News & Events

Skarzynski Black Wins Summary Judgment On Crime Coverage

March 22, 2017
Skarzynski Black attorneys Alexis J. Rogoski and Jonathan A. Sorkowitz, representing Scottsdale Insurance Company, obtained summary judgment in the U.S. District Court for the Central District of California against Commercial Ventures, Inc., a real estate investment firm with interests in the apparel business, which was claiming insurance coverage under the Crime Coverage section of a Business and Management Indemnity Policy. 

Commercial Ventures claimed that its affiliate Noblita LLC had suffered losses from theft by Noblita’s President, Richard Guido.  Scottsdale denied coverage on the basis that Mr. Guido, who was also a 49% owner of the company, was not an Employee, as defined in the Policy.  The Policy’s definition of Employee requires that the perpetrator of the alleged theft be compensated directly by salary, wages or commissions.  Noblita’s Operating Agreement specified that Mr. Guido would not be paid for his services, but would be granted a monthly distribution from the earnings of the entity under certain circumstances. 

Skarzynski Black, on behalf of Scottsdale, persuaded the Court that under the definition of Employee in the Policy, those distributions did not constitute a salary, wages, or commissions.  While the parties offered different dictionary definitions of the terms salary, wages, or commissions, both sides agreed that those terms require compensation for services.  Applying California’s canons of contract interpretation, the Court accepted Scottsdale’s proffered interpretation of Noblita’s Operating Agreement, which it found gave meaning to all the parts of the agreement, and held Mr. Guido was not paid for his services.  The Court also noted that additional evidence beyond the Operating Agreement supported Scottsdale’s position as Mr. Guido’s personnel file did not contain W-2s or W-4s.

The case is Commercial Ventures, Inc. v. Scottsdale Insurance Company, No. 15-cv-08359-BRO-AFM.  The summary judgment opinion can be found at Dkt. No. 100.

To review the decision, click here.