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North Fullerton Surgery Center v. Franklin Mutual Insurance Co.

Superior Court of New Jersey, Appellate Division

October 25, 2013

NORTH FULLERTON SURGERY CENTER, Plaintiff-Appellant/ Cross-Respondent,
v.
FRANKLIN MUTUAL INSURANCE COMPANY, Defendant-Respondent/ Cross-Appellant

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted October 15, 2013

On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-45-11.

Brach Eichler, L.L.C., attorneys for appellant/cross-respondent (Anthony M. Gruppuso, of counsel and on the brief).

Sweet Pasquarelli, P.C., attorneys for respondent/cross-appellant (Anthony P. Pasquarelli and Matthew G. Minor, on the brief).

Before Judges Parrillo, Harris, and Guadagno.

PER CURIAM

This is a declaratory judgment action between an insurer and its insured. Plaintiff North Fullerton Surgery Center (the Center) appeals from the Law Division's July 19, 2012 grant of summary judgment to defendant Franklin Mutual Insurance Company (FMI) declaring that, with respect to FMI's Businessowners Policy that was issued to the Center, the policy's coverage for employee dishonesty was limited to $10, 000. FMI cross-appeals from a June 30, 2011 order dismissing its counterclaim, which sought a declaration that FMI's coverage is excess over the coverage provided to the Center by non-party Westchester Fire Insurance Company (Westchester). We affirm.[1]

I.

The Center operates a surgery center in Montclair. For several years prior to February 2009, the Center employed Heidi Facchini as a nurse administrator, tasked to serve as the facility's bookkeeper and office manager. Facchini was authorized to buy supplies, had check-signing authority, and controlled the use of the Center's credit card.

The Center alleges that over a five-to-seven-year span, on approximately 300 different occasions, Facchini stole, embezzled, and defrauded it of over one million dollars.[2] For example, the Center claims that from August 2005 through February 2009 Facchini made forty-six unauthorized transfers from the Center's checking account to her private bank account, totaling $516, 473.95. Furthermore, Facchini is accused of using the Center's credit card to charge personal items, paying for those charges with the Center's funds on fifty-four separate occasions between September 2004 and February 2009. Over this period, Facchini supposedly converted $432, 361.49 of the Center's money. Facchini's dishonesty, however, is alleged to go even further. The Center claims that Facchini also stole the Center's cash, totaling $62, 236.91, at least thirty-two times. Additionally, she is believed to have used $59, 554 of the Center's money to pay her family health care benefits and $1, 919 for her personal use of a limousine service.

The Center was insured under the FMI Businessowners Policy from 2003 through the date the Center discovered Facchini's actions. As such, the Center alleges that FMI is liable to the Center under the policy for the losses caused by Facchini.

In addition to the FMI policy, the Center's losses resulting from Facchini's actions also were covered by a Business and Management Indemnity Policy issued by Westchester. After a dispute revolving around the scope of the Business and Management Indemnity Policy, Westchester settled with the Center, ultimately paying $832, 000 in satisfaction of its loss coverage caused by Facchini.[3]

The FMI Businessowners Policy provided for several levels and types of coverage. "Coverage B, " a component of Part IA of the FMI Businessowners Policy, insured the Center's business personal property against loss resulting from a variety of causes. "Coverage D" covered loss to money and securities used in the Center's business. Under the Declarations, the policy insured the Center's business personal property with a limit of $1, 000, 000. The same Declarations provided for a $10, 000 limit for losses to money and securities.

The FMI Businessowners Policy was expressly subject to the following exclusions:

Part ID – PROPERTY EXCLUSIONS/LIMITATIONS
1. PROPERTY NOT COVERED
We do not cover the following property except to the extent otherwise specifically provided for here.
A. Accounts, bills, deeds, evidence of debt, money or securities, notes, and gold, silver, or other precious ...

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