentence of 21 months, which he will serve concurrently with his other sentence, according to court documents.

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