(Court rejected plaintiff's theory that discovery of loss only occurs when insured has actual facts from which amount of loss can be estimated). For these reasons, we find that Plaintiffs' own evidence proves that at the very least, they discovered a situation that may have resulted in loss in 1990.
Plaintiffs argue that even if this Court finds, as it has, that they discovered a situation that may result in loss as early as 1990, that this finding is not fatal to their suit under Pennsylvania law. Brakeman v. Potomac Insurance. Co., 472 Pa. 66, 371 A.2d 193 (1977) established the rule that when an "insurance company seeks to be relieved of its obligations under a liability insurance policy on the ground of late notice, the insurance company will be required to prove that the notice provision was in fact breached and that the breach resulted in prejudice to its position." Id. at 76-77, 371 A.2d at 198. The rule has recently been applied by this Court. In re Lloyd Secs., Inc., 153 Bankr. 677, 683 (E.D. Pa. 1993).
Plaintiffs argue that Continental has not demonstrated that it suffered prejudice from any late notice. First, they assert that because Continental has consistently denied that Plaintiffs are insured under the Policy, early notice would have made no difference because Continental would just have ignored their claims for a longer period of time. Second, they argue that when Continental did receive notice they took almost no action, but only appointed an outside investigator. Plaintiffs do not argue that this is inadequate generally, but assert that here, that was Continental's sole action. Further, the outside investigator never interviewed Hayman about his alleged dishonesty or requested any information from Plaintiffs beyond what they initially supplied. Nor has Continental's internal adjuster done any follow-up on the outside investigator's progress or become aware of the nature of that investigation. Indeed, the internal adjuster has not yet made a coverage determination on the Employee Dishonesty claims and does not know when she will. Finally, Continental never physically inspected Northwood, even when warned that repairs were imminent and that evidence of loss would thereby disappear. Plaintiffs allege that these facts demonstrate that even if they had received early notice they would have not timely investigated, and so there is no prejudice now. Hatco Corp. v. W.R. Grace & Co., 801 F. Supp. 1334, 1372 (D.N.J. 1992) (failure to "diligently pursue a factual investigation after its receipt of untimely notice militates against a finding that [the insurer] would have done so had timely notice been provided").
Continental argues that the late notice has prejudiced it in two ways. First, if Plaintiffs had promptly notified it of the potential for loss in 1990, the subsequent losses could have been avoided. Second, the late notice denied Continental a timely investigation. Metal Bank v. Insurance Co., 360 Pa. Super. 350, 520 A.2d 493, app. denied, 517 Pa. 607, 536 A.2d 1332 (1987).
We find that Continental has shown prejudice. If Hubbert or Nursecare had reported a situation that may result in loss in 1990, the losses incurred after that point may have been avoided. If Continental is ultimately responsible to make good those losses, it is certainly prejudiced by having to pay more than it could have were the theft nipped in the bud.
We turn now to Plaintiffs' final argument, that the contractual two-year suit limitation was equitably tolled during Hayman and Realty-Vest's tenure at Northwood. As applied by this Court, the theory of adverse domination permits a statute of limitations to be equitably tolled "'during the period that a plaintiff corporation is controlled by wrongdoers.'" In re Lloyd Secs., 153 Bankr. at 684 (quoting RTC v. Gardner, 798 F. Supp. 790, 795 (D.D.C. 1992)). This theory is generally considered a part of the discovery rule and is used because controlling wrongdoers "'are unlikely to initiate actions or investigations for fear that such actions will reveal their own wrongdoing,'" nor will outsiders generally have access to the facts from which they could discover the fraud. Id. ; see also Admiralty Fund v. Peerless Ins. Co., 143 Cal. App. 3d 379, 389, 191 Cal. Rptr. 753 (1983). Plaintiffs argue that Hayman and Realty-Vest adversely dominated Northwood and so they were unable to discover the fraud. Because of this, they assert, we should toll the two-year limit and permit this suit.
This argument would be successful for Plaintiffs if they had demonstrated that they had no access or no meaningful access to Northwood's financial records. In fact, however, Plaintiffs' own evidence demonstrates that this was not the case. Hubbert testified that Nursecare had the right to receive financial records and reports, and did receive them, albeit often late. Hubbert Dep. at 77, 187. From these, Nursecare's Controller was able to create ledger statements that revealed misappropriated and missing funds. Id. at 77, 664. Because of this access, we find that Northwood was not so adversely dominated as to permit application of the adverse dominion theory.
This is a motion for summary judgment, and as such, Plaintiffs' evidence must be given credence and all inferences drawn in their favor. Anderson, 477 U.S. at 248. We find, however, that a reasonable jury could only find that Plaintiffs discovered at least a "situation that may result in loss" by 1990. The only evidence to the contrary, portions of Hubbert's deposition and affidavit wherein he avers that he did not believe that Hayman was dishonest until 1993, amounts to only a "mere scintilla." Id. Therefore, it is insufficient to create a genuine issue of material fact. Martin v. Merrell Dow Pharms., Inc., 851 F.2d 703, 706 (3d Cir. 1988). Taking Plaintiffs' evidence as true, we find that they had objective knowledge of at least a situation that may result in loss beginning in 1990, and therefore were required to give Continental notice as soon as possible and bring suit within two years. They did not and Continental was prejudiced. For all the above reasons, we grant summary judgment in Defendant's favor on all Plaintiffs' claims.
An appropriate Order follows.
AND NOW, this 20th day of October, 1995, upon consideration of Defendant's Motion for Summary Judgment and responses thereto, the Motion is hereby GRANTED.
BY THE COURT:
J. CURTIS JOYNER, J.