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)

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 [phone] • FAX [phone]

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 [phone] • FAX [phone]

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 [phone] • FAX [phone]

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 [phone] • FAX [phone]

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 [phone] • FAX [phone]

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