MEMORANDUM AND ORDER RE: MOTION TO DISMISS
Plaintiff J & J Pumps, Inc. ("J & J"), filed this action against defendant Star Insurance Company ("Star") arising from defendant's denial of plaintiff's claim under an employee dishonesty provision of a property insurance policy. Defendant has filed a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). (Docket No. 18.)
I. Factual and Procedural Background
Defendant issued a Commercial Lines Policy to plaintiff for October 1, 2009, through October 1, 2010, and a renewed policy for October 1, 2010, through October 1, 2011 (collectively "Policies"). (Notice of Removal; Demand for Jury Trial Ex. A ("Compl.") ¶ 4 (Docket No. 1).) The Policies contain Commercial General Liability, Inland Marine, and Commercial Property Coverage Parts. The Commercial Property Coverage Part includes a Building and Personal Property Coverage Form. This form states: "We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss."*fn1 (Def.'s Mot. Ex.
B, at B-50 (Docket No. 18).)
"Covered Property" is defined as "Building," "Your Business Personal Property," and "Personal Property of Others," and these three terms are defined. "Your Business Personal Property . . . consist[s] of the following unless otherwise specified in the Declarations or on the Your Business Personal Property - Separation of Coverage form: (1) Furniture and fixtures; (2) Machinery and equipment; (3) "Stock"; (4) All other personal property owned by you and used in your business; . . . ." (Id.) The definition of Covered Property is limited by another section, which expressly states that Covered Property does not include, inter alia: "Accounts, bills, currency, food stamps or other evidences of debt, money, notes, or securities." (Id. Ex. B, at B-51.)
The Commercial Property Coverage Part also includes a Causes of Loss - Special Form. This form states: "A. Covered Causes of Loss: When Special [sic] is shown in the Declarations, Covered Causes of Loss means Risks of Direct Physical Loss unless the loss is: 1. Excluded in Section B., Exclusions; or 2. Limited in Section C., Limitations." (Id. Ex. B, at B-89 (emphasis added).) The Exclusions section states:
We will not pay for loss or damage caused by or resulting from any of the following: . . . (h) Dishonest or criminal act by you, any of your partners, members, officers, managers, employees (including leased employees), directors, trustees, authorized representatives or anyone to whom you entrust the property for any purpose: (1) Acting alone or in collusion with others; or (2) Whether or not occurring during the hours of employment. This exclusion does not apply to acts of destruction by your employees (including leased employees); but theft by employees (including leased employees) is not covered.
The Commercial Property Coverage Part also includes a Property Special Broadening Endorsement, which expressly states that it modifies the Building and Personal Property Coverage Form and Causes of Loss - Special Form. In the endorsement, Section II, Covered Property, states that Scheduled Coverages include:
You may extend the insurance that applies to Your Business Personal Property to:
(a) Loss or damage to any property, other than contraband or property in the course of illegal transportation or trade, resulting from dishonest acts committed by an "employee", whether identified or not, acting alone or in collusion with other persons, except you or a partner, with the manifest intent to:
(1) Cause you to sustain loss; and also
(2) Obtain financial benefit (other than employee benefits earned in the normal course of employment, including: salaries, commissions, fees, bonuses, promotions, awards, profit sharing or pensions) for: a-the "employee"; or b-any ...