989 F.2d 635 (3rd Cir. 1993), 91-5874, Oritani Sav. and Loan Ass'n v. Fidelity and Deposit Co. of Maryland

Docket Nº:91-5874.
Citation:989 F.2d 635
Party Name:ORITANI SAVINGS AND LOAN ASSOCIATION, a corporation organized under the Banking Laws of New Jersey v. FIDELITY AND DEPOSIT COMPANY OF MARYLAND (A Maryland Corp.) Fidelity & Deposit Company of Maryland, Appellant.
Case Date:March 16, 1993
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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989 F.2d 635 (3rd Cir. 1993)


organized under the Banking Laws of New Jersey



Fidelity & Deposit Company of Maryland, Appellant.

No. 91-5874.

Submitted Under Third Circuit Rule 12(6)

United States Court of Appeals, Third Circuit

March 16, 1993

June 12, 1992.

Page 636

Andrew T. Fede, Contant, Scherby & Atkins, Hackensack, NJ, for appellee.

James M. Mulvaney, Joseph P. McNulty, Michael S. Stein, McElroy, Deutsch & Mulvaney, Morristown, NJ, for appellant.

Before: MANSMANN, SCIRICA and ROTH, Circuit Judges.


ROTH, Circuit Judge.

This case arises from an insurance coverage dispute stemming from an incidence of telephone fraud perpetrated against Oritani Savings and Loan (Oritani). Oritani brought suit against Fidelity and Deposit Company of Maryland (Fidelity), seeking a declaratory judgment that Fidelity is obligated to indemnify Oritani under an insurance contract, a Savings and Loan Blanket Bond, executed between the parties. The district court held that Fidelity is obligated under the policy because telephone fraud is covered under the "On Premises" coverage provision in the policy. We disagree and will reverse. Moreover, because we find that, as a matter of law, no coverage is provided, we will remand to the district court to enter judgment in favor of the appellant.


During the time period at issue, Oritani and Fidelity had a valid insurance contract. The blanket bond covered "[a]ll the Insured's offices or premises in existence at the time this bond becomes effective...." The provisions of this bond provide coverage for:

(A) Loss resulting directly from dishonest or fraudulent acts of an Employee committed alone or in collusion with others;

(B)(1) Loss of property resulting directly from

(a) robbery, burglary, misplacement, mysterious unexplainable disappearance and damage thereto or destruction thereof while the Property is lodged or deposited within offices or premises located anywhere, or

(b) theft, false pretenses, common law or statutory larceny committed by a person

(i) present in an office of, or on the premises of, the Insured, or

(ii) present on the premises in which the Property is lodged or deposited.

It is undisputed that Oritani suffered a "loss of property" within the meaning of

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the policy. However, Fidelity contests whether this loss of property is covered under the policy.

Oritani suffered the loss from the following scheme of telephone fraud: On May 10, 1988, Jack Rowe, a vice president of Oritani responsible for processing wire transfer requests for Oritani's customers, received a telephone call from a person who identified herself as "Debbie" and said she was an employee of Oritani's branch office in Ho-Ho-Kus, New Jersey. 1 "Debbie" requested that Mr. Rowe effect a wire transfer of $85,300 from an Oritani customer account which "Debbie" identified by name, account number, and all other appropriate information. Mr. Rowe executed the transfer. On May 13, 1988, a similar request for a wire transfer for $87,300 from the same correctly identified account was made by "Susan," who also claimed that she was an employee of Oritani's Ho-Ho-Kus branch office. Mr. Rowe executed this transfer as well. On May 20, 1988, Mr. Rowe learned that the Ho-Ho-Kus office had no record of these wire transfers and that the identified account had insufficient funds to cover the transfers. However, the wired funds had already been disbursed by the recipient banks; Oritani therefore suffered a loss of $172,600.

While Mr. Rowe apparently made no effort to verify whether funds existed to cover the wire transfers, he testified that he followed his normal procedure in effecting the transfers. Moreover, Oritani has admitted that Mr. Rowe was not a knowing participant in the fraudulent scheme. Oritani has investigated the incident and has been unable to determine whether the persons who made the phone calls were actually employees of Oritani and/or present in Oritani's branch office. The parties concede that Mr. Rowe did believe that "Debbie" and "Susan" were employees of Oritani calling from the Ho-Ho-Kus branch office.

Oritani initially claimed that Fidelity breached its obligations under Insuring Agreement (B) of the insurance contract by refusing to provide coverage for Oritani's loss ("Count One") and that Fidelity's denial of coverage constituted bad faith ("Count Two"). Fidelity moved for summary judgment which was denied by the district court. See Oritani Savings & Loan Ass'n v. Fidelity & Deposit Co. of Md., 741 F.Supp. 515 (D.N.J.1990) ("Oritani I ".) On July 23, 1990, Fidelity filed a motion for reargument. Oritani opposed this motion and sought leave to amend its complaint to assert a claim for coverage under Insuring Agreement (A) ("Count Three"). On September 24, 1990, the district court denied Fidelity's motion for reargument, granted Oritani leave to file an amended complaint, and granted summary judgment for Oritani on Count One. See Oritani Savings & Loan Ass'n v. Fidelity & Deposit Co. of Md., 744 F.Supp. 1311 (D.N.J.1990) ("Oritani II "). The amended Count Three of Oritani's complaint was dismissed by the district court. See Oritani Savings & Loan Ass'n v. Fidelity & Deposit Co. of Md., No. 89-5355, 1991 WL 498924, 1991 U.S.Dist. LEXIS 14901 (Oct. 3, 1991) ("Oritani III "). Count Two was dismissed by Stipulation filed October 11, 1991. Fidelity filed its Notice of Appeal on October 24, 1991.


The district court had jurisdiction over this diversity case under 28 U.S.C. § 1332(a). Appellate jurisdiction for this appeal from a final order of the district court is predicated upon 28 U.S.C. § 1291.

This court's review of a grant of summary judgment is plenary. See Erie Telecommunications, Inc. v. City of Erie, 853 F.2d 1084, 1093 (3d Cir.1988). "On review the appellate court is required to apply the same test the district court should have utilized initially." Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir.1976), cert. denied, 429 U.S. 1038, 97 S.Ct. 732, 50 L.Ed.2d 748 (1977).

A court may grant summary judgment only when the submissions in the record "show that there is no genuine issue as to

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any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In determining whether summary judgment is appropriate, "[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson v. Liberty Lobby, Inc., 477...

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