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MDB Communications, Inc. v. Hartford Casualty Insurance Co.

March 28, 2007

MDB COMMUNICATIONS, INC., PLAINTIFF,
v.
HARTFORD CASUALTY INSURANCE CO., DEFENDANT.
MDB COMMUNICATIONS, INC., PLAINTIFF,
v.
HARTFORD CASUALTY INSURANCE CO., DEFENDANT.



The opinion of the court was delivered by: Paul L. Friedman United States District Judge

OPINION

There are several pending motions in these consolidated cases. In Civil Action No. 05-2131 ("Case 1"), there are pending cross motions for summary judgment, as well as a motion to amend the complaint. In Civil Action No. 06-0604 ("Case 2"), there is a pending motion to dismiss or, in the alternative, for summary judgment.*fn1 For the reasons explained below, the Court grants defendant's motion for summary judgment on the claims in the Complaint in Case 1, denies plaintiff's motion for summary judgment on the claims in the Complaint in Case 1, denies defendant's motion to dismiss or, in the alternative, for summary judgment with respect to the claims in the Complaint in Case 2, and denies plaintiff's motion to amend the complaint in Case 1 as moot.

I. BACKGROUND

Plaintiff MDB Communications, Inc. ("MDB") brought these actions against its insurance provider, Hartford Casualty Insurance Company ("Hartford"), for breach of contract after Hartford refused to compensate MDB for losses it sustained through employee dishonesty. See, e.g., Case 1 Complaint ¶¶ 19, 36. There are two insurance policies at issue in Case 1, the policy periods of which ran from July 28, 2003 to July 28, 2004 and from July 28, 2004 to July 28, 2005. See Case 1 Complaint ¶¶ 5, 22. There are four insurance policies at issue in Case 2, the policy periods of which ran from July 28, 1999 to July 28, 2003, also starting and ending on July 28 of each year. See Case 2 Complaint ¶¶ 4, 17, 30, 43. Defendant asserts that the relevant language in the two policies at issue in Case 1 is the same. See Def. Mem. at 4. Plaintiff agrees. See Pl's SMF ¶ 1, Pl's MSJ at 1.

Marilyn Essex was an employee of plaintiff MDB from 1998 or 1999 to 2005. See Def's SMF ¶ 1; Pl's SMF ¶ 12. Essex is alleged to have forged checks from MDB's bank accounts paid for her benefit to third parties. See Case 1 Complaint ¶¶ 13, 30; Def's SMF ¶ 1. MDB alleges that it sustained financial losses as a result of Essex's actions which exceeded the amount of coverage available to plaintiff for such an event. See Case 1 Complaint ¶¶ 15-17, 31-34.*fn2 In its statement of undisputed material facts and accompanying affidavit, plaintiff alleges the following losses:

During the period July 28, 1999 through July 28, 2000, MDB sustained losses in the amount of $79,219.51 . . . Hatch Aff. at ¶ 21.

During the period July 28, 2000 through July 28, 2001, MDB sustained losses in the amount of $102,230.72 . . . Hatch Aff. at ¶ 22.

During the period July 28, 2001 through July 28, 2002, MDB sustained losses in the amount of $126,330.44 . . . Hatch Aff. at ¶ 23.

During the period July 28, 2002 through July 28, 2003, MDB sustained losses in the amount of $107,341.21 . . . Hatch Aff. at ¶ 24.

During the period July 28, 2003 through July 28, 2004, MDB sustained losses in the amount of $153,857.47 . . . Hatch Aff. at ¶ 25.

During the period July 28, 2004 through February 7, 2005, MDB sustained losses in the amount of $76,882.62 . . . Hatch Aff. at ¶ 26.

Pl's SMF ¶¶ 17-22 (paragraph numbers omitted). Thus, the total amount of loss asserted as a result of Essex's conduct was $645,861.97. See Pl's SMF ¶ 23; Pl's Case 2 Opp. at 1.

Plaintiff discovered Essex's embezzlement on or about February 7, 2005. See April 8, 2005 Proof of Loss, Exh. B to Def's MSJ. On February 16, 2005, Essex executed a promissory note to pay MDB $225,000 plus 7% interest per annum as restitution for her actions. See March 29, 2006 Letter from David S. Elmore to Lucinda E. Davis (counsel for Hartford). Beginning on March 11, 2005 and at various times throughout 2005, plaintiff received several restitution payments from Essex. These payments totaled $279,510.75. See Hatch Aff. ¶¶ 31-35; Pl's MSJ at 9.

Plaintiff gave notice of its claims to Hartford by letter dated March 16, 2005. See March 16, 2005 Letter from Roy I. Neidermayer to the Hartford Casualty Insurance Company, Exh. 1 to Neidermayer Aff. On or about April 12, 2005, plaintiff submitted two proof of loss forms to defendant, one for the 2003-2004 policy period and one for the 2004-2005 policy period. These proof of loss forms alleged a loss of $153,857.47 in the 2003-2004 period and a loss of $76,882.62 in the 2004-2005 period. See Def's SMF ¶ 4; April 8, 2005 Proof of Loss Forms, Exh. B to Def's MSJ.*fn3 The April 8, 2005 proof of loss forms stated that credits (obtained from the employee) had been applied to pre-July 23, 2003 losses. See April 8, 2005 Proof of Loss Forms, Exh. B to Def's MSJ.

On August 11, 2005, Hartford rejected plaintiff's April 8, 2005 proofs of loss, on the grounds that "they fail to address the total loss incurred by the insured and the potential credits based upon the restitution [MDB] has received to date." August 11, 2005 Letter from Lucinda E. Davis (counsel for Hartford) to Roy I. Neidermayer (counsel for MDB), Exh. C to Def's MSJ (emphasis added) ("August 11, 2005 Letter").*fn4 In the same letter, Hartford's counsel informed MDB's counsel that "the Hartford will permit the insured to submit revised proofs of loss accompanied by the following documentation within 30 days after the date of this letter." Id.

Defendant alleges that on September 9, 2005, "plaintiff submitted the identical proofs of loss" -- that is, those for the 2003-2004 and 2004-2005 periods only -- "with limited additional documentation . . . but again failed to provide any documentation establishing that it had not been fully compensated by Ms. Essex." Def's SMF ¶ 6; see September 8, 2005 Letter from Roy I. Neidermayer (counsel for MDB) to Lucinda E. Davis (counsel for Hartford), Exh. F to Def's MSJ ("September 8, 2005 Letter").

Plaintiff filed the first lawsuit in the District of Columbia Superior Court on October 7, 2005. See Case 1 Complaint.*fn5 Defendant removed the first lawsuit to this Court on November 1, 2005. See Notice of Removal. Dispositive motions were due in Case 1 on April 3, 2006. On the eve of the summary judgment deadline, on March 31, 2006, plaintiff filed a motion for leave to amend the complaint in Case 1, in order to add claims from four policy periods between July 28, 1999 and July 28, 2003. Also on March 31, 2006, plaintiff filed the second lawsuit with respect to the four earlier policy periods and a motion to consolidate the two cases, which was granted.

II. DISCUSSION

A. Standard for Summary ...


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