Winking Group, LLC v. Aspen American Insurance Company
Filing
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OPINION AND ORDER: re: 23 MOTION for Summary Judgment filed by Aspen American Insurance Company. Defendant's motion for summary judgment is GRANTED. The Clerk of Court is directed to close the motion at Docket No. 23 and close the case. (Signed by Judge Lorna G. Schofield on 1/18/2018) (ama)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------------------------------- X
:
WINKING GROUP, LLC,
:
Plaintiff,
:
:
-against:
:
ASPEN AMERICAN INSURANCE COMPANY, :
Defendant. :
:
------------------------------------------------------------ X
1/18/2018
16 Civ. 7401 (LGS)
OPINION AND ORDER
LORNA G. SCHOFIELD, District Judge:
Plaintiff Winking Group, LLC sues Defendant Aspen American Insurance Company
(“Aspen”), alleging breach of an insurance contract. Defendant moves for summary judgment
under Federal Rule of Civil Procedure 56. Defendant’s motion is granted.
I.
BACKGROUND
The facts below are drawn from the parties’ Rule 56.1 Statements and other submissions
on this motion, and are construed in Plaintiff’s favor as the non-moving party. See Wright v. N.Y.
State Dep’t of Corr., 831 F.3d 64, 71–72 (2d Cir. 2016). The following facts are undisputed.
On July 20, 2001, Plaintiff leased the premises underlying this action -- 75 East Broadway
-- to Ming Dynasty, Inc., which then sub-leased it to East Market, Inc. East Market occupied the
premises with Plaintiff’s knowledge and consent from 2009 to early January 2015. Plaintiff
admits that it “initially entrusted the subject premises to East Market Restaurant.”
In 2014, Ming Dynasty initiated collection proceedings against East Market for nonpayment of rent. The parties agreed to a Stipulation of Settlement, whereby East Market was to
vacate the premises no later than January 10, 2015. On or around January 10, 2015, the premises
were “posted” (i.e., a notice of eviction was posted on the door of the premises), and East Market
was evicted. After the eviction notice was posted, Plaintiff did not retrieve the keys to the
property, and it did not change the locks until January 23, 2015.
Also around January 10, 2015, the premises were vandalized. On January 15, 2015,
Bruce Xi, the property manager, told the New York City Police Department that East Market
caused the damage to the premises.
On January 23, 2015, Plaintiff filed a Property Loss Notice (i.e., an insurance claim) with
Aspen to recover for the damage. During Aspen’s investigation of Plaintiff’s claim, Plaintiff’s
representatives told Aspen’s insurance adjuster, Todd Ballot, that East Market caused the damage
to the premises. Plaintiff’s representatives made similar statements under oath. Jing Shaw, the
superintendent, testified that he witnessed and video recorded the damage; he further testified that
he saw four men “bringing the things back and forth” and “breaking stuff.” Shaw stated, “I don’t
know,” when asked whether he knew any of the four men. There were no signs of forced entry,
and therefore, whoever vandalized the premises likely had a key. Xi testified that only East
Market had access to the restaurant. Aspen’s insurance adjuster, Todd Ballot, stated in his
affidavit that, “at the time of [his] first inspection . . . the premises were secure; meaning the firstfloor door adjacent to the sidewalk of the premises was closed and locked.”
On August 12, 2016, Aspen denied Plaintiff’s insurance claim based on the “entrustment
exclusion” in its insurance policy. The provision states in relevant part:
2.
We will not pay for loss or damage caused by or resulting from any of the
following:
***
h.
Dishonest or criminal act by you, any of your partners, members, officers,
managers, employees (including leased employees), directors, trustees, authorized
representatives or anyone to whom you entrust the property for any purpose:
(1)
Acting alone or in collusion with others; or
(2)
Whether or not occurring during the hours of employment.
This exclusion does not apply to acts of destruction by your employees (including leased
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employees); but theft by employees (including leased employees) is not covered.
(Emphasis added).
On August 26, 2015, Ming Dynasty, Plaintiff’s tenant, filed a complaint in the Supreme
Court of New York alleging that East Market and its principals had caused damage to the
premises.
II.
STANDARD
Summary judgement is proper where the record establishes that “there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). A genuine dispute as to a material fact exists “if the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.” Fireman’s Fund Ins. Co. v.
Great Am. Ins. Co. of New York, 822 F.3d 620, 631 n.12 (2d Cir. 2016) (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). “A party may not rely on mere speculation of
conjecture as to the true nature of the facts to overcome a motion for summary judgment.” Hicks
v. Baines, 593 F.3d 159, 166 (2d Cir. 2010) (alterations omitted). “[M]ere conclusory allegations
or denials . . . cannot by themselves create a genuine issue of material fact where none would
otherwise exist.” Id. (internal quotation marks omitted and alteration in original).
New York law applies as the parties assume that it does. “The parties’ briefs assume that
[New York] state law governs this case, ‘and such implied consent is . . . sufficient to establish
the applicable choice of law.’” Trikona Advisers Ltd. v. Chugh, 846 F.3d 22, 31 (2d Cir. 2017)
(quoting Arch Ins. Co. v. Precision Stone, Inc., 584 F.3d 33, 29 (2d Cir. 2009)).
III.
DISCUSSION
Summary judgement is granted because there are no genuine issues of disputed fact.
Under the entrustment exclusion, which is clear and unambiguous, coverage is barred as to claims
arising from the dishonest and criminal conduct of those to whom the property has been
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entrusted, such as East Market. The undisputed facts show that East Market vandalized the
property.
“[U]nambiguous provisions of an insurance contract must be given their plain and
ordinary meaning, and the interpretation of such provisions is a question of law for the court.”
Lend Lease (US) Constr. LMB Inc. v Zurich Am. Ins. Co., 28 N.Y.3d 675, 682 (2017).
“[A]ny ambiguity must be construed in favor of the insured and against the insurer.” Id.
“[B]efore an insurance company is permitted to avoid policy coverage, it must satisfy the burden
which it bears of establishing that the exclusions or exemptions apply in the particular case, and
that they are subject to no other reasonable interpretation.” Id. at 684 (internal quotation marks
omitted and alteration in original).
“Courts in New York have held that exclusions for the dishonest acts of persons to whom
the insured entrusts its property are enforceable.” Warehouse Wines & Spirits, Inc. v. Travelers
Property Cas. Co. of Am., 101 F. Supp. 3d 299, 305 (S.D.N.Y. 2015) (applying New York law)
(collecting cases). “[A]n insurance contract’s language must be given its ordinary meaning, and
common words in a policy such as entrusted are not used as words of art with legalistic
implications.” Lexington Park Realty LLC v. Nat’l Union Fire Ins., 992 N.Y.S.2d 1, 2 (1st Dep’t
2014) (internal quotation marks omitted). “[W]hen a contract indicates that the property is
entrusted, it can be understood that the parties mean that possession of property is willingly
surrendered or delivered or transferred, to be used for the purpose intended by the owner.” Id.
(internal quotation marks and brackets omitted). “The controlling element is the design of the
owner rather than the motive of the one who obtained possession.” Id.
Here, the parties do not dispute that the entrustment exclusion is valid; rather, Plaintiff
contends that it does not apply. Plaintiff argues that, (1) it is disputed whether East Market
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vandalized the premises, and (2) that even if East Market did vandalize the premises, it was after
Plaintiff had revoked its entrustment. Both of these arguments fail.
First, the undisputed evidence shows that East Market vandalized the premises. On
January 15, 2015, Bruce Xi, the property manager, reported the vandalism to the police, stating
that East Market was responsible for it. During the subsequent insurance investigation, he
testified under oath that East Market caused the damage to the premises. On August 26, 2015,
Plaintiff’s tenant, Ming Dynasty, filed a Complaint in the Supreme Court of New York alleging
that East Market and its principals “caus[ed] damage” to the premises. There were no signs of
forced entry, and Plaintiff admits that whoever vandalized the premises had a key. Xi testified
that only East Market had access to the restaurant. Aspen’s insurance adjuster, Todd Ballot,
stated in his affidavit that, “at the time of [his] first inspection . . . the premises were secure;
meaning the first-floor door adjacent to the sidewalk of the premises was closed and locked.”
Plaintiff has not proffered any evidence, other than the superintendent Shaw’s testimony that he
did not recognize the vandals, to controvert Defendant’s evidence that East Market was
responsible for the vandalism. Plaintiff’s unsubstantiated assertion that East Market’s culpability
is a disputed fact is insufficient to create a triable issue to defeat summary judgment. See, e.g.,
AXA Art Ins. Corp. v. Renaissance Art Investors, LLC, 936 N.Y.S.2d 57 (Table), at *4 (N.Y. Sup.
Ct. 2011) (rejecting argument that there was a material factual dispute as to who stole the
artworks at issue because defendant failed to proffer “any proof or explanation as to what may
have happened to the art works”).
Second, based on the clear and unambiguous language of the insurance contract, no
reasonable jury could conclude that entrustment exclusion does not preclude coverage for claims
arising from East Market’s vandalism of the premises. As a threshold matter, Plaintiff admits that
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it “initially entrusted the subject premises to East Market Restaurant.” Plaintiff’s managing
partner, Bill Lam, filed an affidavit stating that, with Plaintiff’s knowledge and consent, Ming
Dynasty sub-leased the premises to East Market to operate a restaurant from approximately 2009
to 2015. After January 10, 2015, the date on which East Market was to vacate the premises,
Plaintiff did not retrieve the keys to the property or change the locks until January 23, 2015 -after the vandalism had occurred. Because under the insurance contract’s unambiguous terms,
Plaintiff entrusted the property to East Market, and East Market vandalized it -- a dishonest or
criminal act -- the entrustment exclusion applies.
Plaintiff argues that the entrustment exclusion does not apply to the facts of this case
because Plaintiff terminated its entrustment by evicting East Market from the premises on
January 5, 2015. This argument is unpersuasive. Construing the entrustment exclusion in
Plaintiff’s favor, but interpreting it in accordance with its plain meaning, it is sufficient that the
vandalism was causally related to Plaintiff’s initial entrustment of the premises to East Market.
See, e.g., Lexington Park Realty LLC, 992 N.Y.S.2d at 1–2 (holding that the entrustment
exclusion applied where plaintiff’s tenant did not return cabinets and appliances after the
termination of the lease agreement); see also Easy Corner, Inc. v. State Nat’l Ins. Co., 56 F.
Supp. 3d 699, 707 (E.D. Pa. 2014) (applying Pennsylvania law, granting summary judgment
based on a similar entrustment exclusion because “the loss [was] causally connected to the act of
entrustment: because of [the employee’s] prior management of the bar, [the employee] had a key
and was able to access the building easily”). The entrustment exclusion applies broadly to “loss
or damage caused by or resulting from” a dishonest or criminal act by “anyone to whom you
entrust the property for any purpose,” and includes no language suggesting that the parties
intended to limit its application to acts occurring before the conclusion of the parties’ legal
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relationship. See, e.g., id. (applying Pennsylvania law, holding that “entrustment exclusions . . .
apply even after the temporal termination of an entrustment, provided that there is a causal
connection between the between the act of entrustment and the resulting loss”); Su v. New
Century Ins. Servs., Inc., No. 12 Civ. 3894, 2013 WL 5775160, at *4 (C.D. Cal. Oct. 25, 2013)
(internal quotation marks omitted) (applying California law, finding that “[e]ven if the loss occurs
after the entrustment of the property has terminated, the exclusion still applies so long as there is
a causal connection between the act of entrustment and the resulting loss”); F.D. Stella Prods.
Co. v. Gen. Star Indem. Co., No. 03 Civ. 5151, 2005 WL 3436388 (N.D. Ill. Dec. 12, 2005)
(applying Illinois law, holding that an entrustment exclusion “applies even if the dishonest or
criminal act occurs after the entrustment has terminated”). Nor has Plaintiff proffered any
evidence of the parties’ intent to limit the entrustment exclusion’s applicability.
Plaintiff also argues that this case is distinguishable from the cases cited by Aspen
because, here, East Market was legally evicted, as opposed to the parties’ relationship coming to
its natural conclusion, or concluding in some other way. Plaintiff provides no legal authority for
the proposition that East Market’s formal eviction is legally relevant to the scope of the
entrustment exclusion.
IV.
CONCLUSION
Defendant’s motion for summary judgment is GRANTED. The Clerk of Court is directed
to close the motion at Docket No. 23 and close the case.
Dated: January 18, 2018
New York, New York
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