Mound Cotton Obtains Summary Judgment in Pennsylvania Federal Court for Lexington Ins. Co. based on Entrusted Property Exclusion

in

3039 B Street Assoc. v. Lexington Ins. Co., Case 2:10-CV-01740-ER (E.D. Pa. June 21, 2011).
 
In this litigation, the plaintiff made a claim under a first-party property insurance policy issued by Lexington Insurance Company for radiators and other fixtures that were allegedly stolen from plaintiff's warehouse.  Plaintiff admitted that the alleged thief was given the keys to the warehouse and was allowed to enter it unaccompanied; however, plaintiff claimed that the thief was only authorized to remove scrap metal that was lying about -- not radiators and other fixtures.  This version of the facts was disputed by a tenant of the warehouse who, while observing the radiators being removed, called plaintiff to inform him, but was advised that the removal was authorized.
 
Lexington denied the insurance claim based on the policy's fraud provision as well as the exclusion for losses caused by the dishonest acts of an insured, its employee, or anyone "to whom the property may be entrusted."  In the lawsuit that followed, the plaintiff sued for breach of contract and bad faith. United States District Court Judge for the Eastern District of Pennsylvania Eduardo Robreno awarded Lexington summary judgment based on the entrustment exclusion, finding that even if the thief was not an employee, he was entrusted with the property by virtue of being given the key to the building and "unsupervised access."  It was clear to the court that the thief had committed one of the acts described in the exclusion, i.e., dishonesty, conversion, fraud, etc.  The Court also noted that, although there were issues of fact that would preclude it from also dismissing plaintiff's claim based on the Fraud exclusion, there were "very questionable circumstances attendant to the alleged theft."
 
On the issue of bad faith, the Court found those claims to be "frivolous and entirely unsupported by the record.  The Defendant had more than reasonable grounds to act as it did under the circumstances."
 
Lexington was represented by Philip C. Silverberg, Kevin F. Buckley, and Daniel M. O'Connell of Mound Cotton Wollan & Greengrass.