Bankruptcy of Storage Facility Created a Compensable Loss
Barry Zalma
Jan 15, 2024
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Plaintiffs insurers sought a declaration that there is no coverage for the insurance claim made under the policy for the loss of soybeans. The Defendants moved for partial summary judgment on its first and second counterclaim. In Endurance American Insurance Company, Zurich American Insurance Company, and, Atain Insurance Company v. Stonex Commodity Solutions, LLC F/K/A FC Stone Merchant Services, LLC, 2024 NY Slip Op 30076(U), Index No. 653234/2022, Motion Seq. No. 004, NYSCEF Doc. No. 108, Supreme Court, New York County (January 8, 2024) the Supreme Court (trial court) resolved the dispute.
BACKGROUND
From 2017 to 2021, defendant stored millions of bushels of soybeans at warehouses owned by non-party, Express Grain Terminals, LLC (“EGT”). In September 2021, upon the discovery by EGT’s lender that EGT had less inventory than it was reporting, EGT was forced into bankruptcy, resulting in the dispossession from StoneX of 2,780,000 bushels of soybeans subject to a determination by the bankruptcy court of various competing interests in the disposition of EGT’s assets.
Ultimately, in the bankruptcy proceedings, defendant recovered all but 502,315 bushels of soybeans. Defendant seeks coverage for the loss of these 502,315 bushels of soybeans.
SUMMARY JUDGMENT STANDARD
The proponent of a motion for summary judgment must tender sufficient evidence to show the absence of any material issue of fact and the right to entitlement to judgment as a matter of law. Courts have also recognized that summary judgment is a drastic remedy that deprives a litigant of his or her day in court. Therefore, the party opposing a motion for summary judgment is entitled to all favorable inferences that can be drawn from the evidence submitted.
DISCUSSION
In support of its motion defendant cites to the language of the insurance policy that provides that warehouse receipts, together with third-party inspection reports showing that the warehouse has sufficient goods to meet the insureds requirements, demonstrates the existence of an insurable interest.
Defendant contends that the warehouse receipts establish that EGT was in possession of the requisite number of soybeans to cover the amount of defendant’s soybeans. Further, inspection reports, prepared by independent inspectors, confirm that EGT maintained the appropriate number of soybeans to satisfy defendant’s stored amount. With respect to the date of the loss, defendant contends that September 2021 is the date when it became actually dispossessed based on the bankruptcy filing by EGT.
Specifically, plaintiffs contend that inspector indicating that “obligations to other depositors cannot be adequately verified […] therefore I am unable to make any certifications on these actual obligations and their effect regarding these inventories” creates an issue of fact as to whether the soybeans for which defendant seeks coverage were in existence.
CONCLUSION
The New York Court found that defendant established an actual loss as well as an ascertainable date of the loss, September 29, 2021. The Court declined to read terms into the policy that are not there, specifically that defendant was required to ascertain whether EGT had sufficient soybeans to satisfy all receipt-holders. The parties could have contracted to include those terms in the policy but did not.
The unrefuted evidence was that there were in fact a sufficient number of bushels of soybeans to satisfy defendants claim at the time EGT filed for bankruptcy, it follows that once EGT filed for bankruptcy defendant no longer had access to the soybeans, thus triggering the date of the loss.
Defendant’s motion for partial summary judgment on its first counterclaim is granted; and it is further Adjudged and Declared there is insurance coverage to cover the loss of 502,315 bushels of soybeans; and it is further Ordered that defendant’s motion for summary judgment on its second counterclaim is granted; and it is further adjudged and declared that plaintiffs have breached the underlying contract between the parties for refusing to provide coverage.
ZALMA OPINION
Since the evidence showed that there were enough soybeans to cover that deposited by the defendants when EGT was forced into bankruptcy the division of the assets by the court resulted in a loss to the defendants that was not excluded from the coverages provided by the Plaintiffs.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.
In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.
FACTUAL BACKGROUND
Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...
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The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma
Post 5087
See the full video at and at
Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf
Zalma’s Insurance Fraud Letter – June 1, 2025
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ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...
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BACKGROUND
On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.
Plaintiff filed suit ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
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Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
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