When 5 + 3 = 1

COMMERCIAL PACKAGE POLICY – EMPLOYEE DISHONESTY COVERAGE – NUMBER OF OCCURRENCES – ANTI-STACKING PROVISION 
Dan Tait, Inc. v. Farm Family Cas. Ins. Co.
(Sup. Ct., Albany Co., 7/2/2018)

Over a five-year period, plaintiff's former bookkeeper stole approximately $500,000 from his employer by: (1) making unauthorized purchases with company credit cards; (2) making unauthorized withdrawals from the company's line of credit; and (3) taking company inventory for personal use.  Plaintiff made a claim for employee dishonesty coverage to its commercial package insurer, Farm Family.

Deeming the former bookkeeper's course of dishonest acts committed over multiple policy periods to constitute one "occurrence" under the language of the policy, Farm Family paid $15,000, representing the limit of the employee dishonesty coverage for one policy period.  Plaintiff sued.

Under the subject policy, Farm Family agreed to pay for the direct loss of business property or cash "resulting from dishonest acts committed by [the named insured's] employees acting alone or in collusion with other persons[.]" The policy further provided that "[t]he most [Farm Family] will pay for loss or damage in any one occurrence is [the policy limit of $15,000]" and that "[a]ll loss or damage . . . [c]aused by one or more persons; or. . . [i]nvolving a single act or series of acts . . . is considered one occurrence" under the policy.

The policy also contained what the motion court characterized as "robust anti-stacking language", which provided:

If any loss is covered: (1) Partly by this insurance; and (2) Partly by any prior cancellation or terminated insurance that we or any affiliate had issued to you or any predecessor in interest; the most we will pay is the larger of the amount recoverable under this insurance or the prior insurance. We will pay only for loss or damage you sustain through acts committed or events occurring during the Policy Period. Regardless of the number of years this policy remains in force or the number of premiums paid, no Limit of Insurance cumulates from year to year or period to period.

On the issue of the number of occurrences, Supreme Court rejected plaintiff's asserted reliance on the "unfortunate-event test" and held that the former bookkeeper's series of thefts from plaintiff constituted "one occurrence" under the policy and, therefore, was subject to the $15,000 limit applicable to losses arising from employee dishonesty.

With respect to the anti-stacking issue, Supreme Court rejected plaintiff's argument that the policy was ambiguous and held:

Based on the foregoing, the Court concludes that [plaintiff] cannot recover an amount in excess of $15,000, representing "the larger of the amount recoverable under" any one of the insurance policies that were in effect during the multi-year period in which [the former bookkeeper]'s dishonest acts were committed.

If Supreme Court is right that there are no prior reported decisions of the New York courts that speak directly to the "occurrence" issue, we may see this case head to the Appellate Division, Third Department.  Stay tuned.