District Court Affirms Summary Judgment for Insurer in Employee Theft Case

The federal district court for the district of New Jersey recently denied an insured’s motion for reconsideration of its prior award of summary judgment in favor of its insurer. Pine Belt Automotive, Inc. v. Royal Indemnity Co., et al., Civil Action. No. 06-5995 (D.N.J. Feb. 19, 2009). The coverage issues arose out of losses resulting from the insured’s employee’s alleged embezzlement and falsification of loan applications. The insurer determined that the policy only provided $100,000 in coverage based on its determination that (i) the embezzlement constituted only a single occurrence; (ii) the losses resulting from the submission of a false loan application did not constitute employee theft under the policy, and (iii) there was no coverage under the Truth in Lending provision of the policy, which, according to the insurer, provides coverage for only negligent acts.

The insured subsequently sued its insurer for breach of the insurance policy  in the New Jersey federal district court and the insurer filed a motion for summary judgment during the course of that litigation.  After the oral argument on the summary judgment motion, the insured submitted additional information, including a 1998 decision from a New York court. Nevertheless, the New Jersey court granted summary judgment  in favor of the insurer, and the insured  then filed a motion for reconsideration, arguing that (i) the court  initially overlooked controlling law;  (ii) there  was new evidence not previously available  to the court;  and (iii) the court acted in error when it overlooked several dispositive factual matters.

The court denied the insured’s motion for reconsideration and addressed the insured’s three-part argument as follows: First, the court held that the 1998 case introduced by the insured after oral argument was neither “new” nor “controlling,” and other information provided by the insured was considered and analyzed in the its original opinion.  Second, the court denied the insured’s argument that there was new relevant evidence since the evidence at issue was both known to the parties and submitted to the court prior to its decision, noting that the insured’s “disagreement with the Court’s evaluation of the evidence - in that it did not affect the outcome of the motion - is not sufficient grounds to reconsider its initial decision.”  Lastly, the court rejected the insured’s argument in which it sought to introduce the policy notification form in interpreting the relevant policy exclusion for employee dishonest, because not only did the initial court consider and reject that same argument, but under New Jersey law “extrinsic evidence should not be used in construing an unambiguous insurance policy.”