The opinion of the court was delivered by: WARD
This is an action by an insured against its insurer to recover for the loss of more than six tons of gold and silver valued at $394,096.52. In the first cause of action of the amended complaint plaintiff United States Smelting Refining and Mining Company (now U.V. Industries, Inc.), seeks to recover $394,096.52, the claimed value of the gold and silver allegedly stolen by dishonest employees. Alternatively, in the second cause of action, plaintiff seeks to recover $300,000 (the policy limit) alleging that if the gold and silver was not stolen by dishonest employees, it disappeared.
Plaintiff is a corporation organized under the laws of Maine, with its principal office in the Southern District of New York. Defendant is a stock company organized under the laws of Connecticut, with a place of business in this district. The jurisdiction of this Court is based on diversity of citizenship, 28 U.S.C. § 1332.
On or about October 28, 1964, defendant issued to plaintiff a policy of insurance entitled "Blanket Crime Policy" effective November 8, 1964.* The policy limit was $300,000.
By the terms of Insuring Agreement I of the policy defendant agreed to cover plaintiff against:
"Loss of Money, Securities and other property which the Insured shall sustain . . . through any fraudulent or dishonest act or acts committed by any of the Employees, acting alone or in collusion with others."
The policy does not apply:
"under Insuring Agreement I, to loss, or to that part of any loss, as the case may be, the proof of which, either as to its factual existence or as to its amount, is dependent upon an inventory computation or a profit and loss computation; provided, however, that this paragraph shall not apply to loss of Money, Securities or other property which the Insured can prove, through evidence wholly apart from such computations, is sustained by the Insured through any fraudulent or dishonest act or acts committed by any one or more of the Employees;" (Section 2(b)).
The policy further provides:
"If a loss is alleged to have been caused by the fraud or dishonesty of any one or more of the Employees and the Insured shall be unable to designate the specific Employee or Employees causing such loss, the Insured shall nevertheless have the benefit of Insuring Agreement I, subject to the provisions of Section 2(b) of this Policy, provided that the evidence submitted reasonably proves that the loss was in fact due to the fraud or dishonesty of one or more of the said Employees, and provided, further, that the aggregate liability of the Company for any such loss shall not exceed the Limit of Liability applicable to Insuring Agreement I." (Section 4).
Under Insuring Agreement II of the policy defendant agreed to cover plaintiff against:
"Loss of Money and Securities by the actual destruction, disappearance or wrongful abstraction thereof within the Premises. . . ."
"Money" is defined in the policy as "currency, coins, bank notes and bullion ; and travelers checks, register checks and money orders held for sale to the public." (Section 3). (Emphasis added)
On or about November 19, 1965 defendant also issued to plaintiff a policy of insurance known as a "Comprehensive Dishonesty, Disappearance and Destruction Policy" effective November 8, 1965 which covered plaintiff for loss of money, securities or other property sustained through any fraudulent or dishonest act or acts committed by any employees acting alone or in collusion with others. This policy was in the penal sum of $200,000 excess of $300,000. In all relevant respects the language of this excess policy is identical to the language of the "Blanket Crime Policy."
By reason of the two policies and subject to the various conditions and limitations contained therein plaintiff and its subsidiaries had a total of $500,000 in coverage for losses sustained through employee dishonesty and $300,000 in coverage for loss of money and securities by the actual destruction, disappearance or wrongful abstraction thereof from plaintiff's premises.
On October 24, 1969 plaintiff filed with defendant a proof of loss wherein plaintiff claimed a loss of gold and silver having an aggregate value of $394,096.52 "due to the dishonesty of Henry Jones, Willie Reed, George Kasperski, James Smith and other employees; also non-employees . . . ."
Defendant argues that this proof of loss was not timely and was not adequate to cover a claim under Insuring Agreement II based on the disappearance of bullion. The provisions of the insurance policies that plaintiff had to give notice of loss "as soon as practicable" mandate notice within a reasonable time in light of all the circumstances. Rand v. Underwriters at Lloyd's, London Subscribing Lloyd's Policy No. DB 6/234, 295 F.2d 342 (2d Cir. 1961); Zauderer v. Continental Casualty Co., 140 F.2d 211 (2d Cir. 1944).
The first actual knowledge which plaintiff or its subsidiary U.S. Lead Refinery, Inc. ("Lead") had of the loss of gold and silver was acquired following completion of Lead's annual inventory in December, 1968. Plaintiff notified defendant of the loss prior to January 27, 1969. Any suspicions which officers of Lead had earlier were not sufficient to require an earlier notification to defendant. United States Fidelity and Guaranty Company v. Empire State Bank, 448 F.2d 360 (8th Cir. 1971). Defendant granted plaintiff several extensions of time within which to file its formal proof of loss. The proof of loss was filed on October 24, 1969, before the expiration of the last extension granted by defendant; and ...