ERNST YOUNG LLP v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH PA (2003)

Order, Supreme Court, New York County (Charles Ramos, J.), entered February 11, 2002, which, in this action seeking declaratory relief, inter alia, granted defendant's cross motion for summary judgment dismissing the complaint, unanimously modified, on the law, to the extent of declaring in defendant's favor that it is not liable under the subject policies and fidelity bond for fees, costs, and lost interest attributable to the theft of funds by plaintiff's employee, and otherwise affirmed, with costs to defendant.

The motion court properly determined that defendant's disclaimer of plaintiff's claim for fees, costs and lost interest occasioned by plaintiff's employee's theft of client funds, was appropriate under the subject fidelity bond.   Endorsement 9 to the governing policies unambiguously limits the coverage afforded to indemnification for loss of client property, as defined by the endorsement, sustained as a “direct result” of employee dishonesty.   Plaintiff's suggested interpretation of the endorsement would, as the motion court found, impermissibly transform indemnity policies into liability policies (see Aetna Cas. & Sur., Co. v. Kidder, Peabody & Co., 246 A.D.2d 202, 212-213, 676 N.Y.S.2d 559, lv. denied 93 N.Y.2d 805, 689 N.Y.S.2d 429, 711 N.E.2d 643).

We modify only to declare in defendant's favor (see Lanza v. Wagner, 11 N.Y.2d 317, 334, 229 N.Y.S.2d 380, 183 N.E.2d 670, appeal dismissed 371 U.S. 74, 83 S.Ct. 177, 9 L.Ed.2d 163, cert. denied 371 U.S. 901, 83 S.Ct. 205, 9 L.Ed.2d 164).