The opinion of the court was delivered by: Robert C. Jones United States District Judge
This case arises out of an insurer's refusal to pay benefits under an executive protection policy. Before the Court is Defendant's Motion for Summary Judgment (ECF No. 30). For the reasons given herein, the Court denies the motion.
FACTS AND PROCEDURAL HISTORY
Plaintiff Orgill/Singer & Associates, Inc. ("Orgill") used non-party Lakes Payroll, Inc. ("Lakes") to process its payroll from 2001 until 2011. (First Am. Compl. ¶¶ 2, 11, Aug. 28, 2012, ECF No. 19-1). From 2009 to 2011, non-party Deborah DiFrancesco (the sole proprietor, officer, and director of Lakes) perpetrated a fraudulent scheme to embezzle Orgill's Money by forging and altering Electronic Federal Tax Payment System ("EFTPS") transfers to the IRS, i.e., computer-generated EFTPS transfers to reduce or eliminate the actual payments to the IRS and embezzling the difference from Orgill. (Id. ¶¶ 12--14). DiFrancesco embezzled over $650,000 in this manner, and Lakes reimbursed Orgill for only $200,000, resulting in a loss to Orgill of over $450,000. (Id. ¶ 15).
Orgill was insured under a $1 million Executive Protection Policy No. 8185-5233 (the "Policy") with Defendant Federal Insurance Co. ("Federal") from May 20, 2011 to May 20, Id. ¶¶ 1, 16, 35). The fourth of five insuring agreements in the Policy states:
[Federal] shall be liable for direct losses caused by forgery or alteration of, on or in any check, draft, promissory note, bill of exchange, or similar written promise, order or direction to pay a certain amount of money, made or drawn by, or drawn upon [Orgill], or made or drawn by one acting as agent of [Orgill], or purporting to have been made or drawn as set forth above . . . . ¶ 17). The Policy contains eleven general exclusions applying to each of the five insuring Id. ¶ 19). Orgill argues that none of the general exclusions apply to its claim based upon Lakes's embezzlement. (See id.). The two additional exclusions applicable to the fourth insuring agreement for "Depositor's Forgery" are as follows:
(A) Any instrument, if such forgery or alteration is committed by any: Employee or by any person in collusion with any Employee; or
(B) Any registered or coupon obligations issued or purported to have been issued by [Orgill] or any coupons attached thereto or detached therefrom. ). Contrary to the exclusions in the Policy applicable to each of the other four insuring agreements therein, the exclusions to the Depositor's Forgery insuring agreement do not apply to
Orgill's "authorized representative." (Id. ¶ 20). Rather, the Depositor's Forgery insuring agreement specifically covers acts by those acting or purporting to act as Orgill's agent. (Id.).
Orgill tendered its demand to Federal based upon the Lakes embezzlement on August 9, Id. ¶ 22). Federal "denied coverage" in a September 16, 2011 letter because the loss did not involve an employee. (Id. ¶ 23). However, Federal accepted Lakes's own claim under Lakes's own similar policy with Federal based upon the $200,000 Lakes reimbursed to Orgill, ¶ 15), to ameliorate the losses DiFrancesco had caused to Orgill, (see id. ¶ 32).
The last few paragraphs of the First Amended Complaint ("FAC") present a complex of bad faith. (See id. ¶¶ 29--37). Orgill appears to argue that Federal is guilty of bad faith with respect to Orgill, because Federal denied Orgill's claims under the Policy while at the same Lakes's claim under its own policy based upon DiFrancesco's embezzlement of Orgill's money on behalf of Lakes, which Federal knew was a sole proprietorship of DiFrancesco See id.).
Orgill sued Federal in this Court. The FAC lists two causes of action: (1) breach of contract; and (2) insurance bad faith. Defendant has moved for summary judgment.
A court must grant summary judgment when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Material facts are those which may affect the outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. See id. A principal purpose of summary judgment is "to isolate and dispose of ...