L.M. Scofield Company Incorporated v. Travelers Casualty and Surety Company of America et al

Filing 23

STATEMENT OFUNCONTROVERTED FACTS ANDCONCLUSIONS OF LAW signed by Judge Manuel L. Real. IT IS HEREBY ORDERED AND ADJUDGED THAT Plaintiff take nothing by its complaint, that the action be dismissed on the merits, and thatDefendants recover their costs (pj)

Download PDF
1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION 10 LAWYERS 444 SOUTH FLOWER STREET, THIRTY-FIRST FLOOR LOS ANGELES, CALIFORNIA 90071-2901 TEL (213) 688-0080 • FAX (213) 622-7594 ANDERSON, MCPHARLIN & CONNERS LLP 8 11 L. M. SCOFIELD COMPANY, INCORPORATED, 12 Plaintiff, 13 vs. 14 TRAVELERS CASUALTY AND 15 SURETY COMPANY OF AMERICA; THE TRAVELERS COMPANY, 16 INCORPORATED; and DOES 1 through 20, inclusive, 17 Defendants. 18 Case No. CV 11-06190 R (MANx) STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW Date: March 5, 2012 Time: 10:00 a.m. Crtrm.: 8 19 20 Defendants TRAVELERS CASUALTY AND SURETY COMPANY OF 21 AMERICA’s and THE TRAVELERS COMPANY, INCORPORATED’s Motion 22 for Summary Judgment, and Plaintiff L. M. SCOFIELD COMPANY, 23 INCORPORATED’s Motion for Partial Summary Judgment, both pursuant to Fed. 24 R. Civ. P. 56, came on regularly for hearing on March 5, 2012, before the Hon. 25 Manuel L. Real, Judge presiding. Peter J. Godfrey, of Gilbert, Kelly, Crowley & 26 Jennett LLP, appeared on behalf of Plaintiff. David T. DiBiase and Mark J. Krone, 27 of Anderson, McPharlin & Conners LLP appeared on behalf of Defendants. 28 / / / 936836.1 2985.621 1 FINDINGS OF FACT 2 The Court makes the following findings of fact: 3 1. Plaintiff L. M. SCOFIELD COMPANY, INCORPORATED 4 (“Scofield”) is a citizen of California. (Joint Statement of Uncontroverted Facts No. 5 [“UF”] 17, filed as Docket Document No. 10.) 6 2. TRAVELERS CASUALTY AND SURETY COMPANY OF 7 AMERICA (“Travelers”) is an insurance company that is a citizen of and 8 headquartered in Hartford, Connecticut. (UF 2 and 17.) 3. THE TRAVELERS COMPANIES, INC. (sued incorrectly herein as 10 “THE TRAVELERS COMPANY, INC.”) is a citizen of Minnesota. (UF 17.) 11 LAWYERS 444 SOUTH FLOWER STREET, THIRTY-FIRST FLOOR LOS ANGELES, CALIFORNIA 90071-2901 TEL (213) 688-0080 • FAX (213) 622-7594 ANDERSON, MCPHARLIN & CONNERS LLP 9 4. Scofield employed David J. Wardenaar (“Wardenaar”) from June 10, 12 1996 until July 25, 2008. (UF 4.) 13 5. From approximately December 7, 1996 to July 23, 2008, Wardenaar, 14 without knowledge or permission of Scofield, spent approximately $572,447 in 15 hundreds of personal purchases using Scofield’s company credit cards (the 16 “Prohibited Purchases”), which purchases included purchases of gifts for family and 17 paramours, travel, hotels, rental cars, cash advances, and other personal items and 18 services. (UF 5 – 7.) 19 6. Wardenaar paid for his Prohibited Purchases using funds from 20 Scofield’s operating account and funds drawn from Scofield’s lines of credit with 21 banks. (UF 8.) 22 7. Travelers issued in favor of Scofield its “Wrap +” policy of insurance 23 No. 104971442 (the “Policy”), effective from July 3, 2009 to July 3, 2010. (UF 3; 24 Exhibit A thereto.) 25 8. The Policy provided indemnity coverage to Scofield from various 26 perils, coverage under the Crime Terms and Conditions form, Form No. CRI-3001 27 (07-05) (the “Crime Policy”). With respect to loss directly caused by “Theft” by 28 Scofield employees, the Crime Policy provides in pertinent part: 936836.1 2985.621 2 1 I. 2 This Crime Policy shall provide coverage under each of the following Insuring Agreements. … . 3 INSURING AGREEMENTS A. 4 1. 5 7 8 11 LAWYERS 444 SOUTH FLOWER STREET, THIRTY-FIRST FLOOR LOS ANGELES, CALIFORNIA 90071-2901 TEL (213) 688-0080 • FAX (213) 622-7594 ANDERSON, MCPHARLIN & CONNERS LLP 10 12 (Ex. A, p. 8) (bold in original). 9. 10. …. L. indirect or consequential loss of any nature, including, but not limited to, fines, penalties, multiple or punitive damages[.] …. 17 18 23 24 25 26 27 28 EXCLUSIONS This Crime Policy does not cover: 16 22 The Crime Policy contains the following exclusion: IV. 15 21 Wardenaar was an “Employee” within the meaning of the Crime Policy. (Complaint, ¶ 12; Answer, ¶ 12.) 14 20 936836.1 2985.621 …. 13 19 Employee Theft We will pay you for your direct loss of, or your direct loss from damage to, Money, Securities and Other Property directly caused by Theft or Forgery committed by an Employee, whether identified or not, acting alone or in collusion with other persons. 6 9 FIDELITY (Ex. A, p. 19) (bold in original). 11. Following Scofield’s discovery of Wardenaar’s Prohibited Purchases, Scofield sought indemnification for its loss pursuant to the terms and conditions of the Policy. (UF 8-9.) 12. Scofield’s claim for payment under the Policy consists of two components: (1) the Prohibited Purchases and (2) “Interest Charges” (UF 10 and 15.) 13. The “Interest Charges” consist of: /// 3 a. 1 Interest charged by Scofield’s banks on Wardenaar’s draws from 2 the credit lines to pay for credit card balances for the Prohibited Purchases; and b. 3 Interest charged by Scofield’s banks on existing credit line 4 balances because Wardenaar’s use of Scofield’s operating accounts to pay credit 5 card balances for the Prohibited Purchases resulted in Scofield having less available 6 cash to pay down the credit line balances. (UF 15.) 7 14. Travelers paid Scofield a total of $592,550.13, which reimbursed 8 Scofield for the amount, in excess of the deductible, of the Prohibited Purchases, 10 incurred on the credit cards. 11 LAWYERS 444 SOUTH FLOWER STREET, THIRTY-FIRST FLOOR LOS ANGELES, CALIFORNIA 90071-2901 TEL (213) 688-0080 • FAX (213) 622-7594 ANDERSON, MCPHARLIN & CONNERS LLP 9 certain funds Wardenaar caused to be paid to his mistress(es), and certain fees 15. Travelers declined to pay the Interest Charges. (UF 13.) 12 CONCLUSIONS OF LAW 13 Based on the foregoing Findings of Fact, the Court makes the following 14 Conclusions of Law: 15 1. The Court has jurisdiction over this action, pursuant to 28 U.S.C. § 2. The substantive law of California applies to the interpretation of the 16 1332. 17 18 Policy. Erie R.R. Co. v. Tomkinsm 304 U.S. 64, 68, 58 S. Ct. 817, 82 L.Ed. 1188 19 (1938). 20 3. Although courts in some states interpreting fidelity policies hold that 21 loss resulting “directly” is equivalent to loss resulting “proximately” (see, e.g., 22 Scirex Corp. v. Federal Ins. Co., 313 F.3d 841, 848-50 (3d Cir. 2002), California 23 holds that “direct means direct.” Vons Cos., Inc. v. Fed. Ins. Co., 212 F.3d 489, 492 24 – 493 (9th Cir. 2000). See also United General Title Ins. Co. v. American Int’l 25 Group, Inc., 51 Fed. Appx. 224 (9th Cir. 2002). 26 4. The insured’s liability to third parties is not direct loss under a 27 fidelity policy. Vons, 212 F.3d 492 – 493. Here, the Interest Charges are Scofield’s 28 liability to a third party, and therefore they are an indirect loss, which is not covered 936836.1 2985.621 4 1 under the Policy. Id. See also Universal Mort. Corp. v. Württembergische 2 Versicherung AG, 651 F.3d 759, 762 (7th Cir. 2011). 3 5. Accordingly, Defendants have not breached the Policy and judgment 4 should be entered in Defendants’ favor forthwith. 5 IT IS HEREBY ORDERED AND ADJUDGED THAT Plaintiff take 6 nothing by its complaint, that the action be dismissed on the merits, and that 7 Defendants recover their costs. 8 10 11 LAWYERS 444 SOUTH FLOWER STREET, THIRTY-FIRST FLOOR LOS ANGELES, CALIFORNIA 90071-2901 TEL (213) 688-0080 • FAX (213) 622-7594 ANDERSON, MCPHARLIN & CONNERS LLP 9 DATED: March 16, 2012 HON. MANUEL L. REAL 12 United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 936836.1 2985.621 5