9th Circuit rules insurers don't owe coverage to Cachet Financial because a policy exclusion for…
Cachet Financial Services v. Berkley Insurance Company
Status and record
Your position
Do you support this decision?
An advisory read. Your position on a ruling is citizen opinion; it does not form a citizen mandate and is never a legal appeal.
Civitus citizens
Take a position above to see how verified Civitus citizens are weighing in. Positions stay sealed until you have one of your own.
The Civitus brief
AI analysis
Plain English
9th Circuit rules insurers don't owe coverage to Cachet Financial because a policy exclusion for fraudulent instructions bars the claim.
Why it matters
The Ninth Circuit affirmed the dismissal of Cachet Financial Services' lawsuit against two insurance companies, Berkley Insurance and Great American Insurance. The court found that a Fraudulent Instructions Exclusion in the commercial insurance policy clearly and unambiguously barred coverage for Cachet's claimed loss. The court also rejected Cachet's argument that the exclusion should be thrown out because it made coverage illusory.
Who it affects
This ruling directly affects Cachet Financial Services, which loses its insurance coverage claim. More broadly, it is relevant to businesses that purchase commercial crime or financial institution insurance policies and need to understand how exclusions for fraudulent instructions may limit their coverage.
What happens next
Current
Decision issued Jul 21, 2026
Unpublished opinion
Next
Possible rehearing
Parties can ask the same court to reconsider. Then: possible supreme court petition.
View possible path
- Decision issued Jul 21, 2026Unpublished opinion
- Possible rehearingParties can ask the same court to reconsider.
- Possible Supreme Court petitionThe Supreme Court takes only a small share of petitions.
Citizens vs Court
Civitus citizens
Sealed
Take a counted position to open the tally.
Appellate court
Decision issued
Jul 21, 2026 · Unpublished opinion
Take a position above to open the comparison.
A comparison of public sentiment with the ruling. Courts are not subject to a citizen mandate, and judges are not elected representatives.
Take action
Courts decide cases; Congress can respond with legislation. Telling your representative is the civic lever here.
Public discussion
Add a tag
Citizen opinion on this ruling, not a rehearing of the case. Similar opinions on this case can open a solution poll.
3 similar opinions open a solution poll
Loading opinions
Deeper context
Long-form analysis, legal background, and source material
Read analysisAnalysis · Source
DEEPER READ
Cachet Financial Services, a California company that processes financial transactions, sued its insurers after suffering a loss it believed was covered under its commercial insurance policy. The central question was whether a policy exclusion called the Fraudulent Instructions Exclusion barred Cachet's claim for coverage under a provision known as Section A.6.a.(1) of the policy. The court first examined whether the exclusion's language was ambiguous. Cachet argued that the phrase 'which instruction proves to be fraudulent' in the exclusion should be read to match the policy's separately defined term 'Fraudulent instruction,' which would have limited the exclusion's reach. The court disagreed. It noted that the policy used a specific formatting practice, putting defined terms in quotation marks, and the exclusion's relevant phrase was not in quotation marks. The court concluded that a reasonable insured would not assume two similar but differently worded phrases have identical meanings when only one is a defined term. Cachet also argued that even if the exclusion's language was clear, it should not be enforced because it would make the coverage under Section A.6.a.(1) illusory, meaning the promised coverage would be essentially worthless. The court declined to accept this argument on two grounds. First, it noted that even the California Supreme Court has not clearly recognized an illusory coverage doctrine. Second, the court said Cachet had not shown that the remaining coverage under Section A.6.a.(1) after applying the exclusion is so unrealistic as to be meaningless. The court also pointed out that Cachet itself was in a position to evaluate whether the policy's terms were likely to benefit its specific business before purchasing the coverage. The court's decision was unanimous, with no dissent noted in the opinion. Because this is a memorandum disposition, it is not considered binding precedent in the Ninth Circuit except as provided by Circuit Rule 36-3.
CITATION AND RECORD
Record source: CourtListener
NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JUL 21 2026 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT CACHET FINANCIAL SERVICES, a No. 25-2089 California corporation, D.C. No. 2:22-cv-01157-SPG-JEM Plaintiff - Appellant, v. MEMORANDUM* BERKLEY INSURANCE COMPANY, a Delaware corporation; GREAT AMERICAN INSURANCE COMPANY, an Ohio corporation, Defendants - Appellees. Appeal from the United States District Court for the Central District of California Sherilyn Peace Garnett, District Judge, Presiding Argued and Submitted June 22, 2026 Pasadena, California Before: FRIEDLAND, FORREST, and DESAI, Circuit Judges. Plaintiff-Appellant Cachet Financial Services appeals the district court’s grant of Defendants-Appellees Berkley Insurance Company and Great American Insurance Company’s Motion to Dismiss in this commercial insurance coverage * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. dispute. The district court held that Cachet’s claims failed because the relevant policy’s Fraudulent Instructions Exclusion barred coverage under the policies issued by both insurers. We have jurisdiction under 28 U.S.C. § 1291 and affirm. We review de novo an appeal from a district court’s grant of a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1014 (9th Cir. 2012). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Block v. eBay, Inc., 747 F.3d 1135, 1138 (9th Cir. 2014) (citation omitted). The “district court’s interpretation of state contract law . . . and its interpretation of an insurance policy” are also reviewed de novo. L.A. Lakers, Inc. v. Fed. Ins. Co., 869 F.3d 795, 800 (9th Cir. 2017) (citation omitted). We apply California state law to the parties’ contract dispute. See Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996). The first question we must address is whether the Fraudulent Instructions Exclusion, Exclusion D.4.d, is ambiguous because “if the policy language is clear and explicit, it governs.”1 John’s Grill, Inc. v. Hartford Fin. Servs. Grp., Inc., 552 1 We do not decide whether Cachet forfeited its arguments concerning ambiguity and the proper interpretation of the Exclusion because, even assuming forfeiture, we would exercise our discretion to reach the “pure question[s] of law” presented, In re Mercury Interactive Corp. Sec. Litig., 618 F.3d 988, 993 (9th Cir. 2010), where “the pertinent record has been fully developed,” Cascadia Wildlands 2 25-2089 P.3d 1045, 1053 (Cal. 2024) (citation modified). We conclude that it is not ambiguous. The Exclusion removes coverage under paragraph A.6 of the policy for: Fraudulent Instructions Loss resulting from an “employee” or “financial institution” acting upon any instruction to: (1) Transfer, pay or deliver “money”, “securities” or “other property”; or (2) Debit or delete your account; which instruction proves to be fraudulent, except when covered under Insuring Agreement A.6.a.(2) or A.6.b. Cachet stated a viable claim for coverage under only § A.6.a.(1). See Cachet Fin. Servs. v. Berkley Ins. Co., No. 23-55217, 2024 WL 1042985, at *2–3 (9th Cir. Mar. 11, 2024) (holding that Cachet stated a claim under § A.6.a.(1) and affirming the dismissal of Cachet’s claim under § A.6.a.(2)). While “Fraudulent instruction” is a defined term in the policy and this Exclusion is labeled Fraudulent Instructions, that label is not in quotation marks, which is how the policy indicates the use of defined terms. Nonetheless, Cachet argues that the phrase “which instruction proves to be fraudulent” should be read to have the same meaning as “fraudulent instruction” to incorporate the policy’s defined term. This reading is inconsistent with the policy’s overall structure and context. See John’s Grill, 552 P.3d at 1053 (“A policy provision v. Scott Timber Co., 105 F.4th 1144, 1154 (9th Cir. 2024) (citation omitted), and “the parties have fully briefed and argued [these issues] on appeal,” Kaufmann v. Kijakazi, 32 F.4th 843, 847 (9th Cir. 2022). 3 25-2089 is ambiguous only if it is susceptible to two or more reasonable constructions despite the plain meaning of its terms within the context of the policy as a whole.” (citation omitted)). By its express terms, the definition of “Fraudulent instruction” applies only to § A.6.a.(2) and § A.6.b, which are not at issue. Further, a reasonable insured would not assume that similar—but different—phrases have the same meaning when one of them is a defined term and when defined terms are incorporated only by use of a specific formatting practice that was not employed in the relevant provision. Cachet further argues that we should hold the Exception unenforceable because it would render coverage illusory. Even assuming California recognizes an “illusory coverage doctrine,” see id. at 1054 (noting that the California Supreme Court “has never recognized an illusory coverage doctrine as such”), Cachet would not qualify for its protection, see id. at 1057–59. Cachet could not have “reasonably expect[ed] coverage where the cause of the loss is expressly excluded under the policy.” Id. at 1057 (citation modified). In any case, Cachet “has not shown that the prospect of” loss under § A.6.a.(1) that is not excluded by the Fraudulent Instructions Exclusion “is so unrealistic as to render the promised coverage illusory.” Id. at 1059. And we decline to treat the possibility that there may only be narrow applications of coverage under § A.6.a.(1) as an “extraordinary circumstance” that justifies not applying the unambiguous policy language. See id. Indeed, Cachet “could assess for itself whether it, specifically, was likely to benefit from the coverage based on the 4 25-2089 policy’s terms,” and “[t]he fact that [Cachet]’s particular business arrangements would make it unlikely to benefit from the policy’s limited [] coverage would be something for [it] to consider when obtaining coverage.” Id. AFFIRMED. 5 25-2089
Sources
- Official opinionPrimary record
Public record. Timeline facts only; no accusation of wrongdoing. Advisory citizen opinion does not form a citizen mandate.