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National Retail Systems, Inc. v. Markel Insurance Co.

United States District Court, E.D. Pennsylvania

April 25, 2018

NATIONAL RETAIL SYSTEMS, INC., et al.
v.
MARKEL INSURANCE COMPANY

          MEMORANDUM

          R. BARCLAY SURRICK, J.

         Presently before the Court in this insurance coverage dispute is Defendant Markel Insurance Company's (“Markel”) Motion to Compel Supplemental Discovery Responses (ECF No. 32). For the following reasons, the Motion will be granted in part and denied in part.

         I. FACTUAL AND PROCEDURAL HISTORY [[1]]

         The parties' dispute involves a Commercial Crime Policy issued by Markel to Plaintiff National Retail Systems, Inc. (“National Retail”) as the Named Insured. (Policy, Declarations, ECF No. 1-1.) Plaintiff Keystone Freight Corporation (“Keystone”) and a number of other entities are additional insureds under the Policy pursuant to Endorsement 1. (Policy, Endmt. 1.) Among the Policy's Insuring Agreements is one for Employee Theft, which provides, in relevant part:

[Markel] will pay for loss of or damage to “money”, “securities” and “other property” resulting directly from “theft” committed by an “employee”, whether identified or not, acting alone or in collusion with other persons.

(Policy § A.1.)

         Plaintiffs allege that during a several month period in 2015 and 2016, two employees of Keystone, Richard Joseph Allen (“Allen”) and Brian Keith Allison (“Allison”), acting under false pretenses and without permission, sold approximately seventy trailers and miscellaneous scrap metal owned by Keystone Freight and kept the proceeds. (Compl. ¶¶ 13-17, ECF No. 1.) Plaintiffs allege that Allen's and Allison's theft caused National Retail and Keystone to sustain a loss in excess of $75, 000. (Compl. ¶ 18.) National Retail reported the theft to the authorities, and Allen and Allison subsequently pled guilty to the resulting charges. (Id. ¶¶ 19-21.)

         On or about April 26, 2016, National Retail notified Markel of the loss and sought coverage under the Policy. (Id. ¶¶ 22-24.) By letter dated July 21, 2006, Markel denied coverage based on the following Policy exclusion (the “Prior Act Exclusion”):

         D. Exclusions

1. This Policy does not cover:
* * *
b. Acts Committed By Your Employees Learned Of By You Prior To The Policy Period.
Loss caused by an “employee” if the “employee” had also committed “theft” or any other dishonest act prior to the effective date of this Policy and you or any of your partners, “members”, “managers”, officers, directors or trustees, not in collusion with the “employee”, learned of such “theft” or dishonest act prior to the Policy Period shown in the Declarations.[2]

(Disclaimer Ltr., ECF No. 1-4; Policy § D.1.b.) In its denial letter, Markel stated that the Prior Act Exclusion bars coverage because:

[T]he employee involved in the loss, Brian Allison had a criminal record prior to this loss. The public criminal records for Brian Allison show a previous felony and two misdemeanors. He also committed a dishonest act while in your employment in 2004.

(Disclaimer Ltr. 2.)[3]

         On February 14, 2017, Plaintiffs filed a Complaint against Markel alleging that its denial of coverage constitutes a breach of contract. (Compl. ¶¶ 31-35.) On March 7, 2017, Markel filed an Answer to the Complaint (ECF No. 3). On March 24, 2017, Markel filed a Motion requesting a transfer of venue to the United States District Court for the District of ...


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