Defendants Chubb Insurance Corporation ("Chubb"), Federal Insurance Company ("Federal"), and Vigilant Insurance Company ("Vigilant")^[FN1] move, pursuant to CPLR 3211 (a) (1) and (a) (7), for an Order dismissing the entire complaint of the plaintiff Cumberland Packing [*2]Corp. ("Cumberland"). For the reasons set forth below the motion is granted in its entirety.

BACKGROUND

This suit arises out of the aftermath of the collapse of the well-publicized Ponzi scheme perpetrated by Bernard L. Madoff and his company, Bernard L. Madoff Investment Securities LLC (collectively, "Madoff"), who, over the course of twenty years, defrauded thousands of unsuspecting investors. Plaintiff Cumberland was one of those investors, and in its complaint, it makes the following factual allegations. Cumberland, the Brooklyn based manufacturer of the sweeteners Sweet'N Low and Sugar in the Raw, began investing with Madoff on behalf of its employees through the Cumberland Employee's Pension Plan and Trust ("Cumberland Pension"), through a transfer to Madoff in the amount of $2 million in 2002, and an additional transfer in the same amount in 2004, for an investment totaling $4 million. Cumberland also made separate investments with Madoff beginning in 2005 with two wire transfers of $2 million and $2.3 million and signed a customer agreement and a separate release authorizing Madoff, as its agent and attorney in fact, to buy, sell and trade securities on its behalf. Cumberland made an additional transfer to Madoff in the amount of $3 million in 2007. Cumberland is seeking to recover its entire total investment, claiming that losses due to Madoff amounted to $7.3 million for Cumberland and $4 million for Cumberland Pension, for a total of $11.3 million in losses.

Defendant Vigilant issued a policy of insurance ("Policy") to plaintiff effective from February 1, 2008 to February 1, 2009 (Exhibit 2 to Motion) naming Cumberland Packing Corp. as the "Parent Corporation" in the Policy. The complaint alleges that Cumberland has been insured under the Policy or a substantially similar predecessor policy since at least 1999. All parties agree that the Policy also provides coverage for plaintiff's affiliates, including Cumberland Pension. On December 11, 2008, Madoff was arrested by the Federal Bureau of Investigation and criminally charged in federal court in New York.^[FN2] Cumberland submitted a notice of claim dated December 22, 2008 to Vigilant, seeking coverage for a claimed loss due to Madoff's theft (Exhibit 3 to Motion). On March 4, 2009, plaintiff, by its counsel Gregg Kander, Esq. from Buchanan Ingersoll & Rooney, sent a letter to Andrew Schutzman, Vigilant's insurance representative, which purported to respond to a January 7, 2009 request from Chubb for additional information. The March 4, 2009 letter included a copy of the "Customer Claim" filed by Cumberland with Irving Picard, Esq., the Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC (Exhibit 4 to Motion).

In its Customer Claim, Cumberland claimed that it and Cumberland Pension had lost $11.3 million by investing with Madoff and was entitled to recover those losses through the Policy. Cumberland's Policy with Vigilant contained a "Crime Non-Liability Coverage Section" ("Crime Coverage Section") (Exhibit 2 to Motion). The Crime Coverage Section contained nine insuring clauses with varying limits of liability, designed to protect Cumberland and its affiliates from exposure to a range of criminal activity. Plaintiff claims that is entitled to recovery under four separate insuring clauses: the "Employee Theft" insuring clause, with a $3.5 million limit of [*3]liability, the "Funds Transfer Fraud" insuring clause, with a $1 million limit of liability, the "Premises" insuring clause, with a $250,000 limit of liability, and the "Computer Fraud" insuring clause, with a $1 million limit of liability.^[FN3]

On April 8, 2009, Patricia Duffy, an Assistant Vice President of Chubb, responded to plaintiff's March 4, 2009 letter, denying Cumberland coverage under the Computer Theft insuring clause, the Fund Transfer Fraud insuring clause and the Premises insuring clause, but approving a payment of $3.5 million under the Employee Theft insuring clause, due to Madoff's status as an "Employee" of Cumberland Pension (Exhibit 6 to Motion). On or about May 18, 2009, Vigilant delivered and Cumberland accepted a check for $3.5 million.

Plaintiff now seeks to recover the $7.3 million balance of losses incurred. In its complaint, Cumberland brings separate declaratory judgment claims seeking indemnification for its losses and breach of contract claims for each of the three transfers it made to Madoff in 2005 and 2007. Vigilant argues that plaintiff's $7.3 million claim is barred on multiple grounds, including: a) Vigilant has already paid plaintiff $3.5 million, which constitutes the limit for the Employee Theft coverage to which plaintiff is entitled b) plaintiff is not eligible for coverage under any other insuring clause and is also barred from recovering under multiple insuring clauses for the same loss c) the Policy bars plaintiff from seeking multiple recoveries for losses incurred as a result of the actions of one individual, regardless of the number of years, the number of insureds or the number of transactions involved in the loss and d) the Policy precludes coverage for any loss due to the unlawful taking of money by those to whom the insured has entrusted or delivered money.

Defendants move to dismiss pursuant to CPLR 3211 (a) (1) and (7). Under CPLR 3211 (a) (1), dismissal is warranted if a defense based upon documentary evidence exists, but only if the documentary evidence submitted, conclusively establishes a defense to the asserted claims as a matter of law (see Leon v Martinez, 84 NY2d 83, 87, 614 NYS2d 972 [1994]) and resolves all factual issues as a matter of law, conclusively disposing of the plaintiffs' claim (Forftis Fin. Servs., LLC v Fimat Futures USA, Inc., 290 AD2d 383, 383, 737 NYS2d 40 [1st Dept 2002]).

In support of its motion, defendants submit, inter alia, the Policy, its Customer Claim and a copy of the $3.5 million cancelled check as documentary evidence providing a definitive bar to plaintiff's claims.

"As with any contract, unambiguous provisions of an insurance contract must be given their plain and ordinary meaning and the interpretation of such provisions is a question of law for the court" (White v Continental Cas. Co., 9 NY3d 264, 267 [2007] [citation omitted]). While any ambiguity in the insurance contract must be construed against the insurer as the drafter of the policy (see Guardian Life Ins. Co. of Am. v Schaefer, 70 NY2d 888, 890 [1987]), the plain meaning of the policy's language may not be disregarded in order to find an ambiguity where none exists (see Bassuk Bros. v Utica First Ins. Co., 1 AD3d 470, 471 [2d Dept 2003]). "Generally, when an insurer wishes to exclude certain coverage from its policy obligations, it must do so in clear and unmistakable language" (Gaetan v Firemen's Ins. Co. of Newark, 264 [*4]AD2d 806, 808 [2d Dept 1999]; see Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 311 [1984]).

The contract unambiguously establishes that Vigilant's determination of coverage, based upon the definition of "Employee" set forth in the Employee Theft insuring clause, was correct and that plaintiff was entitled to recover the maximum amount under the insuring clause for its affiliate, Cumberland Pension. The insuring clause states: "[t]he Company [Vigilant] shall pay the Parent Corporation [Cumberland] for direct loss sustained by an Insured [Cumberland or Cumberland Pension] resulting from Theft or Forgery committed by an Employee acting alone or in collusion with others" (id.). The Employee Theft insuring clause has a limit of liability of $3.5 million (id.). "Employee" is defined in the Policy as any:

(1) natural person in the regular service of an Insured Organization in the ordinary course of such Insured Organization's business, whom such Insured Organization governs and directs in the performance of such service, including any part-time, seasonal, leased and temporary employees as well as volunteers;

(2) Executive while performing acts within the scope of the usual duties of an Employee; or

(3) natural person fiduciary, trustee, administrator or Employee of a Sponsored Plan and any other natural person required to be bonded in connection with such Sponsored Plan by Title 1 of the Employee Retirement Income Security Act of 1974, as amended ["ERISA"].

(id.). Both Cumberland and Vigilant agree that Cumberland Pension was a "Sponsored Plan" under the Policy, which caused Vigilant to pay $3.5 million to Cumberland Pension for the losses sustained under the Crime Coverage Section (Exhibit 5 to Motion). Defendant Vigilant also does not dispute that, for the purposes of Cumberland Pension, because Cumberland Pension was required under ERISA to be bonded as a Sponsored Plan, Madoff should be considered an Employee under the third clause in the definition of Employee.

Section VIII of the Crime Coverage Section, entitled "Limits of Liability," reads:

(A) The Company's maximum liability for each loss shall not exceed the Limit of Liability applicable to such loss, as set forth in Item 2 of the Declarations of this Coverage Section, regardless of the number of Insureds sustaining the loss.

(B) If a direct loss is covered under more than one Insuring Clause, the maximum amount payable under this Coverage Section shall not exceed the largest applicable Limit of Liability of any such Insuring Clause

(C) All loss resulting from a single act or a number of acts of the same Employee or Third Party, and all loss, whether such act or acts occurred before or during the Policy Period, will be treated as a single loss and the applicable Limit of Liability of this Coverage Section will apply, subject to Section VII Liability for Prior Losses.

Here, under the clear language of the Policy, pursuant to clause (A), defendant Vigilant is only liable for a maximum of $3.5 million in the event of Employee Theft, regardless of the [*5]number of Insureds suffering the loss, because that is the limit of liability for Employee Theft set forth in Item 2. That means that even if Cumberland and Cumberland Pension both sustained a loss, Cumberland, as the policyholder, can not recover more than the maximum limit of the applicable insuring clause. Plaintiff, in fact, denies that it is seeks to differentiate between Cumberland and Cumberland Pension for the purposes of determining coverage.

Pursuant to clause (B), should a loss be covered by more than one insuring clause, defendant Vigilant was liable only for the maximum amount payable under the largest limit of liability. In this case, the $3.5 million limit of liability for Employee Theft is the maximum amount payable under the insuring clauses contained in the Crime Coverage Section. Because the maximum limits of liability for the other insuring clauses are all substantially less than the maximum limit of liability for Employee Theft, Cumberland has been compensated to the maximum allowable.

Pursuant to clause (C), because all of the losses resulted from Madoff's acts, a single Employee, all transfers to Madoff constitute a single loss. Thus, Cumberland's claim, that it is entitled to coverage under the Employee Theft insuring clause for multiple individual losses under the theory that each transfer of funds from Cumberland and Cumberland Pension to Madoff constituted a separate theft by Madoff and a separate, defined loss, is without basis. In support of its argument that multiple losses occurred, plaintiff further claims that the Employee Theft was not conducted by Madoff alone, but that Madoff was assisted by others, and lists several indicted and convicted co-conspirators. Defendants argue that the co-conspirators were acting as Madoff's agents at his instruction. However, in this particular scenario, acting with co-conspirators has no bearing on the Employee Theft insuring clause because the clause expressly covers any "loss sustained by an Insured resulting from Theft or Forgery committed by an Employee acting alone or in collusion with others (Exhibit 2 to Motion) (emphasis added). Plaintiff readily states that "Madoff and / or one or more third parties working in league with him, fraudulently transferred funds out of the Cumberland investment account at [Madoff's offices]" (Cumberland's opposition to Motion to Dismiss at 4). Therefore, any losses caused by Madoff's collaboration with others falls under the Employee Theft insuring clause limitation as a single loss resulting from Madoff's theft. Because Vigilant already paid $3.5 million to Cumberland Pension for Cumberland Pension's losses due to Madoff's theft as an Employee, the limit of liability has been exhausted under the Employee Theft insuring clause and Vigilant is not obligated to pay Cumberland for any loss in excess of the $3.5 million limit of liability under the Policy (see Hosp. for Joint Diseases v State Farm Mut. Auto. Ins. Co., 8 AD3d 533, 534 [2d Dept 2004] ("[a]n insurer is not required to pay a claim where the policy limits have been exhausted")).

If additional coverage is not available under the Employee Theft insuring clause Cumberland seeks, in the alternative, coverage under the Premises, Computer Fraud, and Funds Transfer Fraud insuring clauses. All three of these insuring clauses are triggered only if the loss is caused by a Third Party (Exhibit 2 to Motion). Plaintiff cannot recover outside the Employee Theft provision upon the theory that Madoff was a third party since Section III of the Policy, entitled "Exclusions," precludes recovery for any "loss resulting directly or indirectly from any authorized or unauthorized trading of Money, Securities or Property, whether or not in the name of the Insured and whether or not in a genuine or fictitious account" excluding any loss incurred [*6]from Employee Theft (Section III (A) (1)). The section also precludes recovery for any "loss due to the unlawful taking of Money, Securities or Property, Computer Fraud or any other fraudulent, dishonest or criminal act . . . by any authorized representative . . . other than an Employee, provided that such authorized representative is not acting in collusion with any Employee" (Section III (A) (15)). Madoff was expressly authorized to act as plaintiffs' broker/agent. Moreover, the Policy defines "Third Party" as "a person other than an Insured or Employee" (Exhibit 2 to Motion). Madoff clearly was not the "Insured" as defined in the Policy. However, Madoff was an Employee under the Policy because of the definition of Employee under clause (3) of the Employee definition due to his status as "a natural person fiduciary, trustee, administrator or Employee" of Cumberland Pension. As plaintiff itself contended at oral argument and in its opposition papers, Madoff must be either an Employee or a Third Party; he cannot be both. Because the Policy provides coverage for Cumberland and all of its affiliates, if Madoff is an Employee of Cumberland Pension, he cannot, by the terms of the Policy, be a Third Party to Cumberland, and he certainly cannot be a Third Party to Cumberland Pension. Thus, because Madoff was an Employee under the terms of the Policy per clause (3), he is not a Third Party, and coverage is not available under the Premises, Computer Fraud, and Funds Transfer Fraud insuring clauses as a matter of law (CPLR 3211(a)(1); see Leon, 84 NY2d 83 at 87).

In any event, the facts of the loss do not comport with the definitions of coverage under Premises (taking of securities or money from the Premises of the insured or from Banking Premises (Crime Coverage Section I(B))), Computer Fraud (unauthorized violation or entry into a computer system (Crime Coverage Section I (E), II (C-E))), or Funds Transfer Fraud (unauthorized instruction to transfer money or securities from any account maintained by insured (Crime Coverage Section I(F), II (N)), for which recovery is precluded by the authorized representative exclusion contained in Section III (A) (1) and (15)).

Finally, Cumberland claims that its losses are covered not only by the existing Policy, but also by policies for which Cumberland had paid premiums in years prior, and that the Policy limits of liability should accumulate with such prior policies. This argument clearly contradicts the plain language of the Policy. Section VII, entitled "Liability For Prior Losses"provides:

(A) If the Loss Sustained option is purchased, as set forth in Item 3 of the Declarations for this Coverage Section:

(1) Coverage will be available for loss sustained prior to the inception date of this Coverage Section, or the effective date of coverage for any additional Insureds, or the effective date of any coverage added by endorsement, subject to the following: . . .

(2) If such prior bond or policy carried by the Insured or predecessor in interest of such Insured was issued by the Company or its affiliates, such prior bond or policy shall terminate as of the inception of this Coverage Section and such prior bond or policy shall not cover any loss not discovered and noticed to the Company prior to the inception of this Coverage Section; and

(3) The Insured shall neither be entitled to a separate recovery under each policy in force at the time any part of the prior loss was sustained, nor shall the Insured be entitled to recover the sum of the limits of liability of any such policies. The Company's maximum liability for the [*7]prior loss shall not exceed the lesser of either the limit of liability of the policy immediately preceding this Coverage Section under which part of the prior loss was sustained, or the applicable Limit of Liability as set forth in the Declarations of this Coverage Section. (Exhibit 2 to Motion).

Section IX, entitled "Non-Accumulation of Liability," provides:

(A) When there is more than one Insured, the maximum liability of the Company for loss sustained by one or all Insureds shall not exceed the amount for which the Company would be liable if all losses were sustained by any one Insured.

(B) Regardless of the number of years this coverage remains in effect and the total premium amounts due or paid, the amount the Company shall pay for any loss shall not be cumulative from year to year or from Policy Period to Policy Period."(Exhibit 2 to Motion).

Section VII, when read in conjunction with Section IX, precludes the relief being sought by Cumberland in this case: recovery of claims under previous policies issued by the defendant Vigilant. Clause (A)(2) of Section VII clearly states that any prior policies issued by the defendant terminate upon commencement of the present Policy at issue and that there will be no coverage under any previous policy that had not been discovered and noticed to the defendant Vigilant upon commencement of this Policy. Furthermore, clause (A)(3) of Section VII and clause (B) of section IX expressly serves to prevent any separate or additional recovery under another policy or accumulation of limits of liability under prior policies and the existing Policy. Therefore, Cumberland's claim for coverage under the theory of prior losses under prior policies is without merit under the plain and ordinary meaning of the Policy (see P.J.P. Mech. Corp. v Commerce and Indus. Ins. Co., 65 AD3d 195, 198 [1st Dept 2009]).

Given that the documentary evidence provided clearly bars Cumberland from recovering additional money under the Policy, defendants' motion to dismiss pursuant to CPLR 3211 (a) (1) is granted. Cumberland's remaining claim for punitive damages is dismissed and defendants' remaining arguments, pursuant to 3211 (a) (7) need not be addressed. In any event, Cumberland's claim for punitive damages would not be appropriate upon its breach of contract claims (see Rocanova v Equitable Life Assur. Soc. of U.S., 83 NY2d 603,613, 612 NYS2d 33 [1994] (punitive damages meant to vindicate public rights and are not generally recoverable upon a private breach of contract)).

The foregoing constitutes the Decision and Order of the Court.

E N T E R,

Carolyn E. Demarest

J. S. C.