Global Coverage, Inc. v Charter Oak Fire Ins. Co.

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Global Coverage, Inc. v Charter Oak Fire Ins. Co. 2010 NY Slip Op 33842(U) May 7, 2010 Sup Ct, New York County Docket Number: 110180/07 Judge: Doris Ling-Cohan Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. ~ SCANNED ON 511412010- [* 1] I . Index Number : 110180/2007 ' ' 1 , GLOBAL COVERAGE vs. CHARTER OAK FIRE SEQUENCE NUMBER : 002 SUMMARY JUDGMENT - -- -. . . [* 2] motion is denied R A C KG K 0LJNI, : : Plaititif(' Global Coverage, Inc. (Global) is a New York State licensed corporation which operaics an insurance brokerage and agency. See Notice of Motion, Exhibit A (complaint), 7 1. /;or tliz piirposes oi'this motion. it is also relevant to note that Global was an employer of 30-35 e m p l o y s during tlic operative period of late 2006. Zd.; Rinsky Affirmation, 7 8. In 1907, Global contracted with non-party Quality Payroll Systems, Inc. (Quality) to adniinistcr its payroll system and to pay its employees and payroll taxes. See Notice of Cross Motion, Lerner Affirmation, 15 . Pursuant to that conlract, Global permitted Quality to niake avcehl!, witlidrawals from the general operating clcco~int that Global maintained at HSRC Bank 1 [* 3] (the Global account) into an escrow account that Quality maintained at KeyBank (the Quality id.. 6. Quality would thereafter inake payments from the Quality account to cover 7 accomt). Global's employees' salaries. as well as Global's federal and state payroll tax payments. Id. 111 September of 2005, defendant Charter Oak Fire Insurance Company (Charter), an insurance company duly licensed by the state of Connecticut, issued a commercial general liabilic4/bu~inessowners property insurance policy (the Charter policy) to Global with effective dates o1'Septeiiiber 23. 200.5 through September 23, 2006. Id., 7 8; Notice of Motion, Exhibits A. 1' 1. F'. I'he relevant portion of the Charter policy is found in the section entitled b'Businessowners Property (,'overage Special 1:om MP TI 02," and provides as follows: 13. Exclusions ... 2. We will n o t pay for loss or damage caused by or resulting from any ofthe ibllowing: ... Voluntary parting with any property by you or anyone else to whom you have entrusted the property. 1. I d , : Exhibit F'. 111 August of 2006, defendant Travelers Property Casualty Company of America (Travelers), an insurance company also duly liceiised by the state of Connecticut, issued a coniiiirrcial general I iabil ityjbusiness owners property insumnce policy (the Travelers policy) to Global with ellkctivc dates of' September 23, 2006 through September 23, 2007. See Notice of Cros:, Motion, 1 ,erner Affirmation, 7 17; Notice of Motion, Exhibits A 7 3; G. The relevant porliori of the 'l'i~tvelers policy is also found in the section entitled "Businessowners Property C~.'ovt.rage Spccial Form MP 'TI 02," and iises the exact same language as the provision set forth in thc C'hartci- policy l c l : Fxhibit G. [* 4] O n August 25, 2006, afier being informed by several of its employees that their salaries had not been paid. Global contacted KeyBank and learned that the bank had attached the funds in the ()utility cscrow account. LCeeNotice of C. ross Motion, Lerner Affirmation, 7 7. At her deposition on March 26,2009. Global employee Andrea Pushkin (Pushkin) stated that she had been ablc to halt the transfer of approximately $40,000.00 from the Global account into the Qualily account on August 25, 2006. Id.; Notice of Motion, Exhibit C, at 70-71. This amount had hcen cai*markedfor Global s employees weekly salaries. Id. Pushkin also stated that she lincl I I O ~been able to halt the transfer of $14,740.61 into the Quality account, which amount had been czinnarked to pay Global s federal and state payroll taxes that week. ld.; Notice of Motion, Exhibit C . a t 70-7 1. (.ilobal states that i t paid this m o u n t to the federal and state taxing autliori(ics instead, and presents copies of the cancelled checks. reflecting these payments. Zd., fi 9; Exhibit A. Global also states that i t submitted a notice of claim for these payments to Charter (the Charter claim), but that Charter denied liability therefor. Id., lfl 9-12. In its denial letter, dn~ed Scpteiiiber 28, 2006. Charter referenced the policy language quoted earlier, and stated that: One or more [Quality] employees were granted access to specific [Global] accounts. I Quality) was functioning in the capacity of fiduciary agents of I Global]. (These Quality] employees were [not] employees of [Global]. An agency relalionship existed and Covered Property was entrusted to those [Quality] c.mployees. Hased upon the available inlbrmation, this loss is considered to be the resiilt of fraudulent, dishonest. or criniinal acts committed by [Quality] eliiployecs, wlio were acting as agents of [Global] and were also persons to whom covered property had been entrusted. l hcbusiness relationship and actions on the par( of those [Qualily employees] MI within the exclusionary language cited li bov c . Jd.: Exhibit C . However, o n July 24. 2009. Global deposed a Charter employee - investigator l h v i c l Sclnelmakcr (Semelmaker) - who had concluded that the loss of Global s funds had not 3 [* 5] been caiised by fraudulent acts committed by Quality, but were instead the result of KeyBank attaching those funds after it had placed a lien on the Quality account. Id.; Exhibit B, at 30-34. (311 October 30, 2006. Global leuriied that Quality had once again failed to pay Global's wcokly t'cdcral ;ind stale payroll taxcs to the respcctive taxing authorities. Id.; Lerner Affirmation, 1 17. On this occasion, Global states that it paid a total of $33,35 1.17 to those 1 taxiiig authorities. and has annexed copies of'the cancelled checks as proof. Id., 1 19; Exhibit E. 1 C~ilohalalso statcs that it submitted a notice of claim for these payments to Travelers (the Travelers claim). but that Travelers denied coverage therefor. Id., 77 18, 20. Traveler's denial lettcr. clal-ed November 14, 3006, refers to the exclusion provisions of the Travelers policy and states as follows: I3ascd or1 thc available information, this loss is considered to be the result of lii~udulen~, dishonest. or criminal acts committed by [Quality] employees, who ere acting as agents 01' [Cilobal] and were also persons to whom covered property had been entrusted. The business relationship and actions on the part of those at I Quality] fall within the exclusionary language cited above. 1d.i Exhihit F. Global notes that the claim representative. Susan Scott (Scott), did not assign an invesliyitot' to the 'l'ravelers claim. as she had previously done to the Charter claim.' Id.; Lerner Aflirmation. 'I[ 20. Global comnieiiced [his action on November 26. 2007, by filing a cornplaint that sets forth ciiiiws o f action for: 1 ) h i ~ i c l O F the C'hartcr policy; and 2 ) breach ofthe Travelers policy i SCYJNoticc of- Motiori. Exhibit A. Ilefendants filed a$oint answer on December 3, 2007. Id., Exhibit 13. 13efendants now move for summary judgment to dismiss the complaint, and Global I Scott I S employed by Travelers. but also oversees claims made on Charter policies bccau\o ('hartcl IS evidenlly tl Travelers member company. See Notice of Cross Motion, Exhibit I1 4 [* 6] cross-riiows for sLiiiiiiiary judgment on the complaint (motion sequence number 002). 11SC U S SI ON 1 Wlicn scekiiig suniinary .judgmenl. the moving party bears the burden of proving, by coinpctcnt. admissible evidence. that rio niaterial and triable issues ol fact exist. See e.g. W i ) w a y r d N w 1 or.k 1Unii:. ,Md. Clr.. 64 NY2d 85 1 ( 1985); Sokulow, Dunaud, Mercadiier & 1 UY fLI LuL hor, 299 AD2d 64 ( 1 st Dept 2002). Once this showing has been made, the biirilcn shiiis 19 IO the pai-iy opposing tlia niotioii to produce evidentiary proof, in admissible form, sirl liuicnl LO establish the existence of material issues offact which require a trial of the action. Siw c .,q Liic*ki:i.miin1: I i + o/ Ariw Y w k , 49 NY2d 557 (1 980); Pernbertvn 1 New York City Tr. A i r / h . . 304 A l X d 340 ( 1 st Ilept 2003). Further, it is well settled that on a motion for summary , j ~ i d g i i ~dit: n ~ ~ . construction of an unambiguous contract is a question of law for the court to pass on. arid _ . cil.clll11slill1ces e s ~ r i i ~ sto the agreement or vaiying interpretations of the contract ic provisions will riot be considered. where ... the intention of the parties can be gathered from the 284 AD2d 203, 204 (1st Dept 2001), instruinent ilself. hlq1,wk & Morun v Wurhmrg & (. a, quot iiig Lriko C orzs/r & h r . 1 orp 1 City o/ Nci.i>I ork, 2 1 1 AD2d 5 14, 5 15 (1 st Dept 1995). l licissuc M o r e the courl is whether or not C.ilobal s two claims for reimbursement of federal arid stale payroll tiis payments that i t had deposited in the Quality account must fail becairsic h e ) fall within the volLintnry parting exclusionary language of the Charter and TI-avt-lcl-spolicies. For [he ibllowing rcasons. the court h d s that they do fail. In thcir moving papers. dcfcndants assert that the plain language of the identical cxcILisioiiary provisions sct forth i n sections B (2) ( I ) of the Clliarter and Travelers policies shows that I.ilobal s two claims are 1101 covered. See Notice of Motion, Rinsky Affirmation, 5 1 15-1 7. 7 [* 7] Global rcsponds that thal language is clearly inapplicable to the subject claims, because it requires a * voluntarypai-ting with property, whereas Global did not part with the funds in the Quality escrow account voluntarily, but only because KeyBank had attached them to satisfy a jiidpiicrit. ,Sr~cNotice of Cross Motion, Lerner Affirmation, 77 28-30. Defeqdants reply papers rcstatc tlicii. original argiiinent. See Defendants Reply Memorandum of Law, at 9-1 0. Based upon h e submissions, the court is constrained to grant dcfeiidants motion for summary j Lidgiiicnt. Global correctly notes that [g]enerally. the coui-t will co1istrLie the limitations of an insuimce contract in the light of the speech of coniinoii [people]. Thrags Neck Bagelx v GA c!/.N. 1 : . 241 AD2d 66, 69 ( 1 I Dept 1998). quoting Gittelson v Mutual Lifi Ins. Co. o f I m I 0, N.I . 206 App Iliv I4 1. I45 ( 1 I Dept 1943), citing fzwi.v v Ocean Acc. & Guar. Corp., Ltd. Of ~ L017~/0n. Englnnu , 224 N Y 18 (1 91 8). As previously mentioned, Global argues that it did not v ~ ~ l ~ i i ipart ~ ~ ~ its y ~ ~ with i l property because KeyRank took that property (i.c.,the funds in the Qualitj, CSCI OW account) without Global s knowledge via attachment to satisfy a judgment against (Siiality. See Notice of Cross Motion, Lerner Affirmation, 77 28-30. Global s president, Philip 12osrnthal (liosenthal), further argues that. because the Quality account was an escrow acooi.iii1. Glvbul was 111e actual owner of the Quality account, no/ Quality itself. See Notice of Cross Motion. Roseiitlial Affjdavit, 7 12. Thus. Global concludes that, given the common usage of thc terin. i l would hc iinreasonablc to find that it had voluntarily parted with its property. l his ai.gtinicnt. Iiowever. does not accouiit foI all of the operative facts of this case. (ilobal does iiot deny that it deposited its funds into an escrow account. Id. However, the very tcnn escrow rcfers to a piircly lcgal construction. I n Nationcrl Union Fire Ins. Co. 6 [* 8] Pillshzcrgli. X ci. 1 1 P l m k m e r Hose Goclz K. Menclelsoh ( 1 65 Misc 2d 539, 544-545 [Sup Ct, NY County 19941, UJd 237 AD2d 106 [ 1 Dept 1996]), this court (Schackman, J.) observed that: For an instrument to operate as an escrow there must be: a) an agreement as to the subject matter and deliveiy of thc saiiie; b) a third-party depositary; c) deli\wy of the sub,ject matter to a third party conditioiied upon the performance of soiiie act or h e happening of the event; and d) relinquishment by the promisor. *** Delivery of the instrument or property is necessary in order lo have an escrow. Moi-cover, the delivery must be made with the intent that the condition required to release the saine take effect in the future. The delivery must be made to a third and person, i.e., the escrow agent (discussed Lszq~rii), the deliveiy must be intended by the promisor as relinquishment of any right of possession and control of the property [internal citations omitted]. and Global s atliiiitted use of an escrow account presumes that it relinquished LCpos.session control over the funds that KeyBank later appropriated. Indeed, under the foregoing definition, it would be 1:inomalous to find that Global s weekly deposits of its federal and state payroll tax paynioiits i i i t o tlic Quality escrow account werc not voluntary. Therefore, the court rejects Global s argumenl. On the submissions, defendants have demonstrated that the exclusions set forth in sections I3 (2) (i) of the Charter and Travelers policies clearly apply to Global s c l a i m . Thus. del tiidnnts iiiotion for summary Judgment of dismissal is granted. Global s cross motion is denied IIEC IS ION I AC. (. (I)KI~INC;I,Y, the forcgoing reasons, i t is hereby for C~KIlERE13 tlic motion, pursuant to C PILR 32 12, of defendants the Cliarter Oak Fire that Insurancc ( onipaiq and l ravelcrs Property (:mudry C ompany of America is granted and the coriiplaiiit is dismissed with costs and disbursements to defendants as taxed by the Clerk of the 7 [* 9] * Court ~ i p o i the i submission of an appropriate bill of costs; and it is further OKDEKED that the Clerk is directed to enter judgment accordingly; and it is further OKDERE,II that the cross niotion, pursuant to CPLK 32 12, of plaintiff Global Coverage, Inc. is denied, and i t is further OR13t'RED that within 30 days of entry oflhis order, defendants shall serve a copy upon pl tl i n t 1 t'l i with iic) t i ce (3 1' c'ii try. . 7 Dated: N e w York, New York May .2010 .>/ , .. r ' Hon. Doris Ling-Cohan, J.S.C. 8

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