Representing Insureds Since 1970

Copr. © West 2000 No Claim to Orig. U.S. Govt. Works

1995 WL 104100
(Cite as: 1995 WL 104100 (S.D.N.Y.))
Only the Westlaw citation is currently available.

United States District Court, S.D. New York.

Thomas CURRAN and Denis Connors d/b/a
Curran & Connors Investment Co., and
Curran & Connors, Inc., Plaintiffs,
CO., Defendant.

No. 93 Civ. 1289 (JFK).

March 8, 1995.

Weg & Myers, P.C., New York City (Dennis T. D'Antonio, Debra Ruth Wolin, of counsel), for the plaintiffs.

Gladstein & Isaac, New York City (Michael E. Stern, of counsel), for the defendant.


KEENAN, District Judge:


*1 Before the Court are cross?motions for summary judgment pursuant to Fed.R.Civ.Proc. 56 brought by Plaintiffs Thomas Curran and Denis Connors (d/b/a Curran & Connors Investment Co.) and Curran & Connors, Inc. (collectively "Curran & Connors") and Merrimack Mutual Fire Insurance Company ("Merrimack"). For the reasons that follow, summary judgment is granted for Defendant as to liability coverage, and granted for Plaintiffs as to property coverage.


The parties agree to the following underlying facts. Defendant issued to Plaintiffs an insurance policy, No. CL 137?68?66, effective April 17, 1991 through April 17, 1992 (the "Policy"). See Stern Aff.Ex. I (the Policy and related documents); Connors Aff.Ex. H (same). The Policy provided coverage for liability incurred by an insured party to third parties for various types of personal injury or property damage as defined therein and not excluded. Defendant also issued to Plaintiffs for the Policy a specific endorsement, No. CM 00 67 11 85, entitled "Valuable Papers and Records Coverage Form," which provided coverage for losses to certain property defined therein and not excluded, see id., up to a specified coverage limit. See id. at "Commercial Inland Marine Coverage Part Declarations" (listing valuable papers coverage limit of $200,000.00).

The Policy was in effect on January 27, 1992. On that date Plaintiffs' employee Evan Connolly parked his car on a street in Manhattan where an individual unrelated to this action broke into the trunk and stole, among other items, Mr. Connolly's briefcase containing photographic color slide transparencies (the "slides"). The slides belonged to non?party firms The Stock Market Photo Agency ("Stock Market") and The Image Bank. These firms represent professional photographers by providing stock photographic images to commercial users for a fee. See Connors Aff. 10. The images are used for illustration in the commercial graphic arts. See id. Curran & Connors would present the slides to its clients for evaluation and possible inclusion in corporate presentations and annual reports.

The slides were consigned to Curran & Connors pursuant to separate written agreements with Stock Market and The Image Bank. See Connors Aff.Exs. D & E. Under the liquidated damages provision of each agreement, which allegedly reflect the standard of the industry, the consignee is obligated to the consignor for damages of $1500 for any "original" slide lost or damaged, and $100 for any "duplicate" slide lost or damaged. See id. [FN1]

By letter dated January 28, 1992, the day after the theft of the slides, Stock Market stated its position that Curran & Connors was liable to Stock Market under the liquidated damages provision of their consignment agreement. See Connors Aff.Ex. C. Curran & Connors thereafter notified Defendant of its claim under the Policy for coverage for the slides belonging to both Stock Market and The Image Bank. Defendant accepts that Plaintiffs satisfied the conditions for filing a claim under the Policy.

*2 By letter dated June 23, 1992, Defendant disclaimed liability coverage for actions arising out of the loss of Stock Market and The Image Bank slides. See Stern Aff.Ex. L. Defendant cited Policy Exclusions G (which excludes coverage for property damage "arising out of the ownership, maintenance, use or entrustment to others of any aircraft, 'auto' or watercraft owned or operated by or rented or loaned to any insured," including the "loading or unloading" thereof), J(1) (excluding damage to property owned, rented, or occupied by the insured), J(3) (excluding damage to property loaned to the insured), and J(4) (excluding damage to personal property in the care, custody or control of the insured). Id. The letter specifically stated, however, that it "refer [red] only to liability coverage and [did] not affect other portions of the policy which may provide in part for some of the damages involved." Id. at 2.

By letter dated July 16, 1992, Defendant acknowledged that the duplicate slides were covered by the terms and conditions of the Policy, but disclaimed property liability coverage for any original slides. See Stern Aff.Ex. J. The letter cited provision (A)(2) of the Valuable Papers and Records Coverage Form, which states that "Covered property does not include: (a) Property not specifically declared and described in the Declarations if such property cannot be replaced with other property of like kind and quality." Id. (emphasis added).

On or about August 7, 1992, Stock Market filed suit in the Supreme Court of New York County seeking damages from the Plaintiffs for the loss of the slides. See Stern Aff.Ex. H (state court complaint).

On or about March 4, 1993, Plaintiffs filed this action. In their Amended Complaint, filed April 2, 1993, Plaintiffs seek a declaratory judgment that Defendant is obligated to defend and indemnify the Plaintiffs as regards the claim brought by Stock Market and for judgment against Defendant in the sum of $159,000.00 plus attorney's fees, costs, and disbursement. Discovery commenced on or about May 24, 1993 under the supervision of Magistrate Judge Dolinger.


This Court has jurisdiction under 28 U.S.C. § 1332(a)(1), as this suit is between citizens of two different states and the amount in controversy exceeds $50,000. This Court has the power to grant the declaratory relief sought under 28 U.S.C. § 2201.

A. Applicable Standard for Summary Judgment

Rule 56 of the Federal Rules of Civil Procedure "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corporation v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552 (1986). That is, a motion for summary judgment may be granted only if the entire record demonstrates that "there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511 (1986). When viewing the evidence, the court must "assess the record in the light most favorable to the non?movant and ... draw all reasonable inferences in its favor." Delaware & Hudson Railway Co. v. Consolidated Rail Corp., 902 F.2d 174, 177 (2d Cir.1990), cert. denied, 500 U.S. 928 (1991); see Francis v. Coughlin, 891 F.2d 43, 46 (2d Cir.1989). The district court may not resolve issues of fact; it may only ascertain whether such issues are present. See Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 58 (2d Cir.1987).

*3 In contract actions, summary judgment is an appropriate method of disposition when the contract's terms are clear and not conducive to more than one reasonable interpretation. See American Home Prods. Corp. v. Liberty Mut. Ins. Co., 748 F.2d 760, 765 (2d Cir.1984). Whether terms are ambiguous presents a threshold question of law for the court that is resolved within the four corners of the document. See Weiss v. Weiss, 52 N.Y.2d 170, 174, 436 N.Y.S.2d 862, 864, 418 N.E.2d 377, 380 (1981). Terms are unambiguous when, construing the writing as a whole and giving each section its plain meaning, the writing is readily susceptible to only one interpretation. See id.; American Home Prods., 748 F.2d at 765; Hong Kong Export Credit Ins. Corp. v. Dun & Bradstreet, 414 F.Supp. 153, 158 (S.D.N.Y.1975).

In American Home Products the Second Circuit discussed the interpretation of an insurance policy. See 748 F.2d at 765. The Circuit found that the "plain meaning" approach to interpreting an insurance policy is well settled. See id. at 764?65; McGrail v. Equitable Life Assur. Soc'y, 292 N.Y. 419, 424, 55 N.E.2d 483, 486 (3d Dep't 1944). Alternate meanings put forth by the litigants do not automatically render ambiguous contract language that sustains a plain meaning. See Metropolitan Life Insurance Co. v. RJR Nabisco, Inc., 906 F.2d 884, 889 (2d Cir.1990); Hunt Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir.1989).

In addition, under New York law governing interpretation of insurance contracts, which applies to this action in diversity, "all ambiguities in terminology are to be resolved in the insured's favor so long as such a construction would be neither strained nor unnatural." See Goldner v. Otsego Mut. Fire Ins. Co., 39 A.D.2d 440, 442, 336 N.Y.S.2d 717, 720 (3d Dep't 1972) (citing Tonkin v. California Ins. Co., 294 N.Y. 326, 328?29, 62 N.E.2d 215, 216 (1945), & Silverstein v. Commercial Casualty Ins. Co., 237 N.Y. 391, 393, 143 N.E. 231, 232 (1924)).

B. Liability coverage

Defendant's letter of June 23, 1992 cited four exclusion provisions in the Policy, each as independent grounds for denying Plaintiffs' claim that Defendants had a duty to defend and indemnify Curran & Connors from liability in any action arising out of the lost slides. See Stern Aff.Ex. L.

Defendant cited policy exclusion G, which states

This insurance does not apply to: g. 'Bodily injury' or 'property damage' arising out of the ownership, maintenance, use or entrustment to others of any aircraft, 'auto' or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and 'loading or unloading.' [FN2]

Stern Aff.Ex. I (the Policy). Under New York law, "use" is interpreted broadly in the context of auto insurance liability claims. See Gering v. Merchants Mut. Ins. Co., 75 A.D.2d 321, 323, 429 N.Y.S.2d 252, 254 (A.D.2d Dep't 1980) (an attempt to make an emergency repair); Ass'n for the Help of Retarded Children, Inc. v. Ins. Co. of North America Inc., 59 A.D.2d 525, 526, 397 N.Y.S.2d 109, 111 (A.D.2d Dep't 1977) (supervising a handicapped child's boarding of a school bus); Aetna Cas. & Sur. v. Liberty Mut. Ins. Co. 91 A.D.2d 317, 320?21, 459 N.Y.S.2d 158, 161 (A.D. 4th Dep't 1983) (being injured by explosives that were overloaded in a rented truck and accidentally detonated); Neice v. Nationwide Mut. Ins. Co., 419 N.Y.S.2d 799, 100 Misc.2d 595 (Sup.Ct., Special Term, 1978) (transferring a trailer hitch from one auto to another). Nevertheless, the vehicle and its "use" must be the proximate cause of the injury, not merely the locus of the loss. Cf. United States Auto Assn. v. Aetna Cas. & Sur., 429 N.Y.S.2d 508, 510 (4th Dep't 1980) (child's injury from "spit ball" while riding in auto not arising out of the use of the auto). That is, the loss "must arise out of the use of the automobile qua automobile." See id. Here, the loss resulting from the theft of the slides is connected to the automobile only insofar as the automobile provided the locus of the occurrence of loss??the loss is not attributable to any function of the automobile itself. The Court finds, therefore, that exclusion of Plaintiffs' claim under this provision was improper.

*4 The Court notes that this reading of Exclusion G is within the overall plain meaning of the liability section of the Policy. The general purpose of the Policy's liability coverage was to provide security for the insured against the risk of liability for unforeseen, accidental bodily injury or property damage done by the insured or its agents to third parties. The Policy exclusions thereafter limit the scope of this security in relation to the premiums and optional extensions purchased by the insured. The auto provision was intended to exclude the obvious risks associated with the operation of vehicles, risks for which an insured could easily, and generally would be required, to obtain alternative coverage. However the risk of theft of a third party's property is simply not the type of risk associated with the operation of a vehicle such that it may be considered within the plain meaning of that exclusion.

Defendant also cited Exclusion J, which states

This insurance does not apply to:
j. 'Property damage' to:

(1) Property you own, rent or occupy; ....
(3) Property loaned to you;
(4) Personal property in [the insured's] care, custody or control; ...

Stern Aff.Ex. I (the Policy). The plain meaning of this exclusion is clear: the Policy does not provide security from liability for damage to property that it is within the power of the insured to protect. This exclusion ensures that the insured will behave prudently and take all necessary precautions with property in its possession. Without this exclusion, an insurer would assume responsibility not only for the risks created by third parties, but for the risks created by careless insureds as well. Absent the purchase of an extension of coverage, [FN3] such increased risks are properly excluded from the Policy. The only issue for the Court, therefore, is which if any of the definition provisions of Exclusion J apply to the slides.

Plaintiffs assert that the slides could not be "occupied" within the plain meaning of that term, such that provision J(1) does not apply. While acknowledging that "occupy" can be used to denote the legal possession of personal property, its more common usage refers to real property. See 87 NYJur2d Property § 11; Black's Law Dictionary 974 (5th Ed.1979) ("To take or enter upon possession of; to hold or keep for use; to possess; to tenant; to do business in; to take or hold possession. Actual use, possession, and cultivation."). The real property usage is also more consistent in the context of the exclusion which states "own, rent or occupy." Exclusion J(1) thereforedoes not apply to the slides.

Plaintiffs also claim that the slides were not "loaned" to Plaintiffs within the meaning of Exclusion J(3), since Plaintiffs were not the ultimate users of the slides. See Pls.' Reply Mem. at 17. Defendant argues that the slides were provided to Plaintiffs on a temporary basis with the understanding that they would be returned and there would be no further compensation. See Def.'s Mem. at 12. This question raises an issue of fact which the Court cannot resolve. This issue of fact is rendered immaterial, however, insofar as the Court reads Exclusion J(4) to apply to the slides.

*5 Plaintiffs first allege that the slides were not in the "care, custody or control" of their employee when stolen, but rather in the control of the thief. See Pls.' Reply Mem. at 12?13. This proposed reading is beyond common sense. If followed, it would render "control" to govern only intentional acts (since any unintentional act would be outside of the insured's control), and would disregard the term "care" altogether.

Plaintiffs also allege that the slides are not "personal property" within the meaning of the exclusion, but rather are business property or business personal property. See Pls.' Mem. at 20?22. The attempt to distinguish is unavailing. As noted above, the plain meaning of provision J(1) excludes real property. The plain meaning of provision J(4), in context, is to distinguish personal property from real property and to exclude the former. This is further demonstrated by the use of the clarified terms "real property" in provision J(5) and "any property" in provision J(6), and by the availability of extended coverage, via sidetrack agreement, for all types of property damage excluded under provisions J(3)?(6) (which cover only limited portions of real property on which an insured worked), but not for the types of damage excluded under provisions J(1) & (2) (which cover complete areas of real property). The Court finds, therefore, that Defendant properly denied Plaintiffs' claim for liability coverage under exclusion provision J(4), insofar as the slides were personal property within Plaintiffs' care, custody or control. The Court therefore grants Defendant's motion for summary judgment as to Plaintiffs' claims under the liability and indemnity portion of the Policy.

C. Valuable papers and records coverage

Defendant's letter of July 16, 1992 acknowledged that the slides were the personal property of another within Plaintiffs' care, custody or control. Defendant also acknowledged, as least so far as the duplicates were concerned, that the slides were covered property under the Valuable Papers and Records Coverage endorsement to the Policy. Defendant denied coverage for the original slides, however, citing provision A(2)(a), which states
2. Property Not Covered Covered Property does not include:
a. Property not specifically declared and described in the Declarations if such property cannot be replaced with other property of like kind and quality;

Stern Aff.Ex. I (the Policy, at Valuable Papers & Records Coverage Form) (emphasis added). Defendant contends that the slides denominated "originals" cannot be replaced with slides bearing their exact image, and therefore any replacement is not of "like kind or quality." This argument would read the exclusion so narrowly as to require replacement with the exact or identical image. Indeed, Defendant's papers speak of the impossibility of restaging sporting events to recapture the exact moments of the lost images. The Court rejects this reading as contrary to the plain meaning of the term "like," which is "nearly the same," Japan Import Co. v. United States, Cust. & Pat.App., 86 F.2d 124, 131 (1936), "similar," Castell v. United States, 20 F.Supp. 175, 179 (S.D.N.Y.1937), rev'd on other grounds, 98 F.2d 88 (2d Cir.), cert. denied 305 U.S. 652 (1938), or "substantially similar." Jones v. H.D. & J.K. Crosswell, Inc., 60 F.2d 827, 829 (4th Cir.1932). The Court finds that for the use intended in the industry, the image on any given slide is largely indistinguishable from that of another depicting a similar subject and event, such that the slides, while denoted "originals" for commercial reasons, should not have been excluded from coverage under the valuable property portion of the Policy. [FN4]

*6 Defendant also contends that the liquidated damages clauses in the consignment agreements are evidence that the slides are not replaceable. See Def.'s Mem. at 8. The Court disagrees. While it is true that liquidated damages clauses are generally only applicable in cases where it is "difficult, if not actually impossible, to calculate the amount of actual damage," Truck Rent?a?Center, Inc. v. Puritan Farms 2nd, Inc., 41 N.Y.2d 420, 361 N.E.2d 1015, 393 N.Y.S.2d 365 (1977), difficulty in calculation is not the same as impossibility of replacement. Indeed, the very presence of such a general clause, which represents an industry?wide standard applying to all slides, regardless of historical significance, subject?matter, aesthetic quality, identity of the photographer, or any other factors determinative in the valuation of art, throws the assumption of uniqueness into question. Moreover, the consignment agreements themselves refer to the clause not in terms of the irreplaceable artistic value of the lost images, but in terms of an approximated value of the income stream from a lost commercial asset. As comparable assets are readily available, the Court finds that Defendant should not have denied coverage based on the inability to replace the property with property of like kind and quality. The Court therefore grants Plaintiffs' motion for summary judgment as to Plaintiffs' claims under the valuable property portion of the Policy.


For the foregoing reasons, the Court grants summary judgment for Defendant as to liability coverage, and for Plaintiffs as to property coverage. There remains a dispute between the parties as to the total number of slides, the number of originals, and the number of duplicates. The Court directs the parties to confer, to attempt to resolve the dispute informally, and to report the status of such attempt to the Court by letter to be received on or before April 27, 1995. In the event that the parties are unable to resolve the issue, the Court shall order submissions and, if necessary, a hearing on the issue.


FN1. Defendant alleges that a total of 176 slides were consigned and stolen. Defendant alleges that 91 belonged to The Image Bank, of which there were allegedly 28 originals and 63 duplicates, and 85 belonged to The Stock Market, of which there were allegedly 78 originals and 7 duplicates. Plaintiffs do not question the total of 176 slides, but assert that there is insufficient evidence before the Court to determine the number of originals and duplicates.

FN2. Terms in quotes are defined in the definitions section of the Policy. See Stern Aff.Ex. I (the Policy) at Commercial General Liability Coverage Form, Section 5. While the term "loading and unloading" is defined in this section, endorsement No. CG 01 63 04 86, entitled New York Changes??Amendatory Endorsement, indicates that "Any definition of 'loading or unloading' does not apply." See id. at Amendatory Endorsement.

FN3. Exclusion J also states that "[p]aragraphs (3), (4), (5), and (6) of this exclusion do not apply to liability assumed under a sidetrack agreement." This provision indicates an insured could purchase the added security of liability coverage for personal property in the insured's control. No sidetrack agreement was arranged between these parties.

FN4. The Court does not find that photographic images in general are replaceable in this manner, merely that in the commercial context before the Court the lost slides, created and used for entirely commercial purposes, can be replaced with other images of like kind and quality such that exclusion should not apply.