GERARD E. LYNCH, Circuit Judge:
This case requires us to decide whether a particular criminal act constituted "robbery" within the meaning of a crime insurance policy. Because we agree with the district court that the policy is ambiguous and that the insured offers a reasonable interpretation of the policy permitting coverage, we conclude that the insurer is liable under the policy and therefore affirm the district court's grant of summary judgment to the insured.
Plaintiff-appellee VAM Check Cashing Corp. ("VAM" or "the insured") operates a number of check cashing stores in the New York City area, including Pine Check Cashing in Brooklyn, New York. VAM purchased a crime insurance policy ("Policy") from defendant-appellant Federal Insurance Company ("Federal" or "the insurer").
During the pendency of the Policy, a group of criminals successfully tricked a Pine Check Cashing employee, Romanita Vazquez, into turning over $120,000 in cash to them. The parties do not dispute the facts of the scheme, which are detailed principally in Vazquez's three-page statement prepared after the crime.
Some time before noon on September 2, 2009, Vazquez received a phone call from a woman claiming to be the wife of VAM's owner. Over the course of a wide-ranging chat, the caller told Vazquez that her husband was opening three new check cashing stores, including one in Manhattan that very day. During this call, Vazquez received a second call from another woman who identified herself as the manager of the newly opened Manhattan store. The second caller said that a government official had arrived at the new store to collect a tax bill, but because the store had just opened, it had insufficient cash on hand to pay the bill. Vazquez relayed this information to the original caller, who told Vazquez that a man named Windfrey would come to Pine to collect the $100,000, and that she would be able to identify him by his use of a code number. Later, the original caller increased the amount to $120,000, and Vazquez placed that amount in a box.
Eventually, a man who identified himself as Windfrey came into the store. He offered the pre-arranged code number, and Vazquez buzzed him into the back of the store. She then handed him a box containing the $120,000 in cash, and he left. As noted by the district court, Vazquez testified at her deposition that she "never felt threatened by Mr. Windfrey," and at the time, "she did not believe he was dangerous or a thief." Vam Check Cashing Corp. v. Fed. Ins. Co., 787 F.Supp.2d 264, 267 (E.D.N.Y.2011).
After the loss, VAM made a claim under the Policy, asserting that the crime was covered under the Policy's definition of "robbery." In January 2010, however, Federal gave final notice that it denied the claim. Further negotiations between the parties to settle the claim were unsuccessful, and VAM then sued in the United States District Court for the Eastern District of New York (Jack B. Weinstein, District Judge) for breach of contract, claiming damages of $112,500 (the $120,000 loss less the Policy's $7500 deductible). The facts being essentially undisputed, the parties filed cross motions for summary judgment. On May 25, 2011, the district court granted summary judgment to VAM. Vam Check Cashing Corp., 787 F.Supp.2d 264. Federal appeals.
The parties do not dispute the material facts underlying the claim. The case thus turns on the interpretation of the insurance contract. Because interpretation of an insurance agreement is a question of law, we review the district court's construction of the Policy de novo. See, e.g., Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 411 F.3d 384, 388 (2d Cir.2005). The parties agree that New York law governs this diversity action because New York is the "center of gravity" of the dispute. See Lazard Freres & Co. v. Protective Life Ins. Co., 108 F.3d 1531, 1539 (2d Cir.1997) (noting that New York federal courts must apply New York State's choice-of-law principles, including the "center of gravity" test for contract actions).
Under New York insurance law, the plain language of an insurance policy, read "in light of `common speech' and the reasonable expectations of a businessperson," Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d 377, 763 N.Y.S.2d 790, 795 N.E.2d 15, 17 (2003), will govern if the language is unambiguous. See, e.g., Fieldston Prop. Owners Ass'n, Inc. v. Hermitage Ins. Co., 16 N.Y.3d 257, 920 N.Y.S.2d 763, 945 N.E.2d 1013, 1017 (2011). In construing the policy consistent with these dictates,
Fed. Ins. Co. v. IBM, 18 N.Y.3d 642, 942 N.Y.S.2d 432, 965 N.E.2d 934, 936 (2012) (internal citations, brackets, and quotation marks omitted). "Whether a contract is ambiguous is a question of law...." S. Road Assocs., LLC v. IBM, 4 N.Y.3d 272, 793 N.Y.S.2d 835, 826 N.E.2d 806, 809 (2005).
The basis for VAM's claim under the Policy, and thus for its breach of contract action for failure to pay that claim, is that the events of September 2, 2009 fell within the Policy's "Robbery" clause. The Policy states in relevant part that "[Federal] shall be liable for direct losses: ...
The parties agree that Vazquez was an "Employee" and was not "acting as a watchman, porter or janitor." The parties also agree that "Windfrey"
Because the parties also agree that the acts constituted the "unlawful taking of insured property," the only dispute is about the final phrase in the shortened definition: whether the unlawful taking by Windfrey and associates was an "[1] overt felonious act [2] committed in the presence and cognizance of" Vazquez.
[1] "Overt felonious act." Federal contends that "overt felonious act" must be read as a whole. It argues, in effect, that the adjective "overt" should be read to modify the entire phrase "felonious act," such that it covers only a "felonious act" whose felonious character is "overt." On that reading, though Windfrey's taking of the money was a "felonious act," and was "overt" in the sense that it was visible to Vazquez, it was not an "overt felonious act" because its felonious nature was not "overt," but covert. That is, while Vazquez knew that she was giving money to Windfrey and observed his taking it, she did not recognize that she was handing the money over to a criminal because the scheme proceeded by trickery.
VAM counters that Federal's interpretation might prevail if the Policy read "overtly felonious act," in which case the adverb "overtly" would clearly modify the adjective "felonious." But since the Policy uses two consecutive adjectives, VAM contends, both "overt" and "felonious" must each separately modify the noun "act." Thus, coverage is proper if Windfrey committed
We cannot say that either of these two readings is definitive. Federal's interpretation has the advantage, not argued by Federal, that it might better connect the phrase "or other overt felonious act" with the language that precedes it ("violence, [or] threat of violence") under the maxim of ejusdem generis. Federal's meaning might also be thought to come closer to the common law definition (and perhaps the ordinary understanding) of the word "robbery." See supra note 2. As we note above, however, the criminal law definition is not controlling in this contract dispute, and the definition for which Federal argues does not correspond to the criminal definition in any event. Nor is the connection between the criminal law meaning of robbery and the "overtly felonious" reading close enough to render the ejusdem generis argument especially persuasive. Finally, it cannot be said that Federal's proposed reading is grammatically impossible, or even simply incorrect. English usage is sufficiently flexible to admit Federal's use of an adjective to modify a noun phrase, even if more careful writers would use an adverb to express the intended meaning.
Nonetheless, VAM's reading is grammatically more natural, since it does not require an adjectival word to be read adverbially. VAM's reading thus has the advantage of respecting the plain (if strict) meaning of the contested phrase. Nor would VAM's proposed meaning render the word "overt" meaningless. In many forms of theft, the act of taking is itself covert; if, for example, Windfrey had grabbed a pile of cash and snuck it into his pocket while Vazquez's back was turned, his act itself (not simply the true nature of the act) would presumably be considered covert.
Thus, the meaning of the phrase "overt felonious act" is ambiguous standing alone. We therefore examine whether it can be clarified by the second contested phrase, "committed in the presence and cognizance of such person," or by the remaining textual context. See Fed. Ins. Co., 942 N.Y.S.2d 432, 965 N.E.2d at 936 (before finding ambiguity, reviewing court must first "decide whether, affording a fair meaning to all of the language employed by the parties in the contract and leaving no provision without force and effect, there is a reasonable basis for a difference of opinion as to the meaning of the policy") (internal quotation marks, citations, and brackets omitted).
[2] "Presence and cognizance." Though the parties agree that the taking occurred "in the presence of" Vazquez, they disagree on whether it occurred in her "cognizance." Federal argues that under a large set of cases interpreting similar language in crime insurance policies across the nation and over the course of many decades, "cognizance" should be "equated with awareness of the criminal nature of the underlying act." On this view, to meet the Policy's definition, the victim
The discussion of phrase [2] adds little to our analysis of phrase [1]. Neither party's reading better gives each phrase independent meaning. Instead, the key disagreement between the parties about the meaning of [2] is essentially identical to their disagreement about the meaning of [1]. Whether expressed as a difference about the meaning of "overt" or about the object of the employee's "cognizance," the dispute is the same: Federal contends that phrase [1] means the act's criminal character must be possible to observe, and that phrase [2] means the act's criminal character must be actually noticed.
The effect of ambiguity. With Federal's textual arguments exhausted, the ambiguity remains. As mentioned above, New York follows the maxim of contra proferentem in insurance cases: where the plain language of a policy permits more than one reasonable reading, a court must adopt the reading upholding coverage. See Haber v. St. Paul Guardian Ins. Co., 137 F.3d 691, 697-98 (2d Cir.1998) (describing New York law). As the Supreme Court of Arkansas memorably put it, in language long ago embraced by the New York Court of Appeals,
Equitable Life Assurance Soc'y of U.S. v. Dyess, 194 Ark. 1023, 109 S.W.2d 1263, 1265 (1937), quoted in Hartol Prods. Corp.
Because the plain text of the Policy does not resolve this case, VAM must prevail if it has provided us a reasonable reading permitting recovery. It has. Under VAM's overall reading of the Policy provision at issue, the insured will recover for "robbery" whenever property is taken from an employee by means of an observable act that amounts to a felony, provided that the act occurs in the presence of the employee and the employee is aware of the act's occurrence. But the employee need not be aware that the act itself is felonious. As we have already explained, this interpretation is at least as plausible a reading of the language as that provided by Federal.
Precedent. VAM's reading accords with the result in the only case cited by either party that presents the precise question before us. In Schwegmann Bros. Giant Super Mkts. v. Underwriters at Lloyd's London, 300 So.2d 865 (La.Ct.App.1974), a Louisiana intermediate appellate court upheld coverage under a similar crime insurance policy. A group of criminals had observed the time that an armored truck arrived each evening to pick up money from a supermarket. A few minutes before the genuine truck was scheduled to arrive, the crooks showed up in a fake truck with fake guards wearing convincing fake uniforms. The hapless employees freely and unwittingly handed over the money from the vault, and the scheme was uncovered when the real truck arrived on time fifteen minutes later. Id. at 866-67. Thus, as in this case, theft was accomplished by a fraudulent act committed openly by the criminals such that the act itself was observable, but its felonious nature was not. The insured's employees were fully cognizant of the criminals' actions, but oblivious to the actions' felonious quality.
The insurance policy at issue in Schwegmann was quite similar to the one at issue here: it defined "robbery" to mean, inter alia, "a felonious and forcible taking of property" by violence, threat of violence, or "by any other overt felonious act committed in the presence of a custodian and of which he was actually cognizant, provided such overt act is not committed by an officer or employee of the Assured." Id. at 867 (emphasis added). There, as here, the insured argued that "the proper interpretation of this clause is that the custodian must be aware of the act of taking but it is not required that the custodian know at the time of the taking that the overt act is in fact or law felonious," while the insurance company argued "that the custodian [must] know at the time of its occurrence that the overt act is of a felonious nature." Id. at 867-68. The court held that the plain language of the policy required coverage, since:
Id. at 868. No contemporaneous awareness of the act's criminal nature was required: there, as here, the employee both observed the act itself and eventually became aware of the felonious character of the act. We need not hold, as the Schwegmann court did, that the insured's reading is the best one. But we find it persuasive that a court faced with similar language and similar facts upheld coverage. VAM's analogous reading under analogous facts is at least reasonable; in light of the ambiguity
The cases cited by Federal are less germane to the problem before us. First, Federal argues that a number of New York cases have interpreted policies containing language similar to that at issue here without finding ambiguity. But those cases do not present sufficiently similar facts to be helpful here. The same textual provision may apply clearly to one set of facts but unclearly to others. Cf. Gen. Assurance Co. v. Schmitt, 265 A.D.2d 299, 696 N.Y.S.2d 72, 75 (2d Dep't 1999) ("[T]he circumstances particular to each case must be considered in construing the meaning of the term."). For example, Buffalo Smoketeria, Inc. v. Metropolitan Casualty Insurance Co. of New York, 143 Misc. 894, 258 N.Y.S. 581 (Sup.Ct.Erie County 1932), tested a different question — the definition of "in the presence of" under a similarly worded policy. And the opinion in Lorenz v. Indemnity Insurance Co. of North America, 197 Misc. 21, 94 N.Y.S.2d 25 (App.Term 1st Dep't 1949), is so brief and cryptic as to be entirely unenlightening.
Second, Federal cites a number of cases from other jurisdictions in favor of its reading. But again, and in contrast to Schwegmann, these cases involve thefts in which the act itself was covert, and thus do not address the key dispute between the parties: whether the act itself, or its criminal nature, must be apparent to, and observed by, the insured's employee at the time of its occurrence. Schwegmann is the only cited case applying a similarly worded policy on facts where an agent of the insured observes the act, but not its criminal nature.
Thus, for example, in Jones v. Auto Owners Insurance Co., 43 Ala.App. 101, 180 So.2d 145 (1965), a jewelry store clerk felt something was amiss after a group of shoppers left, and after investigation discovered that watches and rings were missing. But the clerk could not have observed, and did not observe, the legerdemain by which the property was taken (that is, the felonious act). As the Jones court stated,
Id. at 151-52. Although the Jones court denied coverage under a policy with similar language, the insured's agent in that case observed neither the act nor its felonious character, and the case is therefore unhelpful here. Much the same is true of Still v. Great Central Insurance Co., 122 Ga.App. 99, 176 S.E.2d 268 (1970), in which no one saw a bag of cash being removed from underneath the counter, and Ashcraft v. United States Fidelity & Guaranty Co., 255 S.W.2d 485 (Ky.1953), in which the insured's agent "was not aware or, as the policy states it, `actually cognizant', of any act involving the abstraction of the $807 from his person," id. at 486, since he was aware only that he had been jostled by a group of men while they were all apparently trying to break up a fight between two dogs.
Finally, it is clear that the theft here falls within VAM's proposed reading of the Policy. Federal offers little analysis of which "act" (or acts) should be considered relevant. But since the act must effect an
The district court correctly held that the Policy's language was ambiguous and that VAM presented a reasonable reading permitting coverage. We therefore AFFIRM the district court's judgment.
