Our insured car dealer took a fake cashiers check for the purchase of an automobile. He let the customer take the car. 10 days later his bank called him and told him the cashiers check was counterfeit. My question is: would the exclusion 2.(2) apply under the attached False Pretense form? I can’t find anything addressing fake checks. It seems to me, based on what I am reading in FC&S, the exclusion would apply because FP coverage is not meant to protect an insured who does not practice sound business practices when taking checks. Thank you.

Arkansas Subscriber

The answer to this question comes down to the nature of the cashiers’ check, which is a check guaranteed by a bank, drawn on the banks own funds and signed by a cashier. Cashier’s checks are treated as guaranteed funds because the bank, rather than the purchaser, is responsible for paying the amount represented.