Resolution Trust Corp. v. Moskowitz

• Decision Date: 13 October 1994
• Docket Number: Civ. A. No. 93-2080.
• Citation: 868 F. Supp. 634
• Parties: RESOLUTION TRUST CORPORATION, in its capacity as Receiver of United Savings Bank, F.S.B., Plaintiff, v. Donald J. MOSKOWITZ, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

868 F. Supp. 634

RESOLUTION TRUST CORPORATION, in its capacity as Receiver of United Savings Bank, F.S.B., Plaintiff, v. Donald J. MOSKOWITZ, et al., Defendants.

Civ. A. No. 93-2080.

United States District Court, D. New Jersey.

October 13, 1994.

Daniel Kinburn, Williams, Caliri, Miller & Otley, Wayne, NJ, for plaintiff Resolution Trust Co.

Edward N. Fitzpatrick, Clapp & Eisenberg, Newark, NJ, for defendant Moskowitz.

Laurence B. Orloff, Orloff, Lowenbach, Stifelman & Siegel, Roseland, NJ, for defendant Kramer.

Peter Bray, Bray, Chiocca, Rappaport & Rothstadt, Wayne, NJ, for defendant Koch.

W. Hunt Dumont, III, Robinson, St. John & Wayne, Newark, NJ, for defendant Wolff.

Chet Preston, Paterson, NJ, for defendant Kessler.

Stephen P. Del Mauro, Sauer & Del Mauro, E. Rutherford, NJ and Leonard Rosenstein, Hurley & Vasios, Short Hills, NJ, for defendant Vernon.

Joseph T. Afflitto, Sr., Diamond, Afflitto & Raimondi, Wayne, NJ, for defendant Ackerman.

John J. Byrne, III, Cornwell & Byrne, Wayne, NJ, for defendant Greenberg.

Robert A. Carmen, Parker, Chapen, Flattau & Klimpl, New York City, for defendants Dorfman, Abrams, Music & Co.

Evelyn A. Donegan, Tompkins, McGuire & Wachenfeld, Newark, NJ, for defendants Dorfman, Abrams, Music & Co., Ruitenberg, Ebner, McKinley, Harraka & Goldberg.

Paulette Pitt, Hayden, Perle & Silber, Weehawken, NJ, for defendant Biber.

Russell S. Burnside, Schneider, Nardone, Burnside & Jemas, Newark, NJ, for defendant Weiss.

Stanley M. Brand, Brand & Lowell, Washington, DC and Thomas J. Herten, Herten, Burstein, Sheridan & Cevasco, Hackensack, NJ, for defendants Schotz and Salzberg.

Karen Buerle, Hoagland, Longo, Moran, Dunst & Doukas, New Brunswick, NJ, for defendants Sciro, Marotta and Sciro & Marotta.

Charles A. Rizzi, Jr., Capehart & Scatchard, Mt. Laurel, NJ, for defendant B.K. Appraisal Services, Inc.

Andrew L. Liput, Hartman, Buhrman & Winnicki, Paramus, NJ, for defendant Rudd.

John P. Belardo, Krugman, Chapnick & Grimshaw, Saddle Brook, NJ, for defendant Zimel.

Nancy McDonald, McElroy, Deutsch & Mulvaney, Morristown, NJ, for defendant Fidelity & Deposit Co. of Maryland.

Gary Mizzone, Mizzone, Filko & Mizzone, W. Paterson, NJ, for defendant Giordani.

Steve Funk, Ross, Dixon & Masback, Washington, DC and Jacqueline Greenberg, Siff Rosen, Newark, NJ, for third-party defendant American Cas. Co. of Reading, PA.

OPINION

WOLIN, District Judge.

Pending before this Court is the motion of the Resolution Trust Corporation ("RTC") for reconsideration of this Court's order dated August 31, 1994, granting partial summary judgment to Fidelity and Deposit Corp. ("F & D"). For the reasons stated below, the Court will deny in part and grant in part the RTC motion.

BACKGROUND

This action concerns the closing and liquidation of United Savings Bank, SLA ("United"). On May 14, 1993, the RTC, as receiver, filed a blunderbuss-like complaint against certain of United's former officers and directors, along with others associated with United. The RTC also has sued United's fidelity bond insurance company, accountants, attorneys, appraisers, and certain borrowers. The RTC alleges that each is liable for United's insolvency. Specifically, the RTC asserts causes of action for breach of contract, negligence, gross negligence, breach of fiduciary duty, conversion and fraud. All defendants have filed answers to the RTC's complaint except for Wayne and Joanne Cross, Alan Taubenkimel,¹ Adland Realty, Inc., and Scott Paladini, all of who have had defaults entered against them.

The instant motion concerns RTC's attempt to recover under a fidelity bond issued to United by F & D for employee dishonesty. The F & D policy was in effect from February 17, 1989, to February 17, 1990. The policy has limits of $2.5 million, subject to a $25,000 deductible. This type of insurance policy is commonly referred to as a "banker's blanket bond" because it provides insurance coverage for a myriad of different risks faced by financial institutions.

F & D argues that RTC is not entitled to recover under the bond because it did not discover the employee dishonesty during the policy period, failed to timely notify F & D of its claim, and failed to timely file a proof of loss.

In its August 31, 1994, Opinion and Order (the "Opinion") this Court concluded that (1) when "discovery" occurred was a fact issue (Opinion, page 11); (2) proof of loss was filed late and the appreciable prejudice rule does not apply to the late filing of a proof of loss (Opinion, page 15); and there was no waiver by F & D of the proof of loss requirement (Opinion, page 16). Because it found the proof of loss condition had been violated, the Court granted summary judgment to F & D.

RTC asks the Court to reconsider several points: (1) whether the F & D policy is a "claims-made" policy; (2) whether the appreciable prejudice rule applies to the late filing of a proof of loss; and (3) whether F & D waived compliance with the proof of loss requirement under the policy.

As diversity of citizenship provides the jurisdictional basis for this action, the Court must look to New Jersey law and attempt to predict how the New Jersey Supreme Court would answer these questions. Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938).

I. Motion to Reconsider

This Court recognizes that motions to reconsider or reargue under Local Rule 12(I) are granted "very sparingly." Maldonado v. Lucca, 636 F.Supp. 621, 630 (D.N.J.1986). However, courts will grant reconsideration when a party demonstrates "dispositive factual matter or controlling decisions of law" were presented to the Court but not considered. Pelham v. United States, 661 F.Supp. 1063, 1065 (D.N.J.1987). Courts also grant reconsideration when the case is complex and the ruling impacts on a new issue of law. State of New Jersey Dept. of Human Services v. United States, 740 F.Supp. 1067 (D.N.J.1990) (Chief Judge Anne Thompson reconsidered a ruling "because the case is complex and raises new issues of law."). RTC has raised several factual and legal issues which were overlooked by the Court including the difference between "discovery" insurance policies and "claims-made" insurance policies. In addition, the Court recognizes that this case is complex and raise new issues of law. Thus, the Court has decided to entertain the plaintiff's motion.

II. "Discovery" Policies Versus "Claims-made" Policies

The Court's ruling was premised on its belief that the F & D policy was a "claims-made" insurance policy. However, upon reconsideration this Court finds that an examination of the language and history of the F & D policy reveals it is a "discovery" policy and not a "claims-made" policy.

The language of a "claims-made" policy states that the insurance company is obligated to provide insurance only for "claims made against the insured and reported to the company during the policy period." Zuckerman v. National Union Fire Ins. Co., 100 N.J. 304, 307, 495 A.2d 395 (1985) (Defining a "claims-made" policy as one "limiting coverage to claims made against the insured and actually communicated to the company during the policy period.") (emphasis added). Thus, under a "claims-made" policy the policyholder must both suffer a loss and report the claim within the policy period. Id.

The language of a "discovery" policy provides that the insurance company is obligated to provide coverage for all losses discovered during the policy period. A "discovery" policy typically states the insurance shall apply to any "loss discovered by the Insured during the policy period." There is no requirement that the policyholder report the loss to the insurance company during the policy period. Rather, the "discovery" policy merely requires the policyholder to report this loss "as soon as practicable."

Thus, a side-by-side comparison of the language of "discovery" policies and "claims-made" policies reveals they are two different animals.

An examination of the F & D policy sold to United reveals that the F & D policy is a "discovery" policy and not a "claims-made" policy. Nowhere in the F & D policy are the hallmark words of a "claims-made" policy which limit coverage to "claims made against the insured and reported to the company during the policy period." Zuckerman, 100 N.J. at 307 (emphasis added). On the contrary, the F & D policy contains the hallmark language of a "discovery" policy. Section 3 of the F & D policy states under the heading "Discovery": "This bond applies to losses discovered by the Insured during the Bond period." And, Section 5 of the F & D policy requires: "At the earliest practical moment, not to exceed 30 days, after discovery of loss, the Insured shall give the Underwriters notice thereof."

Thus, under the clear and unambiguous language of the F & D policy there is nothing that requires the policyholder to both suffer a claim and report the claim within the policy period. Under the F & D policy, a policyholder could discover a loss on the last day of the policy period and report it to the insurance company thirty days after the policy had expired. Therefore, the F & D policy cannot be construed as a "claims-made" policy. The F & D policy is a "discovery" policy.

The F & D policy is not only a "discovery" policy, it is a specialized form of insurance known as a "banker's blanket bond." The history of the banker's blanket bonds confirms that it is a totally different form of insurance from "claim-made" insurance.

In Zuckerman, the New Jersey Supreme Court recognized that the "claims-made" insurance policy originated in the 1970s as a means for underwriters to write insurance coverage for "perils that can cause latent injuries over an extended period of time and where there is difficulty in determining precisely when the essential causal event occurred." Id. 495 A.2d at 312. This is often true in medical malpractice, products liability and environmental litigation. Id.

The...