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BELLAMAH, NEUHAUSER & BARRETT, INC. v. HANOVER INS
July 9, 1980
BELLAMAH, NEUHAUSER & BARRETT, INC., Plaintiff,
HANOVER INSURANCE COMPANY, Defendant
The opinion of the court was delivered by: GASCH
This is an action for damages and declaratory relief for breach of contract. Defendant Hanover Insurance Company ("Hanover") moves for partial summary judgment on count I of the complaint. Plaintiff Bellamah, Neuhauser & Barrett, Inc. ("Bellamah") opposes Hanover's motion, and moves for partial summary judgment on the issue of coverage raised in count I. Hanover opposes Bellamah's motion. For the reasons set forth below, the Court grants Hanover's motion, denies Bellamah's motion, and enters judgment for Hanover on count I of the complaint.
The relevant facts are undisputed. On May 30, 1974, Bellamah and Hanover entered into a contract for insurance designated "Stockholders Blanket Bond No. F-303977-C" (the "Bond"), which was effective from noon on April 27, 1974 until July 23, 1979.
In the bond, Hanover (the Underwriter) agreed "to indemnify and hold harmless" Bellamah (the Insured) for, inter alia,
Loss of Property (occurring with or without negligence or violence) through ... mysterious unexplainable disappearance ... and loss of subscription, conversion, redemption or deposit privileges through the misplacement or loss of Property, while the Property is (or is supposed to be) lodged or deposited within any offices or premises ....
The limit of Hanover's liability for the mysterious unexplainable disappearance of property was $ 750,000.
Sometime between 8:30 P.M. on March 29, 1979 and 8:30 A.M. on March 30, 1979,
securities with a face value of approximately.$ 1.8 million disappeared from Bellamah's offices.
This loss of securities was a loss of property as to which coverage was available under the Bond.
Hanover subsequently replaced $ 750,000 of the missing securities (face value) by issuing lost instrument bonds and obtaining duplicate securities from the issuing agents.
In replacing these securities, Hanover spent less than $ 750,000.
If the missing securities are presented by a holder in due course, Hanover will have to pay the face value of the securities, i.e., $ 750,000.
The question presented by the parties' cross-motions is whether Hanover has fully complied with the terms of the Bond. Hanover urges the Court to answer this question in the affirmative. Hanover maintains that its obligations under the Bond are limited to the replacement of securities with a face value of $ 750,000. Bellamah, on the other hand, submits that the question presented should be answered in the negative. Bellamah contends that Hanover must indemnify Bellamah for all losses Bellamah has suffered and may in the future suffer as a result of the loss of the securities with a face value of approximately.$ 1.8 million until Hanover incurs costs equalling $ 750,000 as a result of such indemnification.
Two provisions contained in the section of the Bond entitled "VALUATION" are relevant to the resolution of the question presented here. The first of these provisions reads as follows:
The value of any securities, for the loss of which claim shall be made under this bond, shall be determined by the cost of an equivalent amount of securities of the same issue purchased by or at the instance of the Underwriter; provided, however, that if prior to such purchase by or at the instance of the Underwriter, the Insured shall be compelled, by the demands of a third party or by market rules, to assume the cost of an equivalent amount of securities of the same issue, and shall notify the Underwriter, in writing, of such compulsion, such cost shall be taken as the value of such securities. The amount of the Insured's claim on account of any such loss shall be deemed the cost of such securities as herein determined....
The second pertinent provision reads ...
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