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Town of Ira v. Vermont League of Cities & Towns

Supreme Court of Vermont

October 31, 2014

Town of Ira
v.
Vermont League of Cities and Towns -- Property and Casualty Intermunicipal Fund, Inc

Editorial Note:

This Opinion is subject to motion for reargument or formal revision before publication. See V.R.A.P. 40

On Appeal from Superior Court, Rutland Unit, Civil Division. William D. Cohen, J.

Patrick J. Bernal of Witten, Woolmington, Campbell & Bernal, P.C., Manchester Center, for Plaintiff-Appellee/Cross-Appellant.

Kaveh S. Shahi of Clearly Shahi & Aicher, P.C., Rutland, for Defendant-Appellant/Cross-Appellee.

Present: Reiber, C.J., Dooley, Skoglund, Robinson and Crawford, JJ.[1]

OPINION

Page 894

DOOLEY, J.

[¶1] Plaintiff Town of Ira brought this action to recover from its insurer, Vermont

Page 895

League of Cities and Towns -- Property and Casualty Intermunicipal Fund, Inc. (PACIF), certain losses related to the embezzlement of town funds by the Town's former treasurer. On summary judgment, the trial court found that the Town was entitled to interest on the embezzled amount up to the policy limit and that this amount mooted the Town's claim for audit and attorney's fees, as well as insurer's counterclaims to recoup certain sums already paid. It also granted judgment to insurer on the Town's claim that insurer acted in bad faith by not paying for all of the items it claimed. We affirm.

[¶2] The Town purchased a policy from insurer that included coverage of losses due to employee embezzlement. The coverage limit was $500,000. In November 2009, an audit revealed to the Town that its long-time elected treasurer had embezzled over $300,000 in funds from town accounts. The audit also reported that the lost interest on the embezzled funds totaled $346,427. For these amounts and others, the Town obtained a judgment against the former treasurer for $1,157,883. The Town sought the coverage limit of $500,000 from insurer. Insurer paid only a part of that amount, essentially reflecting funds actually taken and not including interest on that amount. The Town sued in this action for the difference. On cross-motions for summary judgment, the trial court ruled for the Town, holding specifically that the Town could recover lost interest in addition to the amount embezzled.

[¶3] The insurance policy involved is a fidelity policy, which indemnifies for certain criminal conduct. Agreement H, paragraph a, of Section IV of the policy, labeled as a " commercial blanket bond," [2] provides in pertinent part:

The Fund agrees, subject to limitations, terms and conditions of this Coverage, to indemnify the Named Member against any loss of money or " other property," which the Named Member shall during the term of this Coverage sustain or discover it has sustained

Page 896

through ... embezzlement ... committed by any one of its officials or Employees, acting alone or ...

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