SCHURR

v.

AIG PROPERTY CASUALTY COMPANY

Kenneth B. Schurr, Plaintiff, ) ) v. ) Civil Action No. 21-20092-Civ-Scola )

AIG Property Casualty Company, ) Defendant. )

Order on Cross-Motions for Summary Judgment Plaintiff Kenneth B. Schurr brought this breach of contract action against Defendant AIG Property Casualty Company (“AIG”) after AIG denied coverage for a loss he claimed under his homeowner’s insurance policy. Both parties submitted motions for summary judgment (Pl.’s Mot., ECF No. 25; AIG’s Mot., ECF No. 19) and each party’s motion has been fully briefed. For the reasons below, the Court grants Mr. Schurr’s motion (ECF No. 25) and denies AIG’s motion (ECF No. 19). All other pending motions are denied as moot.

1.

Background On December 20, 2012, Mr. Schurr assumed a personal debt of $148,341.35. (Promissory Note, ECF No. 1-4.) In November 2019, Mr. Schurr wired $124,690.66 to an account at BB&T to pay that debt down. (See AIG’s Statement of Material Facts [“SOMF”] ¶ 7, ECF No. 20; Pl.’s SOMF ¶ 15, ECF No. 24.) About a month later, Mr. Schurr learned that the money he sent had not reached his creditor. Mr. Schurr had been duped. A fraudster impersonating the creditor had sent Mr. Schurr the wire instructions he used. (Corrected Aff. Kenneth B. Schurr, ECF No. 19 at 193; Pl.’s SOMF ¶ 16.) Mr. Schurr reported the event as a loss of $124,690.66 to AIG on December 23, 2019. (AIG’s SOMF ¶ 6; Pl.’s Am. Resp. to AIG’s SOMF ¶ 6, ECF No. 32.) Mr. Schurr’s policy includes AIG’s “Fraud SafeGuard” endorsement, which insures an event of “fraud, embezzlement, or forgery” up to $100,000 subject to a $250 deductible. (See AIG’s SOMF ¶ 2; Pl.’s SOMF ¶ 3.) It says: “We will pay you or a family member for loss of money, securities or other property up to the applicable Limits of Insurance shown in the schedule, resulting directly from fraud, embezzlement or forgery perpetrated against you or a family member during the Policy Period. The loss must be discovered not later than ninety (90) days from the end of the Policy Period." (emphasis in original) (AIG Policy 42, ECF No. 25-1; AIG’s SOMF ¶ 3; Pl.’s SOMF ¶ 4).

The policy defines “fraud or embezzlement” to include an “intentional perversion of truth by someone other than you or a family member perpetrated in order to induce you or a family member to part with something of value.” (emphasis in original) (AIG Policy 41).

And it defines “you” as “the person or persons named on the Declarations Page [i.e. Mr. Schurr] and his or her spouse who lives in the same household.” (AIG Policy 6.) After investigating Mr. Schurr’s claim, AIG denied coverage for three independent reasons.

First, it said that Mr. Schurr had not suffered a coverable loss because the funds were wired out of a bank account belonging to “‘the Law Offices of Kenneth B. Schurr, P.A.,’ a separate legal entity that was not insured by the Policy. . . .” (See Aff. of Kathleen Spinella ¶ 8, ECF No. 19 at 109.) Second, AIG said that “the loss was excluded from coverage due to the ‘Business Or Professional Services’ exclusion, which excludes ‘any loss arising out of a business or professional service engaged in by you or a family member.” (Id. at ¶ 9; AIG SOMF ¶ 4; Pl.’s Am. Resp. to AIG’s SOMF ¶ 4.) Third, it asserted that the event was also subject to the “‘Indirect Loss’ exclusion, which excludes any loss that is an indirect result of any fraud guard event.” (Aff. of Kathleen Spinella ¶ 9; AIG SOMF ¶ 4; Pl.’s Am. Resp. to AIG’s SOMF ¶ 4.) AIG renews those arguments now at the summary judgment stage.

2. Legal Standard

Summary judgment is proper if following discovery, the pleadings, depositions, answers to interrogatories, affidavits and admissions on file show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Fed. R. Civ. P.

56. This standard applies even where cross-

motions for summary judgment exist. See Cafe La Trova LLC v. Aspen Specialty Ins. Co., 519 F. Supp. 3d 1167, 1174 (S.D. Fla. 2021) (Altonaga, J.). “An issue of fact is ‘material’ if, under the applicable substantive law, it might affect the outcome of the case.” Hickson Corp. v.

N. Crossarm Co., 357 F. 3d 1256, 1259– 60 (11th Cir.2004). “An issue of fact is ‘genuine’ if the record taken as a whole could lead a rational trier of fact to find for the nonmoving party.” Id. at 1260. At the same time, contract interpretation is a matter of law that the Court decides “by reading the words of a contract in the context of the entire contract and construing the contract to effectuate the parties’ intent.” Feaz v. Wells Fargo Bank, N.A., 745 F. 2d 1098, 1104 (11th Cir. 2014).

3.

Discussion In Florida, “insurance contracts are construed in accordance with the plain language of the polic[y] as bargained for by the parties.” Fayad v. Clarendon Nat. Ins. Co., 899 So. 2d 1082, 1086 (Fla. 2005) (alteration in original).

Where “policy language is susceptible to two reasonable interpretations, one providing coverage and the other excluding coverage, the policy is considered ambiguous.” Id. In such instances, the ambiguous “provisions are construed strictly against the insurer that drafted the policy and liberally in favor of the insured.” Id. Ambiguous exclusionary clauses are “construed even more strictly against the insurer than coverage clauses.” Id Although the policy does not contain a governing law clause, it uniformly references the applicability of Florida law. (See, e.g., AIG Policy 22, 26, 60, 62, 64.) The parties’ briefs also argue Florida law. Against that backdrop, the Court finds that Florida law applies. See Rollins, Inc. v. Parker, 755 So. 2d 839, 841 (Fla. 5th DCA 2000) (“[w]hen contracting parties indicate in the contract their intention as to the governing law, any dispute under the contract will be governed by such law as long as it is not against the public policy of the forum state.”).

Florida law also applies under the principle of lex loci contractus. See Trumpet Vine Invs., N.V. v. Union Cap. Partners I, Inc., 92 F. 3d 1110, 1115 (11th Cir. 1996) (“[i]n determining which law applies, a federal district court sitting in diversity must apply the choice of law rules of the forum state.”); Prime Ins. Syndicate, Inc. v. B.J. Handley Trucking, Inc., 363 F. 3d 1089, 1091 (11th Cir. 2004) (“[u]nder Florida’s choice-of-law rules, lex loci contractus applies in contract matters . . . unless a statute modifies or abrogates a choice-of-law rule.”) (cleaned up) (citing Brown v. Case, 86 So. 684, 685 (Fla. 1920)). “‘Lex loci contractus’ provides that the laws of the jurisdiction where the contract was executed governs interpretation of the substantive issues regarding the contract.” Prime Ins. Syndicate, Inc. 363 F. 3d at 1091 n.1 (citing Lumbermens Mut. Cas. Co. v. August, 530 So. 2d 293, 295 (Fla.1988)).

Indeed, the policy reflects Florida addresses for both parties (AIG Policy¹) and the record does not suggest that the contracting occurred in another state. Having reviewed the record and relevant legal authorities, the Court concludes that: (1) the policy’s language covers the loss; (2) the policy’s business exclusion does not bar recovery; and (3) the policy’s indirect loss exclusion does not bar recovery.

A. The policy’s language covers the loss. AIG argues that the loss “is not covered by the Policy because the loss was suffered by a legal entity that is not a named insured under the Policy.” (AIG’s Mot. 9.) Mr. Schurr responds that he—not his law firm—suffered the loss because the lost funds were his personal assets, which he kept separate from client and law firm funds held elsewhere. (Pl.’s Resp. 2, ECF No. 26; Dep. of Kenneth B. Schurr 17:1-18,19:5-10, 28:15-18, ECF No. 25-4.) According to him, the “sole purpose of parking [his] personal funds in that particular account was to take advantage of a higher money market rate available at that time on certain accounts.” (Corrected Aff. of Kenneth B. Schurr ¶ 4.) Despite the many efforts dispensed on ascertaining the ownership of the lost funds, the policy’s language requires no such determination. The policy plainly says that AIG will “pay [Mr. Schurr] for loss of money . . . resulting directly from fraud, embezzlement or forgery perpetrated against [him].” (See supra at 1-2; AIG Policy 42.) Contrary to AIG’s assertions, nowhere does that language require Mr. Schurr to prove that he suffered the loss or prove that the lost funds were his. The plain language merely requires that there be some loss and that the fraud leading to that loss be perpetrated against Mr. Schurr. Neither party disputes the existence of the loss or the fact that it resulted from fraud. (AIG’s SOMF ¶ 7; Pl.’s Am. Resp. to AIG’s SOMF, ¶ 7; AIG’s Mot. 11, 14; Dep. of AIG’s Corp. Rep. Kathleen Spinella 69:25-70:4, ECF No. 25-3.) As such, the true question is: Against whom was the fraud perpetrated? AIG’s answer is “the law firm”: Q: I’m sorry. I’ll ask again. Who was defrauded? A: Kenneth B. Schurr, P.A. . . . Q: And the reason that you answer that is because the money that was wired out was in an account titled Kenneth B. Schurr, P.A.? That’s the reason for your answer, right? A: Yes. (Dep. of AIG’s Corp. Rep. Kathleen Spinella, 65:14-16, 66:3-7.) That reasoning fails.

First, AIG cites no case law to back the notion that the title on the account determines whom the fraud was perpetrated against.

Second, the evidence indicates that the fraudster targeted Mr. Schurr specifically. To be sure, the record contains no indication that the fraudster targeted the law firm through its e-mail address for service (see Dep. of Kenneth B. Schurr 117:24-25), the e-mail account of Mr. Schurr’s legal assistant, or otherwise purported to defraud the firm by posing, for example, as a vendor to whom the law firm owed money. On the contrary, the record is clear that the fraudster targeted Mr. Schurr’s communications concerning his personal debt by impersonating Mr. Schurr’s creditor. (Corr. Aff. of Kenneth B. Schurr ¶¶ 1, 3; Promissory Note, ECF No. 1-4.) Nowhere does AIG contest that. And both parties acknowledge that Mr. Schurr filed a loss report with the FBI indicating that he was the victim of fraud under penalty of perjury. (Pl.’s SOMF ¶ 19; AIG’s Resp. to Pl.’s SOMF ¶ 19.) Accordingly, the Court finds that the fraud was “perpetrated against” Mr. Schurr and that the policy’s language covers the loss.

B.

The policy’s business exclusion does not bar recovery.

Nevertheless, AIG says that the policy’s business exclusion denies Mr. Schurr coverage. In the policy, “‘[b]usiness’ means a part time or full-time trade, occupation or profession, including farming or ranching other than incidental business.” (See AIG Policy 6.) AIG argues that Mr. Schurr “was engaged in the business of money lending” because he previously made two interest-bearing loans to family members using other funds in the account. (See AIG’s Mot. 15-17.) However, in arriving at that position, AIG seemed to overlook the existence of the exemption for “incidental business” within the policy’s definition of “business”: Q: How could you have determined then that he – that the claim should be denied because he was in the money lending business when you didn’t determine whether or not he was working full or part-time in the money lending business? A: Well, it wouldn’t matter because it says either/or. . . . Q: [If] I loaned the money to my cousin Vinny and my cousin Vinny is paying me⁴ percent on the loan. Am I in the business of loaning money? A: I guess so, yes. Q: Okay. So just the fact that you loan money to someone else and earn interest on it in and of itself means you're in the business of loaning money? A: Yes. (Dep. of AIG’s Corp. Rep. Kathleen Spinella 169:14-20; 194:2-11.) Even assuming that the loans Mr. Schurr made to his family members qualified as “a business or professional service,” the claimed loss cannot be said to “arise out of” those loans. Indeed, Mr. Schurr made those loans in December 2018 and July 2019—well before the loss. (Dep. of Kenneth B. Schurr 87.) To recall, the business exclusion denies coverage for “any loss arising out of a business or professional service engaged in by [Mr. Schurr.]” (emphasis added) (AIG SOMF ¶ 4; Pl.’s Am. Resp. to AIG’s SOMF ¶ 4.) For that reason, AIG’s argument fails. AIG also argues that the business exception applies because the lost funds were held in the law firm’s name. That argument is simply at odds with the policy’s text. The exclusion does not look to whether the lost funds resulted from a business or professional service. It looks to the source of the loss. In other words, the question is: Did the loss itself arise out of a business or professional service that Mr. Schurr engaged in? The answer is no. The loss arose from the fraudulent wire instructions Mr. Schurr used to “pay down” his personal debt. AIG has not tied that debt to a “business” or professional service. See Professional Service, MERRIAM-WEBSTER LEGAL DICTIONARY, https://www.merriam-webster.com/legal/ professional%20service (“a service requiring specialized knowledge and skill usually of mental or intellectual nature and usually requiring a license certification or registration.”).

In short, neither the title on the account nor the nature of transactions unrelated to the loss are determinative here.

Accordingly, the business exclusion does not bar Mr. Schurr’s recovery for the reasons AIG presents. C. The policy’s indirect loss exclusion does not bar recovery. Last, AIG argues that Mr. Schurr only suffered an indirect loss under the policy, which goes uncovered per its terms: “Indirect Loss We do not cover any loss that is an indirect result of any fraud guard event including but not limited to: