Acquest Holdings, Inc. v. Travelers Casualty & Surety Co. of America

217 F. Supp. 3d 678, 2016 U.S. Dist. LEXIS 153367, 2016 WL 6635159
CourtDistrict Court, W.D. New York
DecidedNovember 3, 2016
Docket1:16-CV-00212 EAW
StatusPublished
Cited by8 cases

This text of 217 F. Supp. 3d 678 (Acquest Holdings, Inc. v. Travelers Casualty & Surety Co. of America) is published on Counsel Stack Legal Research, covering District Court, W.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Acquest Holdings, Inc. v. Travelers Casualty & Surety Co. of America, 217 F. Supp. 3d 678, 2016 U.S. Dist. LEXIS 153367, 2016 WL 6635159 (W.D.N.Y. 2016).

Opinion

[680]*680DECISION AND ORDER

Elizabeth A. Wolford, United States District Judge

INTRODUCTION

Plaintiff Acquest Holdings, Inc. (“Plaintiff’) commenced this action on February 5, 2016, by filing a Summons and Complaint in New York State Court. (Dkt. 1-1). Defendant Travelers Casualty and Surety Company of America (“Defendant”) brought the case to this Court by a Notice of Removal, filed March 10, 2016. (Dkt. 1). Plaintiff asserts a claim for breach of contract based on Defendant’s failure to provide Plaintiff certain insurance coverage to which Plaintiff was allegedly entitled under a crime policy of insurance (the “Policy”) issued by Defendant to Plaintiff. (Dkt. 1-1 at ¶¶ 34-40).

Presently before the Court is Defendant’s motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). (Dkt. 2). Defendant seeks dismissal of Plaintiffs breach of contract claim on the ground that Plaintiff failed to comply with a condition precedent to coverage under the Policy by not providing Defendant timely notice of loss after it discovered the loss. (Id,). For the following reasons, Defendant’s motion is denied.

BACKGROUND

I. Complaint

Plaintiffs breach of contract claim is based on the following factual allegations, which are drawn from the Complaint. Plaintiff is a corporation engaged in real estate development. (Dkt. 1-1 at ¶¶ 1-2). In May 2007, Defendant, an insurance company, issued to Plaintiff the Policy, which covered “generally, crime and fraud, including ... employee theft and fraud.” (Id. at ¶ 4). Under the Policy, Defendant insured Plaintiff against a single event of employee theft or fraud, up to one million dollars. (Id. at ¶ 6). Plaintiff renewed the Policy annually, with coverage continuing through November 9, 2016. (Id. at ¶ 15).

Plaintiff, through its subsidiary, Acquest Vegas LLC (also a named insured), contracted to build and lease to the U.S. Department of Veteran’s Affairs an outpatient facility in Las Vegas (the “Project”). (Id. at ¶¶ 7-8). The Project began in April 2009 and finished in August 2011. (Id.). Plaintiff employed Brian Vanderburgh as the Project Manager. (Id. at ¶ 9). In this role, Vanderburgh was responsible for billings from contractors. (Id. at ¶ 13). Ac-quest Vegas LLC selected Recreation Development Company of Las Vegas (“RDC”), owned by Jeffrey Whittle, as the Project’s general contractor. (Id. at ¶¶ 11-12). During the Project, Vanderburgh colluded with Whittle to “defraud[ ] and embezzle[ ] money from [Pjlaintiff through a complex scheme using a variety of subterfuges.” (Id. at ¶ 14). Plaintiff was not aware of this scheme and made its final payment to contractors on December 19, 2011. (Id. at ¶¶ 14-15).

On March 1, 2014, Plaintiffs vice president, Michael Huntress, received a telephone call from a former RDC employee, who said that “a company owned by ... Vanderburgh was paid kickbacks by RDC on the Project.” (Id. at ¶ 16). The same day, Plaintiff contacted two other former RDC employees, who each stated that they believed RDC and Vanderburgh had engaged in embezzlement. (Id. at ¶ 17). On March 10, 2014, Plaintiff reported the potential fraud and embezzlement to the Las Vegas Metropolitan Police Department (“LVMPD”). (Id. at ¶ 18).

Plaintiffs Complaint quotes a section of the Policy entitled “[Insured’s] Duties in the Event of a Loss”:

[681]*681After [the insured] discover[s] a loss or a situation that may result in loss of or loss from damage to Money, Securities, or Other Property that exceeds twenty-five percent (25%) of the Single Loss Retention, [the insured] must:
(a) notify [defendant] as soon as possible;
(b) notify law enforcement authorities if [the insured] has a reason to believe that any loss ... involves a violation of law;
(c) submit to an examination under oath at [defendant’s] request and give [defendant] a signed statement of [the insured’s] answers;
(d) give [defendant] a detailed, sworn proof of loss within 120 days; and
(e) cooperate with [defendant] in the investigation and settlement of any claim.

(Id. at ¶ 19 (alterations in original)). Plaintiff alleges that based on the “limited information” it had in March 2014, it “was not able to report a ‘loss’ to [Defendant with any meaningful detail or particularity in accordance with the ... Policy and specifically could not submit a sworn detailed proof of loss with any meaningful detail.” (Id. at ¶ 20).

On April 25, 2014, Plaintiff sent business records to the LVMPD, per its request, for use in its investigation. (Id. at ¶ 21). While investigating Vanderburgh and RDC, the LVMPD contacted the Nevada State Contractors Board (“NSCB”), which had obtained copies of checks that RDC issued to a company owned by Vanderburgh. (Id. at ¶¶ 22-23). On December 16, 2014, the NSCB served a “Notice of Hearing’ on Plaintiff and RDC in connection with the fraud and embezzlement scheme, along with documents that “for the first time ... gave [P]laintiff sufficient information to report a loss” under the Policy. (Id. at ¶ 24). Plaintiff alleges that until it received the NSCB’s Notice of Hearing and attached documents, Plaintiff had only suspected fraud and embezzlement but did not have enough knowledge to discover or report a loss to Defendant in accordance with the Policy. (Id. at ¶ 25).

On February 1, 2015, Plaintiff notified Defendant about the suspected loss and its claim under the Policy, and on February 10, 2015, Plaintiff served on Defendant a “Proof of Loss,” supported by the NSCB documents. (Id. at ¶¶ 26-28). On June 4, 2015, Plaintiff submitted to Defendant a revised proof of loss. (Id. at ¶ 29). On June 29, 2015, Defendant denied Plaintiffs claim on the basis that, inter alia, Plaintiff breached the Policy by delaying reporting the loss to Defendant and by not providing a sworn proof of loss within 120 days of discovery. (Id. at ¶ 30).

II. Defendant’s Motion to Dismiss

Defendant seeks dismissal of the Complaint, arguing that it had no obligation to cover Plaintiffs losses because Plaintiff failed to provide Defendant a timely notice of claim and Proof of Loss, as required by the Policy—which, according to Defendant, is incorporated by reference in Plaintiffs Complaint. (Dkt. 2-1 at 16-20). Defendant argues that Plaintiff discovered a loss on March 1, 2014 (when Huntress had telephone conversations with three former RDC employees regarding the fraud), or, at the latest, on March 10, 2014 (when Plaintiff filed a police report). (Id. at 18-19). Despite this discovery, Plaintiff waited 11 months to provide Defendant a notice of loss, which, according to Defendant, was an unreasonable delay as a matter of law. (Id. at 11, 18-19). Defendant also contends that Plaintiffs good-faith belief in Vander-burgh’s honesty or its failure to understand the full details of the scheme do not excuse the 11-month delay. (Id. at 19).

[682]

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Bluebook (online)
217 F. Supp. 3d 678, 2016 U.S. Dist. LEXIS 153367, 2016 WL 6635159, Counsel Stack Legal Research, https://law.counselstack.com/opinion/acquest-holdings-inc-v-travelers-casualty-surety-co-of-america-nywd-2016.