Davenport Peters Co. v. Royal Globe Ins. Co.
| Citation | 490 F. Supp. 286 |
| Decision Date | 21 May 1980 |
| Docket Number | Civ. A. No. 78-334-K. |
| Parties | DAVENPORT PETERS COMPANY, Plaintiff, v. ROYAL GLOBE INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
Ernest B. Murphy, Hemenway & Barnes, Boston, Mass., for plaintiff.
Robert W. Blakeney, Boston, Mass., for defendant.
This matter is before the court on a Statement of Agreed Facts, filed January 24, 1980, and cross motions for summary judgment. Plaintiff sues as the insured of comprehensive business insurance coverage written by defendant, and the court has jurisdiction under 28 U.S.C. § 1332 because the amount in controversy exceeds $10,000 and the parties are citizens of different states.
The policy under which liability is claimed ("Policy") was effective from October 1, 1975 to October 1, 1978. Plaintiff also had coverage under a prior policy ("Prior Policy"), from October 1, 1972 to October 1, 1975, with an affiliate of the defendant. The terms of the Policy and the Prior Policy are in all material respects the same. On each policy, Item 1 of the Declarations under Part VII, Crime, stated the Limit of Liability under Insuring Agreement IA, Employee Dishonesty (Commercial Blanket) Coverage as $50,000.
The claim in this case is made under Insuring Agreement IA, which is as follows:
Loss of Money, Securities and other property which the Insured shall sustain, to an amount not exceeding in the aggregate the amount stated in the Table of Limits of Liability applicable to this Insuring Agreement IA through any fraudulent or dishonest act or acts committed by any of the Employees, acting alone or in collusion with others.
By the terms of the clause defining "Effective Period," and subject to General Agreement C, loss under Insuring Agreement IA is covered "only if discovered not later than one year from the end" of the Effective Period.
General Agreement C provides in relevant part as follows:
Among the Conditions and Limitations applicable to Insuring Agreement IA are the following:
On October 27, 1976, more than one year after the end of the Effective Period of the Prior Policy, plaintiff first discovered a loss caused by an employee in the position of financial vice president. The dishonest actions of the employee, now known, began in October of 1972 and continued to the latter part of September, 1976. Plaintiff, claiming that the $50,000 limit was a per-year-per-dishonest-employee limit rather than a per-Effective-Period-per-dishonest-employee limit, submitted three proofs of loss under the Prior Policy, and one under the current Policy, as follows:
a) Oct. 24, 1972—June 29, 1973 $5,977.25
b) Nov. 14, 1973—June 21, 1974 13,293.26
c) Oct. 1974—Aug. 15, 1975 36,193.55
d) Oct. 24, 1975—Sep. 15, 1976 109,651.97
___________
Grand Total $165,116.03
Plaintiff also submitted claims for interest, which were rejected by defendant.
Commencing in January of 1977, plaintiff recovered the following sums from the dishonest employee or persons acting on his behalf:
a. In or about January, 1977 from Cambridge
Trust Company $7,222.83
b. In or about January, 1977 from National
Industries 255.61
c. In or about January, 1977 from K
Peterson 2,000.00
d. In or about January, 1977 from K
Autio 2,064.60
e. In or about April, 1977 from DiMento
& Sullivan 18,000.00
f. In or about November, 1977 from K.
Autio 100.00
__________
$29,643.04
By letter of June 10, 1977, defendant transmitted payment of $50,000 under the 1975-78 Policy, declining to make any payment under the Prior Policy.
Plaintiff now acknowledges that the Prior Policy affords no coverage for any of the loss since loss was first discovered more than a year after the end of the Effective Period of the Prior Policy. Plaintiff sues instead under the 1975-78 Policy, claiming that, either under a proper interpretation of ambiguous policy provisions or by application of the principle of honoring reasonable expectations, the aggregate limit of liability under the Policy is $100,000—$50,000 applicable to loss occurring during the Effective Period of the Prior Policy but discovered more than one year after the end of that period, and $50,000 applicable to loss occurring during the Effective Period of the Policy on which suit is brought.
Plaintiff's argument includes the following elements: (1) the purpose of General Agreement C was to liberalize recovery; (2) the Prior Policy contained $50,000 of Employee Dishonesty Coverage that would have applied if either the loss had been discovered before October 1, 1976 or the Prior Policy had not been allowed to expire, but the loss was not discovered until October 27, 1976 and the Prior Policy had been allowed to expire;3 coverage is nevertheless continued for the prior period loss because General Agreement C of the new Policy provides it; (3) General Agreement C is ambiguous; since the first of its three subparagraphs says "the insurance under this General Agreement C shall be part of and not in addition to the amount of insurance afforded by Insuring Agreement IA . . ." (emphasis added in Plaintiff's Memorandum), the emphasized language implies that General Agreement C is itself an insuring agreement and might be interpreted as providing $50,000 of coverage for a prior period that is not the same $50,000 that is provided under Insuring Agreement IA of the Policy for the Effective Period of the Policy; the third subparagraph has a simple aim—to limit recovery under General Agreement C to the lesser of the limit afforded under Insuring Agreement IA of a prior policy and a later policy; (4) the first sentence of Section 11 might be read by a reasonable person to mean that a payment under Insuring Agreement IA for a loss sustained during the Effective Period of the Policy will not reduce liability for another covered loss occasioned by an employee's dishonesty, and a loss to which General Agreement C applies is such a covered loss; (5) the provision of the third paragraph of Section 11 that a limit "shall not be cumulative from year to year or period to period" may reasonably be read as designed to preclude more than $50,000 worth of exposure for losses sustained in any three-year period and does not preclude more than $50,000 liability under one Policy, part of which is covered by Insuring Agreement IA (for loss sustained during the Policy Effective Period) and part of...
To continue reading
Request your trial
-
Bensalem Tp. v. International Surplus Lines Ins. Co.
..."in a form explicitly going beyond merely resolving ambiguities against insurers." Davenport Peters Co. v. Royal Globe Ins. Co., 490 F.Supp. 286, 291 & n. 5 (D.Mass.1980) (Keeton, J.).5 In contrast, cases like Standard Venetian Blind concern situations where the insured has no reasonable ba......
-
Hallowell v. State Farm Mut. Auto. Ins. Co.
...Loyal Protective Life Insurance Company, N.J.Supr., 34 N.J. 475, 170 A.2d 22, 30 (1961). See also, Davenport Peters Co. v. Royal Globe Insurance Co., D.Mass., 490 F.Supp. 286, 291 (1980); and Keeton, Insurance Law Rights at Variance With Policy Provisions, 83 Harv.L.Rev. 961, 962 That doctr......
-
Kates v. St. Paul Fire & Marine Ins. Co., Civ. A. No. 76-2070-K.
...recognized in a growing number of jurisdictions, is now a part of the insurance law of Massachusetts. See Davenport Peters Co. v. Royal Globe Ins. Co., 490 F.Supp. 286 (D.Mass.1980). 16 The court need not and does not consider whether the provisions would have remained too misleading to be ......
-
Atwater Creamery Co. v. Western Nat. Mut. Ins. Co.
...ten states had adopted the newer rule of reasonable expectations regardless of ambiguity. Davenport Peters Co. v. Royal Globe Insurance Co., 490 F.Supp. 286, 291 (D.Mass.1980). Other states, such as Missouri and North Dakota, have joined the ten since then. 2 Most courts recognize that insu......