The opinion of the court was delivered by: WILLIAM G. BASSLER
The defendant, Hartford Casualty Insurance Company, ["Hartford"] moves for summary judgment under Fed. R. Civ. P. 56. The Court grants the motion because the insured's undisclosed knowledge of the offending employee's dishonesty, prior to Hartford's issuance of its policy insuring against employee dishonesty, entitles it to disclaim coverage.
Hartford issued a comprehensive dishonesty, disappearance and destruction insurance policy to the plaintiff, Cooper Sportswear Manufacturing Company, Inc., ["Cooper"] on March 25, 1988, in response to Cooper's application in February 1988. By letter dated July 5, 1988, Cooper notified its insurance broker, Kalvin-Miller International, Inc., ["Kalvin-Miller"] that it had discovered that one of its employees "committed dishonest acts against our company." Hartford on July 25, 1988 received a claim report under the policy from Kalvin-Miller.
Cooper's claim ultimately involved James Pagnotta, an employee of 40 years who served as the manager of the company's warehouse at 720 Frelinghuysen Avenue in Newark, N.J. The company, which manufactures and imports leather coats, jackets and other sportswear, maintains its executive offices, warehouse, manufacturing facilities and outlet store at that address. Pagnotta allegedly stole from the company cash and merchandise worth more than the $ 500,000 policy limit. Affidavit of Laurence P. Jortner, Esq., Exhibits G, J.
Hartford denied the claim in November 1990 for various reasons, including its determination that Pagnotta's dishonest acts were excluded from the policy, under Sections 7 and 15, because Cooper had prior information about Pagnotta's dishonesty. Hartford's Support Memorandum at 11. Cooper filed suit on April 11, 1991 in the Superior Court of New Jersey, Law Division, Essex County, alleging that it sustained a loss in excess of $ 500,000. On May 8, 1991, Hartford removed the action to this Court, 28 U.S.C. § 1441, under diversity jurisdiction. 28 U.S.C. § 1332. Hartford filed a third-party complaint against Pagnotta on May 22, 1991. Cooper alleges in its complaint that the policy covers its loss up to the $ 500,000 limit. Hartford in its third-party complaint seeks a judgment against Pagnotta, should Hartford be found liable for Cooper's loss.
A. The Summary Judgment Standard
Rule 56(c) provides that summary judgment is appropriate only "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law." See also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986).
B. The Summary Judgment Analysis
In moving for summary judgment, Hartford argues, inter alia, that Sections 7 and 15 of the policy bar the claim because Cooper discovered Pagnotta's dishonesty before the inception of the policy. This argument merits summary judgment in favor of Hartford.
Section 7 of the policy provides:
The coverage of Insuring Agreement I shall not apply to any Employee from and after the time that the Insured or any partner or officer thereof not in collusion with such Employee shall have knowledge or information that such Employee has committed any fraudulent or dishonest act in the service of the Insured or otherwise, ...