Scranton Volunteer Fire Co. v. United States F. & G. Co.
| Decision Date | 26 October 1971 |
| Docket Number | Docket 71-1431.,No. 77,77 |
| Parties | SCRANTON VOLUNTEER FIRE CO., Inc., Plaintiff-Appellant, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Defendant and Third-Party Plaintiff-Appellee, v. Allen E. JEWITT, Third-Party Defendant. |
| Court | U.S. Court of Appeals — Second Circuit |
Kenneth W. Knapp, Hamburg, N. Y., for plaintiff-appellant.
Frederick D. Turner, Buffalo, N. Y. (Brown, Kelly, Turner, Hassett & Leach, Buffalo, N. Y., on the brief), for defendant and third-party plaintiff-appellee.
Before MOORE, HAYS and FEINBERG, Circuit Judges.
In late 1965, plaintiff Scranton Volunteer Fire Co., Inc. secured from United States Fidelity and Guaranty Company (USF&G) a fidelity bond, effective January 1966, to cover plaintiff's treasurer, third-party defendant Allen E. Jewitt. Under this bond USF&G agreed to indemnify Scranton for any losses amounting to $4,000 that were sustained as a result of the fraudulent or dishonest acts of its treasurer. For this protection Scranton paid a $10 premium each year through 1969, when it discovered that its treasurer had misappropriated company funds every year since 1966. Asserting that the bond provided protection of $4,000 for each year it was in force, Scranton filed a claim with USF&G for $14,500: $4,000 for each of the years 1966, 1967 and 1968, and $2,500 for 1969. USF&G contended that its total liability under the bond was limited to $4,000.
Scranton thereupon commenced this action in the New York State Supreme Court for Erie County to recover on the bond. The case was removed to the United States District Court for the Western District of New York, where USF&G moved for summary judgment limiting Scranton's recovery under the bond to $4,000 and dismissing the remaining claims. Scranton cross-moved for partial summary judgment in the amount of $4,000 and otherwise opposed defendant's motion. Scranton alternatively requested leave to amend its complaint to allege a cause of action for reformation. Judge John T. Curtin granted USF&G's motion, ordered it to pay $4,000 to Scranton in return for a release, and denied Scranton's motion in all respects. Scranton appeals from that order.
The USF&G bond by its terms is of indefinite duration. Section 8 of the bond states :
The "amount stated opposite the Position occupied by such Employee in said Schedule" was $4,000. USF&G argues that this language explicitly limits its total liability to $4,000 regardless of how many years the bond is in effect. Scranton claims that the language is ambiguous and that if USF&G's reading is correct, the bond is unconscionable.
As to the claimed ambiguity, we reluctantly conclude that none exists. However we might be disposed to regard defendant's liability under a bond not containing the limitation set forth in section 8, see United States v. American Surety Co. of New York, 172 F.2d 135 (2d Cir. 1949), the meaning of that provision is clear. In this diversity case, the parties apparently assume, and we agree, that we are bound to follow New York law in interpreting this contract and ruling on Scranton's claim of violation of public policy. The New York cases involving similar bonds indicate that where, as here, the bond contains no specific expiration date and includes a provision, like section 8, which clearly limits the insurer's liability to a specified amount throughout the life of the agreement the courts will enforce the contract as limited. Compare In re Rising, 201 Misc. 869, 112 N.Y.S.2d 349 (1952) ; McCollom v. Aetna Casualty & Surety Co., 260 A.D. 1, 20 N.Y.S.2d 287 (2d Dep't 1940) ; and Russeks Fifth Ave., Inc. v. Aetna Casualty & Surety Co., App.Div., 265...
To continue reading
Request your trial
-
Holdridge v. Heyer-Schulte Corp. of Santa Barbara
...district court. See, e. g., Freeman v. Marine Midland Bank-New York, 494 F.2d 1334 (2d Cir. 1974); Scranton Volunteer Fire Co. v. U. S. Fidelity & Guaranty Co., 450 F.2d 775 (2d Cir. 1971); Crown Coat Front Co. v. United States, 395 F.2d 160 (2d Cir. 1968), cert. denied, 393 U.S. 853, 89 S.......
-
Eriksson v. Galvin, 74 Civ. 4031 (CHT).
...222 (1962). See also Freeman v. Marine Midland Bank-New York, 494 F.2d 1334, 1338 (2d Cir. 1974); Scranton Volunteer Fire Co. v. U. S. Fidelity & Guaranty Co., 450 F.2d 775, 777 (2d Cir. 1971); Mooney v. Vitolo, 435 F.2d 838 (2d Cir. Browning Debenture Holders' Committee v. Dasa Corp., 560 ......
-
A.B.S. Clothing Collection, Inc. v. Home Ins. Co.
...in effect. (Columbia Hospital v. United States Fidelity & G. Co., supra, 188 F.2d at p. 657; see also Scranton Volunteer Fire Co. v. United States F. & G. Co., supra, 450 F.2d at p. 777.) It can also be argued important public policy interests are served by denying an employer the right to ......
-
Browning Debenture Holders' Committee v. DASA Corp.
...222 (1962). See also Freeman v. Marine Midland Bank-New York, 494 F.2d 1334, 1338 (2d Cir. 1974); Scranton Volunteer Fire Co. v. U. S. Fidelity & Guaranty Co., 450 F.2d 775, 777 (2d Cir. 1971); Mooney v. Vitolo, 435 F.2d 838 (2d Cir. 1970). In a motion under rule 15(b) to amend the complain......