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

January 24, 2008

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

In these consolidated cases, the Court granted summary judgment for the defendant on the claims arising from Civil Action No. 05-2131 ("Case 1") in an Opinion and accompanying Order on March 28, 2007. See MDB Communications v. Hartford Casualty Ins. Co., 479 F. Supp. 2d 136 (D.D.C. 2007) ("Opinion"). In sum, the Court held that because plaintiff was in breach of a provision of its insurance policy requiring it to submit information requested by the insurance company, plaintiff could not bring suit under the policy. See Opinion at 15. This matter is now before the Court on plaintiff's Motion to Reconsider, Alter or Amend the Court Order of March 28, 2007 and on defendant's Motion for Summary Judgment as to Plaintiff's Second Complaint [Civil Action No. 06-0604].*fn1 For the reasons explained below, the Court grants defendant's motion for summary judgment on the claims in Civil Action No. 06-0604 ("Case 2") and denies plaintiff's motion to reconsider, alter or amend the Court Order of March 28, 2007.

I. BACKGROUND

The Court previously described the factual background of these cases in its March 28, 2007 Opinion. See Opinion at 2-6. The Court will repeat some portions herein. 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. 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. The relevant language in all of the policies at issue is the same.

Marilyn Essex was an employee of plaintiff MDB from 1998 or 1999 to 2005. Essex forged checks from MDB's bank accounts paid for her benefit to third parties. 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.*fn2 The total amount of loss asserted as a result of Essex's conduct over the course of several years was $645,861.97. See Opinion at 3-4.

Plaintiff discovered Essex's embezzlement on or about February 7, 2005. On February 16, 2005, Essex executed a promissory note to pay MDB $225,000 plus 7% interest per annum as restitution for her actions. 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 Opinion at 4.

On February 15, 2005, defendant requested that plaintiff file a proof of loss within 60 days. See February 15, 2005 Letter from Diane Scott (Hartford) to Philip A. Gorelick (MDB), Exh. 20 to Neidermayer Aff. ("February 15, 2005 Letter"). The letter notes that "the bond or policy contains certain time limitations concerning the discovery of loss, filing of the Proof of Loss, and the institution of legal proceedings against Hartford. We encourage you to read the entire bond or policy carefully." Id.

Plaintiff gave formal notice of its claims to Hartford by letter dated March 16, 2005. On or about April 12, 2005, plaintiff submitted two proof of loss forms (dated April 8, 2005) 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.*fn3 The April 8, 2005 proof of loss forms stated that credits (obtained through restitution from the employee) had been applied to pre-July 23, 2003 losses. See Opinion at 4-5. Plaintiff did not file any proof of loss forms at that time under the four policies at issue in Case 2, which covered time periods prior to July 2003.

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 Case 1 MSJ (emphasis added) ("August 11, 2005 Letter"). 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.; see also Opinion at 5.

Defendant asserts 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." See Opinion at 5. More specifically, MDB's counsel's letter to Hartford states:

I appreciate that we disagree on the method to apply any restitution received from Ms. Essex. However, the insured has applied any restitution received in accordance with standard accounting and bookkeeping principles which it deems proper. Therefore, the Proofs of Loss are accurate as originally submitted with respect to the amounts claimed and the credits applied. By this letter, MDB is resubmitting the Proofs of Loss by incorporation.

September 8, 2005 Letter from Roy Neidermayer (MDB's counsel) to Lucinda E. Davis (Hartford's counsel), Exh. 13 to Neidermayer Aff ("September 8, 2005 Letter"). In this letter, MDB thus explicitly refused to submit the information requested in Hartford's rejection of the proofs of loss on August 11, 2005 -- for example, regarding its treatment of the restitution monies received from Essex and their relationship to the claims plaintiff had presented to defendant. That is, the documentation submitted by plaintiff still "fail[ed] 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.

Plaintiff filed the first lawsuit in the Superior Court of the District of Columbia on October 7, 2005. See Case 1 Complaint. 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. The Court granted the motion to consolidate. As noted above, the Court granted summary judgment for the defendant on the claims arising from Case 1, and denied as moot the motion to amend, in an Opinion and accompanying Order on ...


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