Hortica-Florists' Mutual Insurance Company v. Pittman Nursery Corporation et al

Filing 179

MEMORANDUM OPINION AND ORDER granting in part and denying in part 168 Motion for Partial Summary Judgment. Signed by Honorable Robert T. Dawson on August 22, 2011. (cnn)

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
EL DORADO DIVISION
HORTICA-FLORISTS’ MUTUAL
INSURANCE CO.,
PLAINTIFF
v.

Case No. 07 - 1119

PITTMAN NURSERY CORPORATION,
DONNA SUE PITTMAN KING,
and
JOHN-MICHAEL HUNTER,

DEFENDANTS

MEMORANDUM OPINION AND ORDER
Before

the

Court

are

Plaintiff

Hortica-Florists’

Mutual

Insurance Company’s (“Hortica”) Motion for Partial Summary Judgment
(Doc. 168), Memorandum Brief in Support (Doc. 169), and Statement
of Facts (Doc. 170).

Also before the Court are Defendants Pittman

Nursery Corporation (“PNC”) and Donna Sue Pittman King’s Response
in Opposition (Doc. 175) and Statement of Facts (Doc. 176).
Hortica asserts in its Motion that there is no genuine issue
of material fact regarding its obligation to pay PNC for losses
resulting from the acts of a former PNC employee, Mr. Dawood
Aydani.

First,

Hortica

maintains

that

Mr.

Aydani’s

alleged

vandalism and destruction of PNC property occurred after the
expiration of the insurance coverage provided by Hortica to PNC.
Hortica asks that summary judgment issue on the portion of PNC’s
counterclaim (found in Doc. 149, ¶¶ 58-62) stemming from losses
caused by Mr. Aydani’s alleged vandalism in 2008.

Second, Hortica

asserts that coverage should be denied for other losses PNC claims

were due to Mr. Aydani’s alleged theft or embezzlement, since PNC
did

not

satisfy

requirements.

the

policy’s

pre-conditions

and

notice

In the alternative, Hortica asks that any recovery

for losses due to Mr. Aydani’s alleged theft or embezzlement be
limited to $5,000.
For the reasons discussed herein, Plaintiff’s Motion (Doc.
168) is GRANTED in PART and DENIED in PART.
I.

Background
In 2002, Hortica issued a Greenhouse Grower Business Package

Policy to PNC under Policy Number BP-09496.

The initial Policy

period was from January 1, 2002 to January 1, 2003.

Doc. 168-2.

PNC renewed the Policy each year through the coverage year ending
January 1, 2008. Docs. 168-3, 168-4, 168-5, 168-6, and 168-7.

The

Policy was canceled due to non-renewal by Hortica effective 12:01
a.m. on January 1, 2008, and PNC was notified of the cancellation.
Doc. 168-8.
A.

Damage to Real or Personal Property

PNC’s Second Amended Counterclaim against Hortica states that
“[w]hen Aydani left [PNC]’s property in early 2008, he became
disgruntled and committed several acts of willful and malicious
damage to Pittman Nursery property in the process of abandoning the
residence he occupied on Pittman Nursery’s premises.”

Doc. 149, ¶

59. Because of the losses PNC suffered due to Mr. Aydani’s alleged
vandalism, PNC demands that Hortica, its insurer, reimburse PNC for
2

these losses, pursuant to the insurance Policy covering damage to
real property (Doc. 168-1, p. 21) or to business personal property
(168-1, p. 25).
B.

See Counterclaim at Doc. 149, ¶¶ 58-62.

Damage Caused by Employee Dishonesty

PNC also alleges in its Second Amended Answer and Counterclaim
that Hortica has a duty to pay for loss resulting from Mr. Aydani’s
dishonest acts of theft or embezzlement which occurred, according
to PNC, at various times from 2003-2007.

See Doc. 175, p. 3.

Hortica asserts in its Motion for Partial Summary Judgment that it
does

not

have

a

duty

to

pay

claims

stemming

from

theft

or

embezzlement because PNC failed to adhere to proper notification of
claim procedures.

The Policy provides that no legal action may

arise unless “[t]here has been full compliance with all the terms
and conditions1 . . . and [t]he action is brought within one year
after the date on which the direct physical loss occurred.”
168-1, p. 70.

Doc.

But the Policy also provides that Hortica will pay

for loss or damage “discovered no later than one year from the end
of the Policy Period.”
On

July

23,

Doc. 175-2, p. 25.

2007,

Hortica’s

representative

Nancy

Zollo

acknowledged PNC’s claim regarding Mr. Aydani’s alleged theft and

1

The “terms and conditions” under the Policy include
notifying the police if laws were broken, giving Hortica prompt
notice of the loss along with a description of the property
involved, sending Hortica a signed statement of proof of loss, and
cooperating with Hortica in investigating or settling the claim,
among other conditions. Doc. 169, p. 4.
3

asked PNC to supply Hortica with documentation supporting the
claim.

Doc. 168-9.

Ms. Zollo stated she would “hold the claim

file open” as PNC’s investigation continued.

Doc. 175-25, p. 2.

On July 26, 2007 and August 13, 2007, Hortica received information
from PNC as to Mr. Aydani’s theft.

Docs. 175-25 and 175-2.

On

January 11, 2008, PNC provided hundreds of pages of documentation
to Hortica of employee theft, including checks, bills, and police
reports (Doc. 168-16, Docs. 175-3 through 175-24).

On January 17,

2009, Ms. Pittman King informed Hortica that she would not pursue
a claim for employee theft “at this time” because she did not want
to upset a recent settlement agreement and because she desired that
Hortica focus its efforts on resolving the Muniz litigation,
brought by current and former migrant worker employees of PNC. Doc.
168-16.

Ultimately, on February 14, 2008, Ms. Zollo acknowledged

that, per Ms. Pittman King’s instruction, the theft claim would be
deemed “inactive pending the resolution of several related issues.”
Doc. 168-17.
II.

Legal Standard
In determining whether summary judgment is appropriate, the

moving party bears the burden of establishing both the absence of
a genuine issue of material fact and that it is entitled to
judgment as a matter of law.

See Fed. R. Civ. P. 56(c); Matsushita

Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106
S. Ct. 1348, 89 L. Ed. 2d 538 (1986); Nat’l. Bank of Commerce of El

4

Dorado, Ark. v. Dow Chem. Co., 165 F.3d 602 (8th Cir. 1999).

The

Court must review the facts in a light most favorable to the party
opposing a motion for summary judgment and give that party the
benefit of any inferences that logically can be drawn from those
facts. Canada v. Union Elec. Co., 135 F.3d 1211,

1212-13 (8th Cir.

1998) (citing Buller v. Buechler, 706 F.2d 844, 846 (8th Cir.
1983).
In order for there to be a genuine issue of material fact, the
non-moving party must produce evidence “such that a reasonable jury
could return a verdict for the nonmoving party.” Allison v. Flexway
Trucking, Inc., 28 F.3d 64, 66 (8th Cir. 1994) (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248(1986)); see also Brinkley v.
Entergy Operations, Inc., 602 F.3d 928, 931 (8th Cir. 2010)(“the
non-moving party must be able to show sufficient probative evidence
that would permit a finding in his favor on more than mere
speculation, conjecture, or fantasy”).
Under Arkansas law, when the meaning of an insurance policy is
at issue, “[a] common sense approach should be used, and generally
the words employed in the policy are to be construed in their
plain, ordinary, and popular sense.” Green v. Farmers Ins. Co.,
Inc., 57 F.Supp.2d 729, 732 (W.D. Ark. 1999).

“The terms of an

insurance contract are not to be rewritten under the rule of strict
construction against the company issuing it so as to bind the
insurer to a risk which is plainly excluded and for which it was
5

not paid.”
1997).

Smith v. Shelter Mut. Ins. Co., 327 Ark. 208, 210 (Ark.

However, “[a]lthough ambiguous language . . . should be

construed in favor of the insured, such ambiguity exists only when
a

provision

is

interpretation.”

susceptible

to

more

than

one

reasonable

Id. (quoting State Farm Fire & Cas. Co. v.

Midgett, 319 Ark. 435, 438, (Ark. 1995).
III.

Discussion
A.

Claims Arising from Aydani’s Alleged Vandalism

Hortica moves for summary judgment of PNC’s counterclaim for
damages arising from Mr. Aydani’s alleged vandalism and destruction
of property.

Hortica has pointed out that the alleged vandalism

occurred after the Policy was cancelled effective 12:01 a.m.,
January 1, 2008.

Proper notice of cancellation was issued to PNC,

and the plain language of the notice is unambiguous.

Doc. 168-8.

By PNC’s own admission, the loss it suffered due to alleged
vandalism by Mr. Aydani, occurred “in early 2008,” after he was
fired by PNC and asked to leave PNC property.

Doc. 149, ¶ 59.

This loss therefore occurred after the Policy was cancelled.
There is no coverage for this loss, and there is no genuine issue
of material fact as to the timing of the loss and the expiration of
coverage under the Policy.

Consequently, this portion of PNC’s

counterclaim against Hortica (Doc. 149, ¶¶ 58-62) is dismissed.
B.

Claims Arising from Aydani’s Alleged Theft/Embezzlement

Hortica also moves for summary judgment of PNC’s counterclaim
6

for damages arising from Mr. Aydani’s theft or embezzlement from
PNC.

After consideration of the parties’ briefing on this issue,

the Court finds that there is a genuine issue of material fact as
to whether PNC complied or substantially complied with the notice
requirements of the Policy.
with

some

form

of

notice

Hortica admits that PNC provided it
of

the

claim

documented the claim sometime thereafter.

in

2007

and

further

Doc. 169, pp. 5-7.

In

addition, Hortica acknowledges that PNC’s claim for theft was
investigated and then placed on “inactive status.”

Id. at p. 6.

Considering these facts, summary judgment as to PNC’s failure to
give adequate notice to Hortica of its claims for employee theft or
embezzlement is denied.
As to Hortica’s pleading in the alternative that it be granted
summary judgment on the dollar limit of recovery for loss caused by
Mr. Aydani’s theft or embezzlement, this is also denied.

Though

Hortica aserts that coverage is limited to $5,000 for all loss
caused by Mr. Aydani’s dishonest acts, the Policy provides up to
$5,000 of coverage for each “occurrence.” Doc. 168-1, p. 13. There
is a material question of fact as to whether an “occurrence” means
each theft brought about by a separate and distinct act, or several
acts in the aggregate committed by a single individual. The Policy
is ambiguous as to what constitutes an “occurrence.”

The Policy

states: “All loss or damage: (1) Caused by one or more persons; or
(2) Involving a single act or series of related acts; is considered

7

one occurrence.”

Doc. 175-2, p. 24.

In attempting to interpret

this language, it is not clear to the Court whether an “occurrence”
is defined as all acts committed by a single individual, a number
of “related acts” committed by an individual, or a single act
committed by an individual.
Mr.

Aydani

committed

In the case at bar, PNC alleges that

multiple

acts

of

theft

or

embezzlement

spanning multiple years, using multiple sources of funding.
Considering the complex nature of the counterclaim for recovery for
Mr. Aydani’s acts of theft and the ambiguity of the contractual
language on this subject, summary judgment is inappropriate.
IV.

Conclusion
Hortica does not owe PNC a duty to pay for losses resulting

from the vandalism and destruction of PNC property allegedly
committed by Mr. Aydani in early 2008, after the Policy expired.
Accordingly,

Plaintiff

Hortica’s

Motion

for

Partial

Judgment (Doc. 168) is GRANTED in PART with respect to

Summary
PNC’s

counterclaim for compensation arising from acts of vandalism, Doc.
149, ¶¶ 58-62.

The Motion is DENIED in PART with respect to

Hortica’s duty to pay for losses resulting from Mr. Aydani’s
alleged theft or embezzlement from PNC.

The Motion is also DENIED

in PART with respect to the limitation of $5,000 on coverage for
all loss caused by Mr. Aydani’s alleged theft or embezzlement.
Trial in this matter remains set for the week of October 17,
2011.
8

IT IS SO ORDERED this 22nd day of August 2011.

/s/ Robert T. Dawson
Robert T. Dawson
United States District Judge

9