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Sperling & Slater, P.C. v. Hartford Casualty Insurance Company

December 27, 2012

SPERLING & SLATER, P.C. PLAINTIFF,
v.
HARTFORD CASUALTY INSURANCE COMPANY DEFENDANT.



The opinion of the court was delivered by: Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Sperling & Slater, P.C. (the "Firm") filed a complaint seeking a declaratory judgment that an insurance policy issued by Defendant Hartford Casualty Insurance to the Firm covered the loss of funds embezzled from Firm principal Bruce Sperling's personal Fidelity bank account. On September 5, 2012, the Court dismissed the Firm's complaint with prejudice because it found that Sterling's personal bank account was not covered by the unambiguous Hartford policy. Pursuant to Fed. R. Civ. P. 59(e) and 15(a), the Firm moves the Court to reconsider its prior decision. For the reasons set forth below, the Court denies the Firm's motion.

BACKGROUND

The Firm employed a secretary named Crystal Sangiacomo to work for Bruce Sperling. Sangiacomo's responsibilities included administering Sperling's personal bank account with Fidelity Investments. This consisted of reviewing his bank statements, maintaining custody of his blank checks and preparing checks as authorized by Sperling. In December 2009, other Firm employees discovered that Sangiacomo had embezzled approximately $880,000 from Sperling's Fidelity account by writing checks on the account that were payable to herself. Sangiacomo was charged with and ultimately pled guilty to federal bank fraud in violation of 18 U.S.C. § 1344. Sperling recovered approximately $360,000 of the missing funds. The Firm reimbursed Sperling the remaining unrecovered losses of approximately $525,000.

The Firm then submitted a claim to Hartford for the loss of the $525,000. The Firm's policy requires Hartford to "pay for direct physical loss of or physical damage to Covered Property at the...scheduled premises...caused by or resulting from a Covered Cause of Loss." (Doc. 13, Ex. A, Policy, p. A0014, Section A.)*fn1 The parties do not dispute that the scheduled premises are the Firm's office. The base policy does not cover losses caused by employee dishonesty. It also does not cover losses suffered by third parties. The policy also provides that Hartford "will not pay for direct loss of...property that has been transferred to a person or to a place outside the 'scheduled premises' on the basis of unauthorized instructions." (P. A0015, A.4.a.2.).

However, the Firm purchased a number of Additional Coverages, thereby expanding what is covered under the policy. The Firm contends that two of these Additional Coverages cover the loss of Sperling's personal funds. First, the Firm purchased a "Personal Property of Others" endorsement, which obligates Hartford to cover "direct physical loss of...personal property of others that is in your care, custody or control" under a blanket limit of $250,000. (P. A00105, A.1.d). Second, the Firm purchased an endorsement called Employee Dishonesty Coverage, which obligates Hartford to cover "any loss from employee dishonesty . . . in addition to any other Limit of Insurance" under a sub-limit of $55,000. (P. A0004, A0106). The Firm also purchased an endorsement entitled "Super Stretch for Law Offices," which creates a blanket coverage limit for these Additional Coverages. (P. A0105).

Hartford denied the claim in February 2010. The Firm then filed an action seeking a declaratory judgment that the claim is covered by both the Super Stretch for Law Offices endorsement, (Count I), and the Employee Dishonesty endorsement, (Count II). The Court dismissed the action, with prejudice, on September 5, 2012 because it found that Sperling's personal losses were not covered by either of these provisions.

The Court found that while the Additional Coverage endorsements modified the terms of the base policy, they did not eliminate those terms. Accordingly, in construing the policy, the Court determined that the terms of the base policy and the Additional Coverage endorsements should be read together. As result, the Court found that Sperling's personal losses, and any corresponding reimbursement by the Firm, were not covered by the Personal Property of Others endorsement because: (1) Sperling's personal bank account was not in the care, custody or control of the Firm;

(2) the loss of the funds did not occur at the Firm's premises; and (3) the Personal Property of Others endorsement does not cover acts of employee dishonesty. The Court found that Sperling's personal losses were not covered by the Employee Dishonesty endorsement because: (1) the Firm did not suffer a direct loss from Sangiacomo's acts; and (2) the loss of the funds did not occur at the Firm's premises. The Firm has now moved this Court, pursuant to Federal Rule of Civil Procedure 59(e), to reconsider its decision and alter or amend its judgment.

LEGAL STANDARD

Under Federal Rule of Civil Procedure 59(e) a district court may entertain "[a] motion to alter or amend a judgment." Fed. R. Civ. P. 59(e).*fn2 Motions to alter or amend a judgment under Rule 59(e) are routinely referred to as motions for reconsideration. Motions to reconsider should be granted only in rare circumstances. See Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185, 1191 (7th Cir. 1990) (quoting Above the Belt, Inc. v. Mel Bohannan Roofing, Inc., 99 F.R.D. 99, 101 (E.D. Va. 1983)) (". . .the motion to reconsider should be equally rare."). A party moving for reconsideration bears a heavy burden. See Caisse Nationale de Credit Agricole v. CBI Industries, Inc., 90 F.3d 1264, 1270 (7th Cir. 1996).

A district court reviews its prior judgment under Rule 59(e) to determine whether "there exists a manifest error of law or fact so as to enable the court to correct its own errors and thus avoid unnecessary appellate procedures." Divane v. Krull Elec. Co., Inc., 194 F.3d 845, 847 (7th Cir. 1999) (citing Moro v. Shell Oil Co., 91 F.3d 872, 876 (7th Cir.1996)); see also Obriecht v. Raemisch, 517 F.3d 489, 494 (7th Cir. 2008). They are not an appropriate vehicle for relitigating arguments that the court previously rejected or for arguing issues that could have been raised during the consideration of the motion presently under reconsideration. See id. They are utilized for a very limited purpose: to correct manifest errors of law or fact, to present newly discovered evidence, or where there has been an intervening and substantial change in the controlling law since the submission of the issues to the court. See Cosgrove v. Bartolotta, 150 F.3d 729, 732 (7th Cir. 1998); LB Credit Corp. v. Resolution Trust Corp., 49 F.3d 1263, 1267 (7th Cir. 1995). A manifest error of law is the "disregard, misapplication, or failure to recognize controlling precedent." Oto v. Metropolitan Life Ins. Co., 224 F.3d 601, 606 (7th Cir. 2000) (quoting Sedrak v. Callahan, 987 F. Supp. 1063, 1069 (N.D. Ill. 1997)).

The decision to grant a Rule 59(e) motion lies in the sound discretion of this Court, and its ruling is reviewed deferentially and will only be disturbed upon a showing that the Court abused that discretion. See Matter of Prince, 85 F.3d 314, 324 (7th Cir. 1996); ...


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