# Schurr v. AIG Property Casualty Company

> District Court, S.D. Florida · March 28, 2022

URL: https://www.frixlaw.com/law-library/cases/10120452

## Case

- **Court:** District Court, S.D. Florida
- **Decided:** March 28, 2022
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

United States District Court
for the
Southern District of Florida

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 Policy 1) 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 me 4 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:
1. You or a family member’s inability to realize income that you
would have realized had there been no loss or damage to
money, securities, or other property;
2. Payment of damages of any type for which you or a family
member are legally liable; or
3. Payment of costs, fees or other expenses you or a family
member incur in establishing either the existence or the
amount of loss under this endorsement other than those set
forth under this endorsement.”
(emphasis in original) (AIG Policy 45).
(1) The meaning of “indirect loss.”
The policy does not define “indirect” or “indirect loss.” On one hand, AIG
argues that the law firm suffered the direct loss—not Mr. Schurr—because the
funds came from law firm’s account. (AIG’s Mot. 18.) On the other hand, Mr.
Schurr says he suffered the direct loss because the funds were his personal
assets and argues the indirect loss exclusion refers to consequential losses.
(Pl.’s Resp. 11.)
In other words, AIG focuses the “indirect loss” inquiry on a claimant’s
proximity to the initial fraudulent loss, whereas Mr. Schurr reads the “indirect
loss” inquiry to turn on a given loss’ proximity to the initial fraudulent loss. The
Court agrees with Mr. Schurr’s reasonable reading of the exclusion to refer to
consequential losses that stem from the initial fraudulent loss. But even if
AIG’s reading of the “indirect loss” exclusion were reasonable, the competing
interpretations would give rise to an ambiguity under Florida law. See Fayad,
899 So. 2d at 1086. As a result, the Court would be bound to construe that
ambiguity in Mr. Schurr’s favor—particularly because the indirect loss
provision is an exclusionary clause. See id.
In any regard, the Court’s reading is consistent with the one adopted by
the Second Circuit in Horowitz v. American International Group, Inc., 498 Fed.
App’x 51, 54 (2d. Cir. 2012). It is also consistent with testimony from the AIG
supervisor overseeing the handling of Mr. Schurr’s claim. (See Dep. of Patrick
Flaherty 89:11-22, ECF No. 25-6.) In fact, Black’s Law Dictionary equates an
“indirect loss” with a “consequential loss,” meaning one “arising from the
results of a damage rather than from the damage itself.” LOSS, Black’s Law
Dictionary (11th ed. 2019). Against that backdrop, the Court turns its attention
to AIG’s arguments.
(2) AIG’s arguments on “indirect loss.”
AIG says that paragraphs 1 and 2 of the indirect loss exclusion apply.
(AIG’s Mot. 18-19.) Paragraph 1 excludes coverage of losses related to Mr.
Schurr’s “inability to realize income that [he] would have realized had there
been no loss . . . .” (AIG Policy 45.) Although AIG correctly asserts that
paragraph 1 bars any recovery for interest foregone because of the fraudulent
loss, paragraph 1 does not bar recovery for the loss that is the subject of this
dispute.
Paragraph 2, which excludes indirect “damages,” does not apply. AIG
argues that “the fraudulent wire transfer resulted in the payment of damages
for which [Mr. Schurr] was legally liable, since he was personally liable on the
loan . . . whose intended payoff was intercepted by the fraudster.” (AIG’s Mot.
18.) That argument is flawed.
AIG incorrectly construes Mr. Schurr’s liability on a promissory note as a
form of damages. The policy defines “damages” as “the sum required to satisfy
any claim, covered by this policy, whether settled and agreed to in writing by
us or resolved by judicial review.” (AIG Policy 6.) However, using the policy’s
definition of “damages” (which specifically refers to sums covered by the policy)
in the context of this exclusionary clause (which specifically describes sums
that are not covered) would render the term meaningless. Further, elsewhere in
the policy “damages” is cast in bold to indicate the use of a defined term
whereas in this exclusion it is not. As such, the Court does not believe that the
policy’s definition of “damages” applies in paragraph 2.
To avoid rendering paragraph 2 meaningless, the Court reads it to refer
to “damages” in the ordinary sense. See 11 Fla. Jur. 2d. Contracts § 163 (“an
interpretation that gives a reasonable meaning and effect to all provisions in a
contract is preferred to one that leaves a part useless or inexplicable.”).
“Damages” ordinarily refer to “[m]oney claimed by, or ordered to be paid to, a
person as compensation for loss or injury.” DAMAGES, Black’s Law Dictionary
(11th ed. 2019). A liability under a promissory note that has not been
adjudicated simply does not represent a form of damages. Thus, AIG’s
argument with respect to paragraph 2 fails.
AIG also seems to argue that the loss to Mr. Schurr is consequential in
that any loss he claims represents the loss he ultimately suffered “by having to
pay off the personal loan after the original wire was intercepted.” (See AIG’s
Mot. 18.) However, nothing in the record substantiates the notion that Mr.
Schurr claimed a loss for any form of indemnification (either to himself or his
law firm) that stemmed from the fraud. AIG even repeatedly characterizes the
claimed loss as the fraudulent loss itself. (E.g., Aff. of Kathleen Spinella ¶ 6; see
also AIG’s Mot. 9 (“the money lost as a result of the fraud was being held in a
money market account in the name of [the law firm] . . . the loss, therefore, was
suffered by [the law firm.]”).) Because Mr. Schurr claimed the original loss—not
damages resulting from it, this argument also fails.
For these reasons, the indirect loss exclusion does not bar Mr. Schurr’s
recovery.
4. Conclusion
In light of the above, the Court grants Mr. Schurr’s motion for summary
judgment (ECF No. 25) and denies AIG’s motion (ECF No. 19). Per the policy’s
terms, Mr. Schurr is entitled to a recovery of $99,750. (See AIG’s Mot. 20.) Mr.
Schurr may separately move to recover attorney’s fees pursuant to Fla. Stat.
§ 627.428. All other pending motions are denied as moot.
Done and ordered in chambers, at Miami, Florida, on March 24, 2022.

{[~< N. Scola, Jr.
United States District Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10120452. Public record. Not legal advice.