Sys. Assessment & Research, Inc. v. Hartford Cas. Ins. Co.

• Decision Date: 15 September 2015
• Docket Number: Case No. 2015 CA 002883 B
• Parties: Systems Assessment & Research, Inc., Plaintiff, v. The Hartford Casualty Insurance Company, et al., Defendants.
• Court: D.C. Superior Court

Systems Assessment & Research, Inc., Plaintiff, v. The Hartford Casualty Insurance Company, et al., Defendants.

Case No. 2015 CA 002883 B

SUPERIOR COURT FOR THE DISTRICT OF COLUMBIA Civil Division

September 15, 2015

Judge Michael O'Keefe

ORDER

The issue before the Court is the proper construction of the provisions of an insurance policy relating to business crime coverage issued by The Hartford Casualty Insurance Company (Hartford), the Defendant, to Systems Assessment & Research, Inc. ("SAR"), the Plaintiff. Coverage for loss from dishonest acts is generally excluded under the insurance policy's main coverage, however, the "Property Choice Common Crime Coverages Form (Business Crime)" extends limited coverage for loss caused by employee theft.

The parties filed cross motions for early partial summary judgment¹ on Counts I and II of SAR's complaint against Hartford for breaching the terms of the insurance policy. Specifically, the parties seek judicial determination of the scope of coverage Hartford owes SAR under the insurance policy's definition of "occurrence" ("the coverage issue"). The coverage issue involves how the $25,000 per occurrence limit in the business crime coverage portion of policy [Redacted] (the "Hartford Policy") applies to SAR's loss. Specifically, SAR maintains that each individual act of theft necessarily constitutes a separate "occurrence." whereas Hartford maintains that the total loss from the thefts collectively arises from a single "occurrence."

Standard of Review

Summary judgment is appropriate when the moving party demonstrates that there is no genuine issue as to any material fact and that party is entitled to judgment as a matter of law. The Court must consider the evidence in the light most favorable to the non-moving party and grant summary judgment only if no reasonable juror could find for the opposing party as a matter of law. Biratu v. BT Vermont Ave., LLC, 962 A.2d 261, 263 (D.C. 2008).

Discussion

For purposes of the cross-motions for partial summary judgment, the moving parties stipulate to the following facts. Over the course of multiple policy periods, SAR's former accounts manager. Ms. Mercy Coffie Joseph, made 46² unauthorized withdrawals from SAR's bank accounts, totaling $472,148.52. SAR discovered the employee theft.³ which is undisputedly covered under the Hartford Policy's "business crime" policy, during its policy period, and timely submitted its notice of claim and proof of loss.⁴ See Compl. ¶¶ 29-33. In response to the claim. Hartford determined that the claim involved a single occurrence and issued payment in December 2014 in the amount of $25,000. SAR returned the payment and filed its Complaint challenging Hartford's payment of one occurrence as inadequate. In Count I, SAR seeks a declaration that it is owed coverage for each of the 46 individual acts of theft carried out by its employee, because each act of theft is to be treated as a separate occurrence under the Hartford Policy. In Count II, SAR alleges breach of contract based on Hartford'sfailure to pay SAR based on SAR's interpretation of the coverage issue. The parties concede that SAR has coverage for its loss caused by employee theft within the one policy period in which it was discovered (December 8, 2012 to December 8, 2013) and that Maryland law applies.

Because the facts and arguments hinge on a few specific provisions of the Hartford Policy, those provisions are produced from the outset. See Ex. 1, Stipulated Facts; HARTFORD_00001-160.

PROPERTY CHOICE COMMON CRIME COVERAGE FORM

(BUSINESS CRIME)

A. Insuring Agreements

Coverage is provided under the following Insuring Agreement for which a corresponding Limit of Insurance is shown in the Property Choice Schedule of Premises and Coverages, or Endorsements and applies to loss that you sustain resulting directly from an "occurrence" taking place at any time which is "discovered" by you during the Policy Period shown in the Property Choice Declarations or during the period of time provided in the Extended Period To Discover Loss - CRIME COMMON CONDITION F.1.g.:

1. Employee Theft

We will pay for loss of or damage to "money", "securities" and "other property" resulting directly from "theft" committed by an "employee", whether identified or not, acting alone or in collusion with other persons. For the purposes of this Insuring Agreement, "theft" shall also include forgery.

B. Additional Coverage - Claim Expense

[provision not replicated]

C. Limit of Insurance

The most we will pay for loss in any one "occurrence" is the applicable Limit of Insurance shown in the Declarations. Schedules or Endorsements.

If loss is covered under more than one Insuring Agreement or Coverage, the most we will pay for such loss shall not exceed the largest Limit of Insurance available under any one of those Insuring Agreements or Coverages.

D. Deductible

We will not pay for loss in any one "occurrence" unless the amount of loss exceeds the applicable Deductible Amount shown in the Declarations, Schedules or Endorsements. We will then pay for the amount of loss in excess of the Deductible amount, up to the Limit of Insurance. In the event that more than one Deductible Amount could apply to the same loss, only the highest Deductible Amount will be applied.

E. Exclusions

[provision not replicated]

F. Crime Common Conditions

[1. f.]

3) With respect to losses sustained or "discovered" by any such Plan, Insuring Agreement A.1. Employee Theft is replaced by the following:

We will pay for loss of or damage to "funds" and "other property" resulting directly from fraudulent or dishonest acts committed by an "employee", whether identified or not, acting alone or in collusion with other persons.

G. Definitions

5. "Discover" or "discovered" mean the time when you first became aware of facts which would cause a reasonable person to assume that a loss of a type covered by this insurance has or will be incurred, regardless or when the act or acts causing or contributing to such loss occurred, even though the exact amount or details of loss may not then be known. "Discover" or "discovered" also means the time when you first receive notice of an actual or potential claim in which it is alleged that you are liable to a third party under circumstances which, if true, would constitute a loss under this insurance.

[. . .]

15. "Occurrence" means:

a. Under Insuring Agreement A.1. Money and Securities:

1. An individual act;

2. The combined total of all separate acts whether or not related; or

3. A series of acts whether or not related;

Committed by an "employee" acting alone or in collusion with other persons, during the Policy Period shown in the declarations, before such Policy Period or both.

PROPERTY CHOICE - SPECIALIZED PROPERTY INSURANCE COVERAGES

FOR BUSINESS SERVICES

D. BUSINESS CRIME IS ADDED

This Property Choice Common Crime Coverages Form is made a part of this policy and is subject to the following stated Limits of Insurance:

Coverage

Limit of

Insurance

Employee Theft

$25,000

[. . .]

These Limits are in addition to any other Limit of Insurance that may he shown in the Property Choice Schedule of Premises and Coverages applicable to these Business Crime Coverages.

Under Maryland law, when deciding the issue of coverage under an insurance policy, the primary principle of construction is to apply the terms of the insurance contract itself. Bausch & Lomb v. Utica Mut., 625 A.2d 1021, 1031 (Md. 1993). Maryland does not follow the rule that an insurance policy is to be construed most strongly against the insurer. Rather, following the rule applicable to the construction of contracts generally, Maryland ascertains the intention of the parties, if reasonably possible, from the policy as a whole. See e.g., Kendall v. Nationwide Ins. Co., 702 A.2d 767, 771 (Md. 1997). If the language is unambiguous, the Court must enforce the contract according to its usual, ordinary and plain meaning. If the Court determines that theinsurance contract is ambiguous, the Court may examine extrinsic evidence and resolve the ambiguity against the drafter. A contract is ambiguous if susceptible to more than one possible meaning. The matter of determining whether an insurance policy is ambiguous is a threshold matter which is to be decided by the court as a matter of law. See e.g., Maryland Cas. Co. v. Hanson, 902 A.2d 152, 163 (Md. 2006).

I. Plaintiff's Motion for Partial Summary Judgment

Plaintiff makes two alternative arguments in support of its position that each individual act of theft necessarily constitutes a separate "occurrence" under the policy. First, Plaintiff argues that under the "language that actually appears" there is no aggregate limit provision in the Hartford Policy, thus, each of the 46 individual acts of theft constitutes a separate occurrence. Second. Plaintiff argues that the definition of occurrence is otherwise ambiguous because the definition defines an occurrence in three separate ways and. because it uses the disjunctive "or," the three clauses must be construed as alternatives. Furthermore. Plaintiff argues that the Hartford Policy allows the policyholder the option to select which one of the three alternative definitions applies based on whichever definition most fully indemnifies the policyholder because the Hartford Policy does not include a "deemer" clause or an aggregate limit provision.

Plaintiff illustrated its interpretation at the July 31, 2015 motion hearing. Plaintiff argued that under the first definition of "occurrence," an individual act, the policy would cover one act over the policy deductible limit of insurance, $25,000. Plaintiff cited to the deductible where the Hartford Policy states:

We will not pay for loss in any one "occurrence" unless the amount of loss exceeds the applicable Deductible Amount shown in the Declarations, Schedules or Endorsements. We will then pay for the amount of loss in excess of the Deductible amount [$2,500], up to the Limit of Insurance [$25,000].

Plaintiff stated that...