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THE FEDERAL INSURANCE CO. v. SMITH TRAXLER, Circuit Judge, concurring and dissenting:

9

Because I do not believe that under Virginia law Susan Smith would be held liable on a theory of conversion for the money fraudu- lently obtained by her husband, I cannot agree that FIC is entitled to claim the full fraud loss amount from her. However, I agree with the district court on the alternative ground of unjust enrichment for a por- tion of the claim. For these reasons, I concur in part I.A. of the major- ity opinion, but respectfully dissent as to the remainder.

I.

Susan’s husband, Myron Smith, collected life insurance benefits from false claims he submitted under two bogus policies he obtained from AFBA. Both policies identified Myron’s brother, Michael C. Smith, as the primary beneficiary. AFBA approved both claims and paid out benefits of $300,000 in four separate checks. Two checks, totaling $150,000, were issued in 1997 and two checks totaling the same amount were issued in 1998. All four checks were made payable to Michael and deposited into a joint USAA account in the names of Michael and Myron. There is no evidence that Susan had any knowl- edge of the scheme or of her husband’s receipt of this money.

During a routine investigation in the fall of 1998, the Central Intel- ligence Agency ("CIA"), which employed Susan, discovered unusu- ally large deposits in Myron and Susan’s joint North West Federal Credit Union ("NWFCU") account. The CIA informed AFBA of the possible theft of life insurance proceeds around July 22, 1999. AFBA, in turn, contacted appellee FIC to initiate a claim under FIC’s fidelity policy issued to AFBA. FIC accepted the claim and paid AFBA $290,000 on December 21, 1999.

In March 2000, FIC filed an action in the district court against Susan and Michael for conversion and against Myron’s estate (Myron having died a few months earlier) for conversion and fraud. The court dismissed the claims against Michael and Myron’s estate without prejudice for lack of service of process. The court then granted partial summary judgment on FIC’s motion that it had standing to assert the remaining conversion claim against Susan, and thereafter conducted a bench trial. At the conclusion of the evidence, FIC moved without

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