NEW YORK UNIVERSITY, RESPONDENT, v. THE CONTINENTAL INSURANCE COMPANY ET AL.,
APPELLANTS.
87 N.Y.2d 308, 662 N.E.2d 763, 639 N.Y.S.2d 283
December 27, 1995
No. 302(1995 NY Int. 297)
Decided December 27, 1995
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This opinion is uncorrected and subject to revision before publication
in the New York Reports.
Mark S. Gamell, for Appellants.
Robert P. Walton, for Respondent.
American Council of Life Insurance, et al.; American Insurance
Association et al., amici curiae.
SIMONS, J.:
This is an appeal addressed to the sufficiency of the complaint and
the affirmative defenses contained in the pleadings in this action by
an insured against its insurer who disclaimed coverage under a
commercial crime insurance policy. The two principal issues are (1)
whether the complaint states a cause of action for punitive damages
under the standards set forth in Rocanova v Equitable Life
Assurance Society (83 NY2d 603) and (2) whether plaintiff has stated a
cause of action under General Business Law § 349.
I
In April 1990, plaintiff New York University discovered a substantial
shortage of merchandise in the clothing department of one of the
University book stores. Its internal investigation led it to determine
that Dwight Johnson, the book store's General Merchandise Buyer, had
falsified order forms, invoices, and shipping and receiving documents
for imprinted apparel purchased from MHK, Inc., a clothing vendor.
Plaintiff concluded that Johnson and MHK had acted together in a
scheme to bill NYU for merchandise never received. It calculated that
Johnson's actions had cost the University more than $1.6 million.
In September of 1988, NYU had purchased a commercial crime liability
insurance policy from defendant Continental Insurance which included
an endorsement for losses resulting from "Employee Dishonesty." The
endorsement, which was in effect when NYU discovered Johnson's
defalcations, provided coverage of $10 million. Through its insurance
SNIPPETS:
American Council of Life Insurance, et al.; American Insurance Association et al., amici
This is an appeal addressed to the sufficiency of the complaint and the affirmative defenses
The two principal issues are whether the complaint states a cause of action for punitive
plaintiff New York University discovered a substantial shortage of merchandise in the
NYU had purchased a commercial crime liability insurance policy from defendant Continental
Defendants subsequently denied the claim advising plaintiff that Johnson and Kaye appeared
In its amended complaint, it made comprehensive factual allegations about Johnson's
The fourth and fifth causes of action alleged unlawful and fraudulent conduct, respectively,
In their answer to the amended complaint, defendants' first affirmative defense asserted that
Supreme Court denied defendants' motion in its entirety, and granted plaintiff's cross motion
Where a lawsuit has its genesis in the contractual relationship between the parties, the
Thus, defendant may be liable in tort when it has breached a duty of reasonable care distinct
Plaintiff's fourth cause of action alleges "unlawful" conduct generally, relating it to
But governing the conduct of insurers and protecting the fiscal interests of insureds is
The parties were a major university acting through its Director of Insurance, and a large
Defendants contend that Supreme Court erred in dismissing its second affirmative defense,
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