Vam Check Cashing Corp. v. Fed. Ins. Co.

• Decision Date: 07 November 2012
• Docket Number: Docket No. 11–2644–cv.
• Parties: VAM CHECK CASHING CORP., Plaintiff–Appellee, v. FEDERAL INSURANCE COMPANY, Defendant–Appellant.
• Court: U.S. Court of Appeals — Second Circuit

699 F.3d 727

VAM CHECK CASHING CORP., Plaintiff–Appellee,
v.
FEDERAL INSURANCE COMPANY, Defendant–Appellant.

Docket No. 11–2644–cv.

United States Court of Appeals,
Second Circuit.

Argued: Aug. 23, 2012.
Decided: Nov. 7, 2012.

[699 F.3d 728]

Paul S. Hugel, Clayman & Rosenberg LLP, New York, NY, for plaintiff-appellee.

Arthur N. Lambert (M. Diane Duszak, on the brief), Frenkel Lambert Weiss Weisman & Gordon LLP, New York, NY, for defendant-appellant.

Before: KATZMANN, WESLEY, and LYNCH, Circuit Judges.

GERARD E. LYNCH, Circuit Judge:

This case requires us to decide whether a particular criminal act constituted “robbery” within the meaning of a crime insurance policy. Because we agree with the district court that the policy is ambiguous and that the insured offers a reasonable interpretation of the policy permitting coverage, we conclude that the insurer is liable under the policy and therefore affirm the district court's grant of summary judgment to the insured.

BACKGROUND

Plaintiff-appellee VAM Check Cashing Corp. (“VAM” or “the insured”) operates a number of check cashing stores in the New York City area, including Pine Check Cashing in Brooklyn, New York. VAM purchased a crime insurance policy (“Policy”) from defendant-appellant Federal Insurance Company (“Federal” or “the insurer”).

During the pendency of the Policy, a group of criminals successfully tricked a Pine Check Cashing employee, Romanita Vazquez, into turning over $120,000 in cash to them. The parties do not dispute the facts of the scheme, which are detailed principally in Vazquez's three-page statement prepared after the crime.

Some time before noon on September 2, 2009, Vazquez received a phone call from a woman claiming to be the wife of VAM's owner. Over the course of a wide-ranging chat, the caller told Vazquez that her husband was opening three new check cashing stores, including one in Manhattan that very day. During this call, Vazquez received a second call from another woman who identified herself as the manager of the newly opened Manhattan store. The second caller said that a government official had arrived at the new store to collect a tax bill, but because the store had just opened, it had insufficient cash on hand to pay the bill. Vazquez relayed this information to the original caller, who told Vazquez that a man named Windfrey would come to Pine to collect the $100,000, and that she would be able to identify him by his use of a code number. Later, the original caller increased the amount to $120,000, and Vazquez placed that amount in a box.

Eventually, a man who identified himself as Windfrey came into the store. He offered the pre-arranged code number, and Vazquez buzzed him into the back of the store. She then handed him a box containing the $120,000 in cash, and he left. As noted by the district court, Vazquez testified at her deposition that she “never felt threatened by Mr. Windfrey,” and at the time, “she did not believe he was dangerous or a thief.” Vam Check Cashing Corp. v. Fed. Ins. Co., 787 F.Supp.2d 264, 267 (E.D.N.Y.2011).¹

[699 F.3d 729]

Over the course of the afternoon, Vazquez did not hear anything further from the owner. She gradually grew suspicious and eventually called the police that evening. The police never caught the perpetrators or recovered the money; they advised VAM that the scheme was the work of a sophisticated group of criminals that had perpetrated similar scams across the country.

After the loss, VAM made a claim under the Policy, asserting that the crime was covered under the Policy's definition of “robbery.” In January 2010, however, Federal gave final notice that it denied the claim. Further negotiations between the parties to settle the claim were unsuccessful, and VAM then sued in the United States District Court for the Eastern District of New York (Jack B. Weinstein, District Judge ) for breach of contract, claiming damages of $112,500 (the $120,000 loss less the Policy's $7500 deductible). The facts being essentially undisputed, the parties filed cross motions for summary judgment. On May 25, 2011, the district court granted summary judgment to VAM. Vam Check Cashing Corp., 787 F.Supp.2d 264. Federal appeals.

DISCUSSION I. Legal Standard

The parties do not dispute the material facts underlying the claim. The case thus turns on the interpretation of the insurance contract. Because interpretation of an insurance agreement is a question of law, we review the district court's construction of the Policy de novo. See, e.g., Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 411 F.3d 384, 388 (2d Cir.2005). The parties agree that New York law governs this diversity action because New York is the “center of gravity” of the dispute. See Lazard Freres & Co. v. Protective Life Ins. Co., 108 F.3d 1531, 1539 (2d Cir.1997) (noting that New York federal courts must apply New York State's choice-of-law principles, including the “center of gravity” test for contract actions).

Under New York insurance law, the plain language of an insurance policy, read “in light of ‘common speech’ and the reasonable expectations of a businessperson,” Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d 377, 763 N.Y.S.2d 790, 795 N.E.2d 15, 17 (2003), will govern if the language is unambiguous. See, e.g., Fieldston Prop. Owners Ass'n, Inc. v. Hermitage Ins. Co., 16 N.Y.3d 257, 920 N.Y.S.2d 763, 945 N.E.2d 1013, 1017 (2011). In construing the policy consistent with these dictates,

A reviewing court must decide whether, affording a fair meaning to all of the language employed by the parties in the contract and leaving no provision without force and effect, there is a reasonable basis for a difference of opinion as to the meaning of the policy. If this is the case, the language at issue would be deemed to be ambiguous and thus interpreted in favor of the insured.

Fed. Ins. Co. v. IBM, 18 N.Y.3d 642, 942 N.Y.S.2d 432, 965 N.E.2d 934, 936 (2012) (internal citations, brackets, and quotation marks omitted). “Whether a contract is ambiguous is a question of law....” S. Road Assocs., LLC v. IBM, 4 N.Y.3d 272, 793 N.Y.S.2d 835, 826 N.E.2d 806, 809 (2005).

II. Analysis

The basis for VAM's claim under the Policy, and thus for its breach of contract action for failure to pay that claim, is that the events of September 2, 2009 fell within the Policy's “Robbery” clause. The Policy states in relevant part that “[Federal] shall be liable for direct losses: ...

[699 F.3d 730]

Within the Premises of Money and other property received from sources other than the sale of Food Stamps but only when such loss is caused by: ... (2) Robbery or attempt thereat.” The Policy defines the term:

“Robbery” means the unlawful taking of insured property from an Insured, a partner, an Employee or any other person authorized by the Insured to have custody of the property by violence, threat of violence or other overt felonious act committed in the presence and cognizance of such person, except any person acting as a watchman, porter or janitor.²

The parties agree that Vazquez was an “Employee” and was not “acting as a watchman, porter or janitor.” The parties also agree that “Windfrey” ³ and his associates employed neither actual nor threatened violence. Thus the definition can be simplified for this case:

“Robbery” means the unlawful taking of insured property from ... an Employee ... by ... overt felonious act committed in the presence and cognizance of such person....
Because the parties also agree that the acts constituted the “unlawful taking of insured property,” the only dispute is about the final phrase in the shortened definition: whether the unlawful taking by Windfrey and associates was an “[1] overt felonious act [2] committed in the presence and cognizance of” Vazquez.

[1] “Overt felonious act.” Federal contends that “overt felonious act” must be read as a whole. It argues, in effect, that the adjective “overt” should be read to modify the entire phrase “felonious act,” such that it covers only a “felonious act” whose felonious character is “overt.” On that reading, though Windfrey's taking of the money was a “felonious act,” and was “overt” in the sense that it was visible to Vazquez, it was not an “overt felonious act” because its felonious nature was not “overt,” but covert. That is, while Vazquez knew that she was giving money to Windfrey and observed his taking it, she did not recognize that she was handing the money over to a criminal because the scheme proceeded by trickery.

VAM counters that Federal's interpretation might prevail if the Policy read “ overtly felonious act,” in which case the adverb “overtly” would clearly modify the adjective “felonious.” But since the Policy uses two consecutive adjectives, VAM contends, both “overt” and “felonious” must each separately modify the noun “act.” Thus, coverage is proper if Windfrey committed

[699 F.3d 731]

an “act” that was both “overt” and “felonious.” Here, VAM argues, Windfrey's act was clearly “felonious,” since it amounted to larceny by trick. And it was also “overt,” since the act of taking the money was “ ‘open, manifest; public,’ ” Appellee Br. 15, quoting Black's Law Dictionary 1258 (4th ed.1968), even though its true criminal nature was hidden.

We cannot say that either of these two readings is definitive. Federal's interpretation has the advantage, not argued by Federal, that it might better connect the phrase “or other overt felonious act” with the language that precedes it (“violence, [or] threat of violence”) under the maxim of ejusdem generis. Federal's meaning might also be thought to come closer to the common law definition (and perhaps the ordinary understanding) of the word “robbery.” See supra note 2. As we note above, however, the criminal law definition is not controlling in this contract dispute, and the definition for which Federal argues does not correspond to the criminal definition in any event. Nor is the connection between the criminal law meaning of robbery and the...