Travelers Casualty & Surety Company of America, Inc. v. Northwestern Mutual Life Insurance Company and Merrill Lynch, Pierce, Fenner & Smith Inc.

POSNER, Circuit Judge.

Kenneth Zahner was the chief financial officer of a company named Volwood. He wrote checks on Volwood’s bank account payable to Northwestern Mutual and to Merrill Lynch, but directed Northwestern to use the money to buy him a life insurance policy and Merrill Lynch to deposit the money in his personal account with Merrill Lynch. Volwood owed no money to either defendant; nor had it authorized Zahner to transfer these corporate funds to himself. Zahner was embezzling. He is now in prison.

Travelers, the plaintiff, had insured Vol-wood against losses from employee…