author: WANGELIN, District Judge.

text:
    Dean RAYMER, Plaintiff, v. UNITED STATES of America, Defendant.
    No. S82-138C (D).
    United States District Court, E.D. Missouri, Southeastern Division.
    Feb. 11, 1985.

      Robert J. Albair, Clayton, Mo., for plaintiff.
    Jill S. Newman, Asst. U.S. Atty., St. Louis, Mo., for defendant.
   MEMORANDUM

WANGELIN, District Judge.

This matter is before the Court for a decision following a trial on the merits. In accordance with Rule 52 of the Federal Rules of Civil Procedure, the Court hereby makes the following Findings of Fact and Conclusions of Law. Any Finding of Fact equally applicable as a Conclusion of Law is adopted as such and, conversely, any Conclusion of Law equally applicable as a Finding of Fact is adopted as such.

FINDINGS OF FACT

1. Plaintiff Dean Raymer is a resident of Missouri. He is forty (40) years old.

2. On July 18, 1979, Raymer was injured in a motor vehicle accident in Carter County, Missouri. The accident occurred when plaintiff turned his van onto Highway 103 and collided with another vehicle. Plaintiff’s van was thrown into a depressed area near the side of the road by the force of the collision.

3. Both plaintiff and his passenger, one Joan Barker, were injured in the collision.

4. Plaintiff was unable to move from the van by himself. Consequently, another individual at the scene pulled plaintiff from the van and dragged him to the top of the depression to await the arrival of an ambulance. Plaintiff was approximately four (4) feet from the edge of the depression at this time.

5. Plaintiff was incoherent and semiconscious. However, he was still mobile and moving. He was described by witnesses as “thrashing about”, “rolling” from side to side, and as having some movement and use of all four extremeties including his hips and mid-torso. As a result of this state, he moved around to such an extent that he rolled down the side of the depression and had to be dragged or carried back up.

6. An ambulance from the West Carter County Ambulance Service arrived and plaintiff was placed on a stretcher and put in the ambulance along with Barker. Plaintiff was uncooperative, talking loudly, and thrashing around. Although plaintiff did not move his lower extremeties, he was moving his arms, shoulders, and upper body.

7. The Emergency Medical Technicians in the ambulance placed a cervical collar around plaintiffs neck and strapped him to the stretcher. Plaintiff removed the collar, however, and worked loose of the straps. He then rolled off the stretcher and onto the ambulance floor. The technicians stopped the ambulance and placed plaintiff back on the stretcher.

8. The ambulance took plaintiff first to Doctor’s Hospital in Poplar Bluff. He had remained incoherent and abusive during the trip. While at Doctor’s Hospital plaintiff was interviewed by the admitting nurse who reported no signs of paralysis. Moreover, he was observed by at least one witness as moving his leg. Further testimony indicated that he still retained some movement in his extremeties.

9. Plaintiff requested that he be moved to the Veteran’s Administration Hospital in Poplar Bluff. Pursuant to this request, he was admitted to the Veteran’s Administration Hospital at approximately 9:30 P.M. The ambulance attendants told the admitting nurse, one Joyce Duncan, that plaintiff had been in a “1050”. A “1050” is emergency personnel code which means an automobile wreck.

10. The Veteran’s Administration Hospital in Poplar Bluff is a one hundred seventy six (176) bed facility which contains three medical floors, a surgical floor and an Intensive Care Unit. It is equipped with an FTS communication system allowing it to contact other Veteran’s Administration hospitals in the country, including the St. Louis Veteran’s Administration Hospital.

11. The Court finds by a preponderance of the evidence that the plaintiff retained some movement in his lower extremities when he presented at the Veteran’s Administration Hospital. Plaintiff was still incoherent and thrashing about at the time he was presented at the Veteran’s Administration emergency room. One of the ambulance attendants noted that he still appeared able to move one leg. The testimony is consistent from shortly after the accident until presentment at the Veteran’s Administration Hospital that plaintiff’s condition remained the same. He is described by various witnesses as rolling from side to side, thrashing about, and having movement in his torso and at least the upper portion of his legs.

12. The physicians, surgeons, and medical staff who examined and treated plaintiff at the Poplar Bluff Veteran’s Administration Hospital held themselves out to be competent physicians, surgeons, and medical personnel and able to treat their patients with proper and skillful medical care, including the treatment of spinal injuries. The physicians, surgeons, and medical staff at the Poplar Bluff Veteran’s Administration Hospital were servants, agents, and employees of the defendant United States of America, and they were acting under color of their office and within the scope and course of their employment as physicians, surgeons, and medical personnel employed by the United States of America at all times pertinent to this cause.

13. Plaintiff’s attending physician in the emergency room was Dr. Leary. His initial diagnosis was that plaintiff was suffering from either a head injury or that he was inebriated. Dr. Leary did not notice any movement of the lower extremities but he noted full movement of the upper extremities. He noted no response to painful stimuli anywhere. He ordered x-rays of plaintiff’s skull, chest, lumbar spine, and pelvis. These were all negative. He failed to order a cervical x-ray. Plaintiff was admitted to the intensive care unit at 11:30 P.M.

14. Plaintiff’s cousin, one Steve Raymer, testified that he observed plaintiff doing a partial sit-up, without significant use of his hands, while on the examination table. Moreover, plaintiff was allowed to sit up, roll over, and turn his head and neck during his time at the Veteran’s Administration Hospital.

15. Plaintiff’s brothers, Don and Dale Raymer, observed that plaintiff’s entire body, including his hips and legs were flopping and rolling around after plaintiff had been admitted to intensive care. During that night one of plaintiff’s attending nurses noted that he had sensation beginning in his upper thighs and rising above that level.

16. Plaintiff stayed on a mattress in the Intensive Care Unit from 11:10 P.M. on July 18 to sometime after 9:00 A.M. on the 19th when Dr. Graziani ordered cervical x-rays. During that time he was never immobilized with sandbags, traction or a cervical collar, all of which are available at the Veteran’s Administration Hospital.

17. Dr. Graziani performed a physical examination, ordered x-rays, and determined at approximately 10:00 A.M. on July 19, 1979, that there had been an injury to the C-6 and C-7 level of the spine. Dr. Graziani then contacted a neurosurgeon in St. Louis who advised immediate immobilization with a cervical collar, spineboard, and sandbags. The cervical collar was applied by a Dr. Chung at 1:30 P.M. on July 19, 1979. At 3:00 P.M. on the same day plaintiff was stabilized with sandbags, placed on a spineboard, and transferred to the St. Louis Veteran’s Administration facility.

18. Plaintiff arrived at the St. Louis Veteran’s Administration Hospital at 5:30 P.M. on July 19. He was treated there until September 6,1979 when he was transferred to the Veteran’s Administration Spinal Cord Unit at Jefferson Barracks, Missouri. He remained at this facility until December .21, 1979.

19. Plaintiff’s current condition is complete sensory loss at the T-l Dermatone level, i.e. paralysis from the mid-chest region downward. Consequently, plaintiff has lost full use of and sensation in his hands, arms, stomach, hips, and buttocks. This paralysis has caused a concomitant loss of bowel and bladder control, as well as sexual function. The Court finds that this physical and functional damage described above is a direct and proximate result of defendant’s negligence. The Court also finds, however, that plaintiff’s original paralysis, which started at the mid-thigh level and extended downward, was a result of the accident or events subsequent to the accident but prior to his presentment at the Poplar Bluff Veteran’s Administration Hospital.

20. Plaintiff’s age was 35 years old at the time time of his injury. He had a life expectancy at that time of 37.8 years. He had completed one semester of Junior College in Agri-Business and planned to complete the two year course at the time of the accident.

21. There is substantial medical testimony that plaintiff’s current condition renders him permanently unemployable and unable to continue his schooling and education. There was also testimony to suggest that this would not have been the case if plaintiff had remained a simple paraplegic. In that event, the evidence indicates, and this Court finds, that he would have been reasonably employable, within certain limits, and that he would have reasonably been expected to continue his schooling.

22. Presently, plaintiff requires the services of a full-time nurse and will require some type of medical care for the remainder of his life. Plaintiff has chronic problems with physical therapy, infections, bowel and bladder problems, and ingestion of medications. He also experiences problems with the daily activities of life such as hygiene, shaving, bathing, and transportation. Many of these problems would not exist if plaintiff had remained a paraplegic as opposed to a semi-quadraplegic. Hence, the Court finds that defendant is responsible for a major portion of plaintiff’s full-time nursing expenses.

23. Plaintiff remembers nothing of the accident or his stay at the Veteran’s Administration Hospital due to heavy medication and the trauma of the accident. His first point of continuous recollection begins after his admission to the Veteran’s Administration Hospital in St. Louis several weeks later.

24. On September 12, 1979, plaintiff signed a retainer agreement with an attorney, one Arnold Phillips, to proceed against the West Carter County Ambulance Service, the driver of the ambulance, and Doctor’s Hospital.

25. Plaintiffs attorney immediately attempted to obtain plaintiff’s hospital records from the Veteran’s Administration. To that end, plaintiff’s medical authorization release forms were forwarded to the Veteran’s Administration on September 12, 1979 and again on October 10, 1979. In response to this second request, Phillips received a five page discharge summary from the St. Louis Veteran’s Administration Hospital dated January 4, 1980. On September 29,1980, the Veteran’s Administration sent plaintiff copies of the Memphis Veteran’s Administration Hospital records. It was not until May 14, 1981, after repeated inquiries, that portions of the Poplar Bluff Veteran’s Administration Hospital records were sent to plaintiff. The remainder of the records were sent to plaintiff on June 17, 1981 after yet another request.

26. On June 24, 1981, plaintiff sent a letter to Dr. Marshall Conrad and Dr. Charles Aprahamion, plaintiff’s expert witnesses. This letter contained the completed Veteran’s Administration Hospital records. Dr. Conrad sent a letter on June 29, 1981 which indicated that there had been medical negligence on the part of the Poplar Bluff Veteran’s Administration Hospital personnel. This Court finds that this was the first time plaintiff had been made aware of possible negligence by the Poplar Bluff Veteran’s . Administration Hospital despite his diligent effort to discover such negligence at an earlier date.

27. On. July 17, 1981, plaintiff filed an amended petition in the Circuit Court of Carter County, Missouri naming Doctor's Hospital of Poplar Bluff; thé Veteran’s Administration Hospital of Poplar Bluff, and several individual doctors as additional defendants. The United States filed a Petition for Removal and the case was removed to the United States District Court for the Eastern District of Missouri. The defendant then filed a motion to dismiss on the grounds that plaintiff had failed to file an administrative claim with the Veteran’s Administration prior to filing his amended petition. The motion to dismiss was granted because the filing of the administrative claim is a jurisdictional prerequisite to pursuit of a judicial remedy.

28. On September 11, 1981, plaintiff filed his administrative tort claim with the Veteran’s Administration. The Veteran’s Administration denied plaintiff’s administrative tort claim, determining that plaintiff’s claim was barred by the statute of limitations. Plaintiff then proceeded with the current action.

CONCLUSION OF LAW

This Court’s jurisdiction is invoked pursuant to the Federal Tort Claims Act, 28 U.S.C. § 1346(b). The resolution of this cause focuses on three issues: (1) whether defendant, United States of America, through its agent the Veteran’s Administration Hospital of Poplar Bluff, was negligent in its treatment of plaintiff’s injuries; (2) whether defendant’s negligence, if any, caused plaintiff any additional injury beyond what he would have suffered from the original accident along with the subsequent actions of intervening parties prior to his admission to the Veteran’s Administration Hospital; and (3) whether defendant may effectively raise the affirmative defense of the statute of limitations.

DEFENDANT’S NEGLIGENCE

After reviewing defendant’s actions following plaintiff’s admission and juxtaposing those actions with accepted medical practices, this Court concludes that defendant failed to exercise those practices.

Accepted medical practice dictates that an individual who has been in an automobile accident and who presents with head injuries and lacerations should be considered a candidate for spinal cord injury. As the actions of defendant subsequent to plaintiff’s admission reveal, this practice was not followed. Proper emergency room procedure indicates that a patient with a suspected spinal cord injury be moved and allowed to move as little as possible. To this end, the patient’s head and neck should be immobilized with the use of sandbags, a cervical collar, and a spineboard. The use of such items on an individual who did not have a spinal cord injury would not be harmful. In plaintiffs case, his neck was not stabilized with a cervical collar until sixteen (16) hours after his admission; his neck was not stabilized with sandbags until seventeen (17) hours after admission; and he was not totally immobilized until his transport to St. Louis seventeen and one-half (I7V2) hours after admission. The culpability of the Veteran’s Administration’s delay is exacerbated by the fact that Dr. Graziani had contacted Dr. Rich, a neurosurgeon at the Veteran’s Administration Hospital in St. Louis, who advised immediate immobilization. This call was made several hours before plaintiff was in fact immobilized.

Furthermore, proper procedure dictates that if a patient is restless and combative, as was clearly the case upon plaintiff’s admission, he should be physically or chemically restrained with straps or sedatives. Plaintiff was not so immobilized until shortly before his transport to the St. Louis Veteran’s Administration Hospital. As a result of this delay, plaintiff was allowed to sit up and roll around the entire night and into the next morning during his stay at the Poplar Bluff Veteran’s Administration Hospital. Proper emergency medical room procedure dictates that treatment of possible spinal cord damage includes the taking of cervical x-rays. Upon plaintiff’s admission, Dr. Leary ordered x-rays only in the lumbar region. It was not until twelve (12) hours after admission that a cervical x-ray was taken and a complete physical examination was made, whereupon the spinal fracture was discovered.

This Court finds that it is beyond argument that defendant’s actions in treating plaintiff were negligent.

PROXIMATE CAUSE

A more difficult issue to be resolved is whether the negligent treatment of the Veteran’s Administration Hospital actually caused plaintiff further injury beyond that suffered prior to his admission. A brief review of the facts indicate that plaintiff was injured in an automobile accident and pulled from the wreckage; he was then dragged up a small embankment to the side of the road. Because of plaintiff’s incoherent and delerious condition he rolled around to such an extent that he rolled down the embankment and had to be pulled up again to the side of the road. When the ambulance arrived, he was not placed on a spineboard, but a cervical collar was applied. Plaintiff tore the collar off, however, while he was in the ambulance and it was not placed back on him. Additionally, he moved around to such an extent that he fell off the stretcher while in the ambulance.

It is defendant’s contention that if plaintiff was not paralyzed by the accident, his subsequent actions and treatment was the causative factor of his paralysis. Thus, any negligence on the part of the Veteran’s Administration personnel was not the proximate cause of plaintiff’s injuries.

This Court disagrees. Plaintiff’s current condition is paralysis from the middle of his chest downward. Yet, after his accident, he was able to move his upper body and torso at least three to four feet to the edge of an embankment and over it. Moreover, after presentment to the Veteran’s Administration Hospital in Poplar Bluff, he was observed by both of the ambulance attendants to move his leg, and his torso, thrashing from side to side. Furthermore, he was observed by his cousin Steve Raymer to do a partial sit-up on the examining table without using his hands to pull himself up. Finally, one of the Veteran’s Administration’s own personnel, Nurse Wiley, noted that plaintiff had sensation beginning in his upper thighs and rising above that level during the first few hours after his admission. By the next morning he had lost sensation and movement up to his mid-chest, which is his current condition. Plaintiff’s expert witness, Dr. Charles Aprahamian, concluded that plaintiff’s loss of mobility while at the Veteran’s Administration Hospital indicated a progression of the disability. Moreover, he was of the opinion that the progression of the paralysis was caused by the personnel’s actions and inactions.

From this evidence the Court concludes that the negligence of the Veteran’s Administration’s staff caused a progression in defendant’s injury. The testimony is consistent that plaintiff’s lower legs were paralyzed from the time of the accident. There is very little testimony that plaintiff was actually moving his lower legs at any time after his initial injury. There is, however, consistent and strong testimony indicating that plaintiff was moving his torso from side to side and moving the upper part of his legs for a significant period of time after his admission to the Poplar Bluff Veteran’s Administration Hospital. The competent medical testimony is that plaintiff would. have been unable to move in such a manner had he suffered a complete lesion of his spinal cord. Thus the negligence of the Veteran’s Administration Hospital personnel transformed a case of semi-paralysis into a case of semi-quadriplegia.

STATUTE OF LIMITATIONS

Defendant argues that plaintiff is barred from pursuing this cause because of the delay in filing this suit. As previously delineated in the Findings of Fact, there was a substantial delay between the time of the injury and the time that plaintiff filed this action with the appropriate court.

Title 28 U.S.C. § 2401(b) provides in pertinent part:

“A Tort Claim against the United States shall be forever barred unless it is presented in writing to the appropriate Federal Agency within two years after such claim accrues____”

As defendant points out, plaintiff’s claim clearly accrued on July 18 or 19, 1979. Plaintiff filed his original petition in state court against the West Carter County Ambulance Service and its employees on December 13, 1979. The amended petition, which included the Poplar Bluff Veteran’s Administration Hospital as a defendant, was filed on July 17, 1981. Plaintiff had failed, however, to file the administrative claim with the Veteran’s Administration Office, and had therefore failed to present the claim “in writing to the appropriate federal agency within two years after ...” the accident. Plaintiff’s Administrative Tort Claim was not filed until September 11,1981 at which time the statute of limitations was tolled.'

Defendant directs this Court’s attention to the cases of Kington v. United States, 396 F.2d 9 (6th Cir.1968) and Garrett v. United States, 640 F.2d 24 (6th Cir.1981). These authorities point out that an action dismissed without prejudice leaves the situation the same as if the suit had never been brought. Kington, 366 F.2d at 10 quoting Boner v. Ribicaff, 304 F.2d 427, 428 (6th Cir.1962). Therefore, neither the filing of plaintiff's suit in state court nor its subsequent removal and dismissal from federal district court worked to toll the statute. Hence, defendant concludes that plaintiff’s claim is time barred.

Plaintiff, of course, analyzes this issue differently. Plaintiff states that he was unable to remember anything until several months after the accident due to the trauma induced by the accident and the heavy medication that was administered to him. Moreover, plaintiff points out that he did not receive the complete medical records of his stay at the Poplar Bluff Veteran’s Administration Hospital, despite repeated requests, until June 17, 1981. It was only then that plaintiff’s expert witness, Dr. Conrad, could give plaintiff the first indication that malpractice had occurred during the approximately seventeen (17) hours that plaintiff remained in the Poplar Bluff Veteran’s Administration Hospital. Therefore, plaintiff urges this Court to adopt the position that the meaning of the word “accrue” as. it is used in the Federal Torts Claim Act should not be limited to the actual time of the negligent injury, but should extend to the factual predicate of his claim.

It should be noted first that the United States, as sovereign, is immune from suit absent its consent to be sued. See, e.g., United States v. Sherwood, 312 U.S. 584, 61 S.Ct. 767, 85 L.Ed. 1058 (1941). Thus, Congress controls the conditions under which suits may be permitted. Kendall v. United States, 107 U.S. 123, 125, 2 S.Ct. 277, 27 L.Ed. 437 (1982).

However, when Congress has permitted suit, the courts have viewed the conditions imposed with an eye to providing the type of effective relief that Congress intended. Thus, in Urie v. Thompson, 337 U.S. 163, 69 S.Ct. 1018, 93 L.Ed. 1282 (1949), a case dealing with the government’s liability for plaintiff’s degenerative lung disease, the Court states:

“[I]f we assume that Congress intended to include occupational diseases in the category of injuries compensable under the Federal Employer’s Liability and Boiler Inspection Acts, such mechanical analysis of the ‘accrual’ of petitioner’s injury — whether breath by breath, or at one unrecorded moment in the progress of the disease — can only serve to thwart the congressional purpose.
If Urie were barred from prosecuting this action ... it would be clear that the federal legislation afforded Urie only a delusive remedy. It would mean that at some past moment in time ... Urie was charged with the knowledge of the slow and tragic disintegration of his lungs; under this view Urie’s failure to diagnose within the applicable statute of limitations a disease whose symptoms had not yet obtruded on his consciousness would constitute waiver of his right to compensation at the ultimate date of his discovery and disability____ We do not think the humane legislative plan intended such consequences to attach to blameless ignorance.”

In following this criterion, to implement the intent of Congress in passing legislation such as the Federal Tort Claims Act, it has been held that a claim for medical malpractice against the United States accrues when the claimant discovers, or in the exercise of reasonable diligence should discover, the essential facts relating to: (1) the existence of his injury and (2) its probable cause. Kubrick v. United States, 444 U.S. Ill, 100 S.Ct. 352, 62 L.Ed.2d 259, (1979); Stoleson v. United States, 629 F.2d 1265 (7th Cir.1980).

In plaintiff’s case, this process was rendered significantly more difficult because he had been in a severe automobile accident and had then been treated in what he apparently thought was a negligent manner by the personnel of the West Carter County Ambulance Service. Plaintiff may well have believed, and the Court finds that a reasonably diligent individual would have believed, that he had all of the causative elements of his paralysis at hand. Therefore, the delay in receiving the medical records from the Poplar Bluff Veteran’s Administration Hospital was, in this particular instance, crucial in developing plaintiff’s case. As has been noted, these records were not viewed until June of 1981 despite plaintiff’s attempts to obtain them. Thus, the Court finds that it was not until this time that plaintiff could reasonably believe that malpractice on the part of the personnel in Poplar Bluff had occurred. Consequently, it was at this time that plaintiff’s claim against this defendant accrued and plaintiff is not barred by the statute of limitations.

DAMAGES

The Court has found that defendant was negligent and that this negligence was the proximate cause of plaintiff’s current state of semi-quadraplegia. The Court further has found that but for the negligence of the personnel of the Veteran’s Administration Hospital in Poplar Bluff, plaintiff would have remained a paraplegic. Thus, defendant’s actions and omissions resulted in damage to the spinal cord causing loss of full use and sensation in plaintiff’s hands, arms, stomach, and hips. Along with the loss of control of these areas of the body, plaintiff has suffered loss of bowel and bladder control and loss of sexual function. It is for the physical and emotional damages of these injuries, as well as their future pecuniary costs, upon which this Court must base its judgment. The Court has not found defendant liable for plaintiffs paralysis at the mid-thigh level downward.

Plaintiff has submitted a loss of wages estimate between Four Hundred Sixty One Thousand Five Hundred Six Dollars ($461,506.00) and Six Hundred Forty Three Thousand Eight Hundred Ten Dollars ($643,810.00). The Court finds the lower of these two estimates to be the true measure of plaintiffs lost wages. Although plaintiff had completed his high-school “G.E.D.” and a semester of college, the government is correct in pointing out that plaintiffs age and past employment record militate against a large award based on loss of earnings. The Court disagrees, however, with the government’s assessment that plaintiff should receive no compensation. Defendant apparently bases this conclusion on the theory that, even were he healthy, plaintiff would not work again the rest of his life. The evidence indicates, however, that prior to his accident plaintiff appeared to have taken a greater interest in his professional life. On this basis it appears that there was a significant loss of earnings attributable to defendant’s negligence.

With respect to nursing care, plaintiff indicates a range of cost between Eight Hundred Fifty Two Thousand Eight Hundred Sixty Two Dollars ($852,862.00) and Two Million Twenty Four Thousand Four Hundred Forty Six Dollars ($2,024,446.00). Again, the Court finds the lower figure to be more acceptable and sets a value of One Million Dollars ($1,000,000.00) in damages as compensation for future nursing care. This lower figure is applicable less because the Court believes that it will achieve full compensation for full-time nursing care and more because defendant cannot be held liable for all of plaintiffs nursing needs since plaintiff undoubtedly would have required some nursing care and rehabilitation because of his original paralytic injury.

The Court finds a sum of Six Hundred Thousand Dollars ($600,000.00) appropriate as damages for plaintiff’s mental and physical injuries. This figure incorporates the fact that plaintiff would have been paralyzed from his original injury and compensates him for his quadraplegic condition.

In sum, plaintiff’s total damages equal Two Million Sixty One Thousand Five Hundred Six Dollars ($2,061,506.00). Plaintiff’s prior settlement with the West Carter County Ambulance Service of One Hundred Thousand Dollars ($100,000.00) must be subtracted from this sum leaving a total damage figure of One Million Nine Hundred Sixty One Thousand Five Hundred Six Dollars ($1,961,506.00) awarded to plaintiff.


source: Caselaw Access Project

author: LOUIS H. POLLAK, District Judge.

license: Public Domain

text:
    Harriet JOHNSON v. TOWNSHIP OF BENSALEM.
    Civ. A. No. 83-449.
    United States District Court, E.D. Pennsylvania.
    April 12, 1985.
    See also 609 F.Supp. 1343.

      Alan M. Lerner, Cohen, Shapiro, Polisher, Shiekman & Cohen, Philadelphia, Pa., for plaintiff.
    Joseph Goldberg, Margolis, Edelstein, Scherlis, Sarowitz & Kramer, Philadelphia, Pa., for defendant.
   MEMORANDUM

LOUIS H. POLLAK, District Judge.

This action arises out of the premature retirement of Sergeant William L. Johnson from the Bensalem Township Police Department. Sergeant Johnson retired on January 31, 1981, at the age of fifty-four, pursuant to his employer’s mandatory retirement policy. On May 11, 1981, Sergeant Johnson died. On January 27, 1983, Sergeant Johnson’s widow brought this action, seeking damages for wrongful discharge and violation of the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. §§ 621-634.

On May 23, 1984, I ruled on the parties’ cross-motions for summary judgment. I found, inter alia, that (1) defendant is liable under the ADEA for all properly provable damages arising out of Sergeant Johnson’s premature retirement, Memorandum/ Order at U 1 (May 23, 1984); (2) defendant is also liable for liquidated damages for willfully violating the statute, id. at j[ 5; and (3) defendant may deduct from plaintiff’s damages “[a]ny payment made to Mr. Johnson upon his retirement which he would not have received during his employment or at his death had he remained employed until his death.” Id. at K 4. With regard to the damages set-off issue, I specifically found that “payments made to Mr. Johnson on his retirement for accrued sick leave in the amount of $8602.01” were to be deducted from plaintiff’s damages. Id.

Plaintiff has moved to reconsider my ruling that defendant may deduct Sergeant Johnson’s accrued sick leave from plaintiff’s damages. In addition, plaintiff has moved to compel officers and employees of the township to answer questions concerning sick pay benefits. Both motions are opposed.

I. MOTION TO RECONSIDER THE SET-OFF OF ACCRUED SICK LEAVE

In granting defendant’s motion for summary judgment on the question whether defendant should receive a set-off for accrued sick leave, I necessarily found as a matter of law that plaintiff would not have received such benefits had her husband remained an employee of the township until his death. This finding was based on the language contained in the applicable collective bargaining agreement, the relevant portion of which reads:

Upon retirement, but only in the event the employee has worked twenty-five (25) years of full-time service with the DEPARTMENT and has attained the age of fifty (50) years minimum, the retiring member of the DEPARTMENT shall receive pay at his then current daily rate for all accumulated and unused sick leave credited to him on the date of retirement, not to exceed one hundred (100) days.

Agreement, Article IV, j[B. (attached as Exhibit S to Defendant’s Motion for Summary Judgment). In addition to the contract, I had before me the affidavit of Nathlie Strange, Bensalem Township Manager. Ms. Strange states in her affidavit that Sergeant Johnson’s estate would not have received any accrued sick pay benefits had Sergeant Johnson died while still an employee of the township. Strange Affidavit (Feb. 14, 1984).

Plaintiff argues that this conclusion was error, and submits the affidavit of Detective Kenneth Hopkins, who signed the collective bargaining agreement on behalf of the township’s police officers. Mr. Hopkins’ affidavit states that “the estate of a Bensalem Township Police Officer who dies while employed is entitled to receive pay for the deceased officer’s accumulated and unused sick leave credited to him on the date of his death.” Hopkins Affidavit (Oct. 10, 1984).

At the outset, there is a good deal of confusion in the briefs as to the standard I must apply to plaintiff’s motion to reconsider. Plaintiff assumes her motion falls within Rule 60(b), the relevant portion of which provides:

On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); ...

Fed.R.Civ.P. 60(b). As the text of the Rule makes clear, however, the Rule applies only to challenges of final judgments. Laffey v. Northwest Airlines, Inc., 642 F.2d 578, 583-84 (D.C.Cir.1980); Campos v. Puerto Rico Sun Oil Co., 536 F.2d 970, 972 n. 6 (1st Cir.1976); 7 J. Moore & J. Lucas, Moore’s Federal Practice ¶ 60.20, at 60-170 to 60-172 (2d ed. 1983). Interlocutory orders, such as the one at issue here, “are left within the plenary power of the court that rendered them to afford such relief from them as justice requires.” 7 J. Moore & J. Lucas, Moore’s Federal Practice ¶ 60.20, at 60-170 (2d ed. 1983). Accord Campos v. Puerto Rico Sun Oil Co., supra; Bon Air Hotel, Inc. v. Time, Inc., 426 F.2d 858, 862 (5th Cir.1970). See also John Simmons Co. v. Grier Bros., 258 U.S. 82, 90-91, 42 S.Ct. 196, 199-200, 66 L.Ed. 475 (1922) (“if an interlocutory decree be involved, a rehearing may be sought at any time before final decree, provided due diligence be employed and a revision be otherwise consonant with equity”); Moore & Rogers, Federal Relief from Civil Judgments, 55 Yale L.J. 623, 641-42 (1946) (discussing Simmons). Thus, the stringent requirements of Rule 60(b) do not apply in this case.

I therefore proceed to consider whether revision of my May 22, 1984 Order is warranted on the record before me. Plaintiff appears to argue that the affidavits of Mr. Hopkins and Ms. Strange create a standoff: representatives of labor and management have directly contradicted each other with regard to the interpretation of the relevant contract provision. The results of this swearing contest, plaintiff argues, raise a genuine issue of material fact as to whether accrued sick leave must, under the contract, be paid to the estates of police officers who die while still employed by the township.

It is of course hornbook law that the interpretation of contractual provisions is in the first instance for the court. E.g., Brokers Title Co. v. St. Paul Fire & Marine Ins. Co., 610 F.2d 1174, 1178 (3d Cir. 1979) . The threshold issue is whether the contract is ambiguous; if no ambiguity exists there is no fact issue which prevents the award of summary judgment. Mellon Bank, N.A. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1009-1013 (3d Cir. 1980) .

In this case, I do not find any ambiguity in the relevant provision of the collective bargaining agreement. That provision states simply that members of the police department who (1) retire after twenty-five years of service, and (2) are at least fifty years old, are to collect up to 100 days of accrued sick leave pay. Payment is due “[u]pon retirement”; the amount of sick leave to which the employee is entitled is based on “the current daily rate for all accumulated and unused sick leave credited to him on the date of retirement.” Agreement, Article IV, j] B (attached as Exhibit S to Defendant’s Motion for Summary Judgment). There is no provision for employees who die during the course of their employment. The plain meaning of this provision is that officers are to receive accrued sick leave upon retirement and not otherwise.

Plaintiff has offered no evidence to the contrary. Mr. Hopkins’ affidavit, like that of Ms. Strange, merely states a conclusion. The affidavit does not offer any particular facts from which one might infer that the parties intended the sick pay provision to mean something other than what its language suggests. Nor has plaintiff pointed to the existence of such facts in her brief. Consequently, I must find, based on the language in the collective bargaining agreement, that Mr. Johnson’s estate would not have received accrued sick leave had he been employed by the police department at the time of his death in May, 1981. Plaintiff’s motion to reconsider is denied.

II. MOTION TO COMPEL

Plaintiff seeks to compel various officers of the township to answer questions concerning accrued sick leave payments. Based on my ruling on plaintiff’s motion to reconsider, such questions are irrelevant. Accordingly, plaintiff’s motion to compel is denied.

      . By so concluding, I do not mean to imply that parties are free to relitigate issues which the court has resolved on motions for summary judgment, where neither new evidence nor new legal theories are advanced. There is an interest in finality even where interlocutory orders are involved. See 1B J. Moore, J. Lucas, & T. Currier, Moore’s Federal Practice ¶ 0.404[1], at 118 (2d ed. 1984) (“Prejudgment orders remain interlocutory and can be reconsidered at any time, but efficient disposition of the case demands that each stage of the litigation build on the last, and not afford an opportunity to reargue every previous ruling”). That interest is sufficiently protected when, as here, the moving party offers newly discovered, noncumulative evidence in support of its argument that the interlocutory order should be reconsidered.


text:
    BENSALEM TOWNSHIP v. WESTERN WORLD INSURANCE COMPANY.
    Civ. A. No. 84-2068.
    United States District Court, E.D. Pennsylvania.
    April 15, 1985.

      Emil F. Toften, Emil F. Toften & Associates, Chalfont, Pa., for plaintiff.
    Richard S. March, Galfand, Berger, Senesky, Lurie & March, Philadelphia, Pa., for defendant.
   MEMORANDUM

LOUIS H. POLLAK, District Judge.

Plaintiff Bensalem Township seeks a declaration that defendant Western World is contractually bound to cover any liability which plaintiff may incur in Johnson v. Township of Bensalem, Civil Action No. 83-0449 (E.D.Pa.), an age discrimination action brought by the widow of a former Bensalem Township police officer. See 609 F.Supp. 1340. Defendant has counterclaimed for a declaration of non-coverage, arguing that the insurance policy in question excludes coverage for (1) claims made before February 21, 1982, and (2) claims arising out of willful violations of federal or state statutes. The parties have stipulated to the relevant facts, and have filed cross-motions for summary judgment.

I. Statement of Facts

A. The Johnson Litigation

The facts are uncomplicated. On January 31, 1981, Sergeant William L. Johnson retired from the Bensalem Township Police Department. Sergeant Johnson, then fifty-four years old, was required to retire under the township’s mandatory retirement policy for police officers. Sergeant Johnson died on May 11, 1981. Four months later, on September 18, 1981, Harriet Johnson, the Sergeant’s widow, filed an age discrimination charge with the Equal Employment Opportunity Commission. On September 24, 1981, the township received a letter from the EEOC notifying the township that a discrimination charge had been filed against it. The EEOC letter stated in full:

This is to notify you that the above captioned “charge” has been filed under the provisions of the Age Discrimination in Employment Act of 1967, as amended in 1978, alleging an unlawful discriminatory practice. Charge is defined as a written statement identifying the prospective defendant and generally describing the alleged discrimination. A statement summarizing the particulars of the charge is enclosed.
The law provides that after receiving such a charge, the Equal Employment Opportunity Commission (EEOC) is required to notify the prospective defendant and try to eliminate any alleged unlawful practice by informal conciliation, conference, and persuasion.
An Equal Opportunity Specialist will contact you in the near future to review the circumstance involved in this case and, if possible, to work out some solution consistent with the statute and agreeable to the parties.

Letter from Marvin Meyers, ADEA Supervisor, to Director of Personnel, Township of Bensalem (Sept. 22, 1981) (attached as Exhibit B to the Stipulation of Facts). The enclosure to which Mr. Meyers’ letter refers was a copy of the charge itself. That document contained the following two-sentence explanation of Mrs. Johnson’s age discrimination claim:

On January 31,1981, my husband, William L. Johnson (deceased), was forced to retire at age 54, after 25 years of service as a Police Officer.
Respondent’s policy stated that employees with 25 years of service and were [sic] 50 or more years of age had to retire.

Charge of Discrimination (attached as Exhibit A to the Stipulation of Facts).

Six months later, on March 22, 1982, the township received a letter from one Kevin J. Berry, who was identified as the “Equal Opportunity Specialist” to whom the Johnson matter had been assigned. Mr. Berry’s letter briefly discussed the EEOC’s procedure of seeking voluntary settlement of discrimination charges, and requested some general information concerning the township’s retirement policy for police department personnel. Letter from Kevin J. Berry to Natalie A. Strange, Township Manager (March 19, 1982) (attached as Exhibit C to the Stipulation of Facts).

On June 9, 1982, the township received the EEOC’s determination that the township had violated section 4(a)(1) of the ADEA, 29 U.S.C. § 623(a)(1). Letter from Johnny J. Butler to Natalie A. Strange (June 7, 1982) (attached as Exhibit E to the Stipulation of Facts). Pursuant to section 7 of the ADEA, 29 U.S.C. § 626(d), the EEOC sought to achieve a voluntary settlement of the charge, but to no avail. On December 22,1982, the township’s attorney was informed that Mrs. Johnson would bring suit in federal court on her age discrimination claim; that suit was filed on January 27, 1983. Mrs. Johnson’s complaint sought damages for wrongful discharge and willful violation of the ADEA.

Plaintiff notified its insurance carrier of thé potential claim against it by a letter dated June 23, 1982 — shortly after the EEOC determination but well before suit was instituted. Letter from Henry F. Huhn to Marie Bader (attached as Exhibit F to the Stipulation of Facts). Western World and the township exchanged several letters over the course of the next few months, and on April 7, 1983, Western World notified the township that, while it would defend the township against Mrs. Johnson’s claim, it reserved the right to disclaim coverage at any time. Letter from Michael P. Sotland to Bensalem Township (April 7, 1983) (attached as Exhibit I to the Stipulation of Facts). This letter cited a number of policy exclusions, including the provision excluding from coverage losses arising out of “the willful violation of statute or ordinance committed by or with the knowledge of the insured.” Id.

As the Johnson litigation moved forward, the parties filed cross-motions for summary judgment on a number of issues. In a Memorandum and Order entered May 22, 1984, I granted Mrs. Johnson’s motion for summary judgment on the liability portion of her ADEA claim against the township. Johnson v. Township of Bensalem, Civil Action No. 83-0449, Memorandum/Order (E.D.Pa. May 22, 1984). Included in this determination was the express finding that defendant willfully violated the ADEA within the meaning of Wehr v. Burroughs Corp., 619 F.2d 276 (3d Cir.1980). Id. at ¶5.

B. The Parties’ Contentions

Plaintiff seeks, coverage under a “claims made” policy, covering “any claim or claims [which] are first made against the insureds” during the policy period. The policy period runs from February 21, 1982 to February 21, 1983. Defendant argues that the “claim” in the Johnson case was “first made” on September 24, 1981, when the township received its notification of the EEOC charge which Mrs. Johnson had filed against it. In addition, defendant maintains that the Johnson litigation arises out of “the willful violation” of the ADEA — citing the Memorandum/Order granting Mrs. Johnson’s summary judgment motion on that issue — and is therefore excluded from insurance protection under the policy provision quoted in its reservation of rights letter. Plaintiff contends that (1) defendant is estopped from denying coverage on the basis of the date the claim was first made, because defendant failed to invoke that theory when reserving its right to disclaim coverage in April 1983; (2) in any event, no “claim” was made against plaintiff until December 1982, when plaintiff was first notified that suit would be brought against it; and (3) the “willful violations” exclusion does not apply because the term “willful” carries different meanings in ADEA litigation and in the insurance policy.

II. Estoppel

Plaintiff argues that defendant may deny coverage only on those grounds specifically raised by defendant’s letter of April 7, 1983. In that letter, defendant promised to defend plaintiff in the Johnson litigation, but reserved the right to disclaim coverage for any liability that litigation might generate. The letter does not explain the reasons why plaintiff’s insurance policy might not cover Mrs. Johnson’s lawsuit, but simply quotes several policy provisions which exclude certain categories of injuries or conduct from insurance coverage. Nowhere does the letter refer to the “claims first made” provision of plaintiff’s insurance policy. Plaintiff contends that defendant is therefore estopped from invoking that provision now.

The Pennsylvania Supreme Court has stated that “[t]he essential elements of estoppel are an inducement by the party sought to be estopped ... to the party who asserts the estoppel ... to believe certain facts to exist — and the party asserting the estoppel acts in reliance on that belief.” Sabino v. Junio, 441 Pa. 222, 272 A.2d 508, 510 (1971) (emphasis in original). Thus, in Slater v. General Cas. Co. of America, 344 Pa. 410, 25 A.2d 697 (1942), the insurer initially denied coverage because the policy had been cancelled. The policyholder subsequently failed to forward copies of the summons and complaint to the insurer, as required by the policy. The court found that, due to the insurer’s insistence that the policy had been cancelled, “the insured properly thought it useless to comply further with the requirements of the policy.” 25 A.2d at 699. Having in effect caused the policyholder to violate the policy, the insurer could not rely on the violation to withhold coverage. See id. at 699-700. See also Beck v. Pennsylvania National Mut. Cas. Ins. Co., 429 F.2d 813, 818 (5th Cir.1970) (applying Pennsylvania law) (where insurer denied coverage and refused to defend action against policyholder, insurer could not invoke policyholder’s subsequent failure — in violation of the policy— to tell insurer of any settlement offers).

The converse of this principle is of course that where the party asserting estoppel has not changed its position in reliance on its opponent’s representation, estoppel will not be found. See, e.g., Guardian Life Ins. Co. v. Zerance, 505 Pa. 345, 479 A.2d 949, 954 (1984); Blofsen v. Cutaiar, 460 Pa. 411, 333 A.2d 841, 844 (1975); Pfeiffer v. Grocers Mut. Cas. Ins. Co., 251 Pa.Super. 1, 379 A.2d 118 (1977). In Pfeiffer, recovery was sought for the mistaken demolition of two buildings. The insurer first denied coverage on the basis of untimely notice; later, the insurer suggested that the policy might not apply because it was not in effect on the date of the demolition. Only after these contentions were lost or abandoned did the insurer argue that the policy did not cover the buildings which had been mistakenly destroyed. 379 A.2d at 120. The Pennsylvania Superior Court found that, under Slater, estoppel was inappropriate, since the claimant “offered no proof that he reasonably relied on appellant’s initial grounds for denying liability or that he took action to his prejudice pursuant to such reliance.” Id. at 121. Accord Meth v. United Benefit Life Ins. Co., 198 F.2d 446, 447 (3d Cir.1952); Wasilko v. Home Mut. Cas. Co., 210 Pa.Super. 322, 232 A.2d 60, 63 (1967).

Plaintiff has not shown that it changed its position in reliance on defendant’s April, 1983 letter. All the events that bear on the question of when the claim was first made had taken place by the time that letter was written. Plaintiff’s argument on when the claim was first made would be in no way different if defendant cited that section of the policy in its letter. Accordingly, I find that defendant is not estopped from arguing that the Johnson claim was not first made within the policy period.

III. When Was the “Claim” First Made?

The question of when the “claim” was “first made” in this case turns on the definition of “claim.” If, but only if, the September, 1981 letter from the EEOC and the age discrimination charge which that letter announced constitute a “claim,” then defendant is entitled to summary judgment on this issue, since the policy did not take effect until February 21, 1982. Unfortunately, the insurance policy does not define “claim.” The policy does, however, contain a notice provision which sheds some light on the term. Article YI of the policy, titled “Notice of Claim,” reads, in relevant part:

(a) If during the policy period ... the Public Entity or any insureds shall receive written or oral notice from any party that it is the intention of such party to hold the insureds responsible for a Wrongful Act, they shall give written notice to the Company ... as soon as practicable, but in no event exceeding one year, then any claim which may subsequently be made against the insureds arising out of such Wrongful Act shall, for the purpose of this policy be treated as a claim made during the policy year in which such notice was given during the extended discovery period, as a claim made during the last policy year.
(b) The Public Entity ... shall, as a condition precedent to their rights under this policy, give the Company notice in writing as soon as practicable of any claim made and shall give the Company such information and cooperation as it may reasonably require.

The grammatical incoherence of this language makes it difficult to construe. Nevertheless, the two quoted paragraphs seem plainly to distinguish a “claim” from a “notice that it is the intention of [a potential claimant] to hold the insureds responsible for a Wrongful Act.” Paragraph (a) appears designed to permit the policyholder to obtain coverage for claims not yet filed, but which the policyholder reasonably anticipates. Thus, the policyholder may trigger the policy by passing on to the insurer any written or oral notice that the policyholder is to be “held responsible.” Such action insures coverage for “any claim which may subsequently be made” against the policyholder, notwithstanding that the “claim ... subsequently ... made” is presented after the close of the “policy year.” Difficult as it is to parse, the language of the first paragraph strongly suggests that “notice that it is [someone’s] intention to hold the insureds responsible for a Wrongful Act” is an event commonly antecedent to and different in kind from a “claim.” Paragraph (b) fortifies this inference, since it appears to describe the ordinary procedure for giving notice of a “claim.” And paragraph (a) would be needless if a notice of intention to hold the policyholder responsible was the same as a' “claim.”

Plaintiff argues, correctly in my view, that the EEOC letter of September 1981 was at most a notice that Mrs.. Johnson intended to hold plaintiff responsible for a wrongful act. Neither the letter nor the attached charge of discrimination requested money or other relief; neither document stated that a lawsuit was to follow. The closest the letter comes to any such formal demand is the statement that, upon receiving a charge of discrimination, the EEOC “is required to notify the prospective defendant and try to eliminate any alleged unlawful practice by informal conciliation, conference, and persuasion.” Meyers Letter (attached as Exhibit B to the Stipulation of Facts). This statement does indeed suggest that a formal lawsuit may follow (hence the term “prospective defendant”), but it also suggests that any such formal proceeding will be preceded by EEOC efforts to resolve the matter informally. The letter thus informed plaintiff that a demand for relief, based on a legal right, might well follow. Neither the letter nor the charge, however, purported to be such a demand.

The case law generally supports the conclusion that, for purposes of determining coverage under a “claims made” policy, a “claim” is “a demand for something as a right.” Phoenix Ins. Co. v. Sukut Constr. Co., 136 Cal.App.3d 673, 186 Cal.Rptr. 513, 515 (1982). In Hoyt v. St. Paul Fire & Marine Ins. Co., 607 F.2d 864 (9th Cir. 1979), the plaintiff, a lawyer covered by the defendant’s malpractice policy, received a letter from the representative of the estate of a woman whose will the plaintiff had drafted. The letter, which was received before the effective date of the malpractice policy, noted that the exercise of a general power of appointment in the will had needlessly created substantial tax liability for the estate. The letter went on to ask for “[a]ny thought or information you have on this point.” 607 F.2d at 865. The plaintiff responded, and five months later, the estate’s representative wrote again, this time accusing the plaintiff of gross negligence and demanding compensation for the extra tax liability. Id. at 865-66. The court found that the first letter was not a “claim” within the policy, but was merely a “request for information and explanation.” Id. at 866. The court continued: “If Hoyt was put on notice of any kind it was only that a claim might be expected to follow if the estate attorney was not satisfied with the explanation.” Id.

The critical factor which distinguished the initial letter in Hoyt from a “claim” was the absence of a demand for some action by the policyholder. Cf. Phoenix; Ins. Co. v. Sukut Constr. Co., supra (demand that lawyer correct problem in mechanics lien, free of charge, constituted a “claim”); Katz Drug Co. v. Commercial Standard Ins. Co., 647 S.W.2d 831 (Mo.Ct. App.1983) (demand that employer restore employee’s insurance coverage constituted a “claim”). Because no such demand was made in Mrs. Johnson’s charge or in the Meyers letter, I do not find that the charge and letter constitute a “claim” within plaintiff’s policy.

It is unnecessary for me to determine precisely when a “claim” was “first made” in this case. After the September 1981 letter, all communications between plaintiff and the EEOC, as well as the filing of the Johnson complaint, took place during the period covered by the policy. Defendant does not point to any other incident which might be said to constitute a “claim” and which falls outside the policy period. Accordingly, I find that a “claim” was “first made” within the meaning of the policy sometime between February 21, 1982 and February 21, 1983.

IV. The ‘‘Willful Violations” Exclusion

The sole remaining issue is whether or not the actions which gave rise to the Johnson litigation amount to the “willful violation of [a] statute ... committed by or with the knowledge or consent of an insured” within the meaning of the insurance policy.

Defendant argues forcefully that my earlier decision in Johnson, holding (as a matter of law) that the township willfully violated the ADEA, necessarily resolves this issue. This argument assumes that the policy provision in question uses “willfully” in the same manner as the ADEA. Plaintiff, in response, notes that under Wehr v. Burroughs Corp., 619 F.2d 276 (3d Cir. 1980), merely reckless conduct can give rise to a finding of willfulness under the ADEA. Plaintiff contends that the policy is at best ambiguous on the question whether reckless violation of a statute is “willful”; accordingly, the argument goes, the policy should be construed against the insurer on this issue. See, e.g., Mohn v. American Cas. Co., 458 Pa. 576, 326 A.2d 346 (1974). Plaintiffs argument thus presumes that a finding of recklessness is consistent with my ruling in Johnson.

The issue is more complex than either side acknowledges. I begin by examining my ruling in Johnson, and then proceed to consider whether that ruling triggers the “willful violation” exclusion of plaintiffs insurance policy.

The Memorandum/Order in which I announced my ruling on the willful violation issue in Johnson does not explain the reasons for that ruling, but refers to a conference on the record held on May 16, 1984, at which I explained my rationale. Johnson, supra, Memorandum/Order at ¶ 1 (May 23, 1984). The full transcript of that conference has never been prepared; however, I have attached to this Memorandum a transcript of that portion of the May 16 conference in which I discussed the willful violation question. The discussion is not a long one, and for purposes of understanding precisely what I found, it bears quoting in full:

In my judgment, willfulness for this purpose means intentionality. It doesn’t connote attributing to the township some [malign] purpose to undercut federal law. The township may have thought it was doing right, may indeed have in good faith supposed that it was following a local arbitration which somehow superseded a federal statute, or conceivably somebody in the township actually believed that really the undisclosed and bad health rationale was the township objective, and age was merely being used as a ploy to make something more palatable on a public relations level or whatever. However characterized, without [meaning in] any way to impugn the good faith of the township, its action was willful, in my judgment, meeting the statute. So whatever the damages are, I think they’re doubled.

Johnson v. Township of Bensalem, Civil Action No. 83-0449, Excerpted Transcript of Conference Held May 16, 1984. It is clear from this discussion that no finding was made as to whether the township acted in bad faith — in other words, whether the responsible officials knew or even suspected that their actions violated federal law.

Plaintiff, as I have said, argues that recklessness will support a finding of willfulness under the ADEA, and that “willful” in the insurance policy should not be read to mean merely “reckless.” The discussion just quoted shows, however, that the township has been found to have been not reckless, but intentional in forcing Sergeant Johnson to retire because of his age. The language in Wehr, supra, which defines “willful” in the ADEA to include reckless behavior is therefore unimportant to my resolution of this case.

The more difficult question is whether the exclusion in plaintiff’s policy is intended to govern intentional acts undertaken in the good faith belief that the actor was behaving legally. Nothing in the language of the policy answers this question. The exclusion in question refers to willful violations “committed by or with the knowledge or consent of an insured,” apparently referring to the policyholder’s knowledge of the violative act, not knowledge of the content of the law which was transgressed. The word “willful,” moreover, like the word “claim,” is not defined by the policy.

I have found no Pennsylvania authority construing a “willful violations” clause in an insurance policy. The closest case is Nationwide Mut. Ins. Co. v. Hassinger, 325 Pa.Super. 484, 473 A.2d 171 (1984), in which the Pennsylvania Superior Court interpreted a clause excluding injuries caused by the policyholder’s intentional conduct from insurance coverage. In Has-singer, the policyholder struck and killed a pedestrian in a parking lot, under circumstances which suggested that the collision may have been intentional. See 473 A.2d at 173 (car was driven over a curb and across a sidewalk before striking the decedent). The decedent’s widow sued, and Nationwide denied coverage on the ground that the policyholder’s conduct was intentional. The jury agreed with Nationwide, and on appeal, the policyholder challenged the trial court’s instructions on the intent issue. The Superior Court approved the trial court’s instructions, which were derived from the intent standard used in the Second Restatement of Torts. Id. at 175. That standard focuses on whether “the actor desires to cause consequences [sic] of his act, or that he believes that the consequences are substantially certain to result from it.” Restatement (Second) of Torts § 8A.

The policyholder’s conduct in Hassinger cannot have been both intentional and in good faith. Here, by contrast, plaintiff contends that it acted according to what was believed to be a valid and enforceable collective bargaining agreement. Plaintiff undoubtedly knew that, by forcing Sergeant Johnson to retire, it was terminating the Sergeant’s paycheck; in this sense, plaintiff “intended” to cause the injury which prompted Mrs. Johnson’s lawsuit. There is no evidence on this record, however, which would require a finding that plaintiff acted maliciously or in reckless disregard of its legal obligations. Accordingly, I do not find Hassinger controlling.

Under these circumstances, I am bound by the hoary rule that ambiguities in insurance policies are resolved in the policyholder’s favor. See, e.g., Mohn v. American Casualty Co., 458 Pa. 576, 326 A.2d 346 (1974). “Willful,” as used in plaintiff’s policy, can be read to require knowledge or recklessness with regard to (1) the consequences of the policyholder’s conduct, (2) the legality of the policyholder’s conduct, or (3) both. Accordingly, I find that plaintiff could reasonably have construed the policy to exclude only conduct which exhibited reckless disregard for plaintiff’s legal obligations. I also find that there is a genuine issue of material fact as to whether plaintiff acted “willfully” under such a standard. Accordingly, both parties’ motions for summary judgment will be denied on this issue.

V. Conclusion

For the foregoing reasons, I shall grant plaintiff’s motion for summary judgment on the question whether a “claim” was “first made” within the effective period of the policy, and shall deny both parties’ motions for summary judgment with regard to whether plaintiff acted willfully within the meaning of the clause excluding from coverage liability occasioned by the “willful violation of [a] statute.” An Order to that effect accompanies this memorandum.

      . The parties have also agreed that Pennsylvania law applies to this diversity breach-of-contract action.

      . "Claims made” policies are the insurance market’s alternative to the more common “occurrence” policies. “An ‘occurrence’ policy protects the policyholder from liability for any act done while the policy is in effect, whereas a 'claims made’ policy protects the holder only against claims made during the life of the policy.” St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531, 535 n. 3, 98 S.Ct. 2923, 2926 n. 3, 57 L.Ed.2d 932 (1978). See generally Comment, The “Claims Made"Dilemma in Professional Liability Insurance, 22 U.C.L.A. L.Rev. 925 (1975).

      . Plaintiff also raises arguments with respect to other exclusions. Because defendant relies solely on the “claims first made" and “willful violations” provisions, I need not address any other provisions of plaintiffs policy.

      . Perkoski v. Wilson, 371 Pa. 553, 92 A.2d 189 (1952), on which plaintiff relies, is wholly consistent with Pfeiffer. The insurer in Perkoski defended, without reservation, a policyholder in an automobile accident case brought by an injured husband and wife. At no time did the insurer tell the policyholder that his coverage was in doubt, except insofar as the damages might exceed the overall policy limit of $10,000 per person and $20,000 per accident. After the verdict (which was within the policy limit), the insurer argued that a portion of the damages was not covered, on the ground that the husband’s damages were in part derivative of the wife’s, and were therefore to be counted against her $10,000 limit. The Pennsylvania Supreme Court found that when the insurer undertook its policyholder’s defense, ”[i]t was ... incumbent upon the company to inform its policyholder of its prospective adverse interest with respect to the extent of its liability under the terms of the policy." 92 A.2d at 191. Accordingly, the insurer was estopped from making its claim. Id.

      In Perkoski, the policyholder did change his position in reliance on the insurer’s silence: he failed to obtain his own counsel to litigate the case. Since the insurer’s argument rested squarely on the nature and amount of the damages awarded, different litigation tactics could well have affected the verdict to the policyholder’s benefit. Here, by contrast, the resolution of the “claims first made” issue does not turn on any factual or legal determination which has been or will be made in the Johnson case. Plaintiff could not, therefore, claim it is prejudiced by having relied on Western World to defend it against Mrs. Johnson’s lawsuit.

      . The party asserting estoppel has the burden of establishing its prerequisites “by clear, precise and unequivocal evidence.” Chrysler Credit Corp. v. First National Bank & Trust, 746 F.2d 200, 206 (3d Cir.1984) (per curiam). In this case, plaintiff has introduced no evidence that might suggest detrimental reliance.

      . The notice provision of the policy at issue in Hoyt reinforced the conclusion that a demand of some sort was a necessary element of a "claim.” That provision required that the policyholder "immediately forward to the Company every demand, notice, summons or other process received by him or his representative.” Hoyt, supra, 607 F.2d at 867 (quoting policy). Plaintiffs policy does not contain any analogous language, although the distinction the policy draws between a "claim” and a notice of intent to hold the insured responsible has much the same effect. Indeed, it is difficult to imagine just what separates such a notice from a "claim” unless it is a demand for compensation.

      . Defendant makes much of the fact that the Chairman of the Bensalem Township Board of Supervisors referred to the EEOC charge as "an Equal Opportunity law suit” at a Board meeting, and asked the township’s solicitor to "take care” of the dispute. Stipulation of Facts f 4. According to defendant, these facts show that plaintiff treated the charge as equivalent to a formal lawsuit. Even so, it is unclear how plaintiffs reaction to the EEOC letter bears on the question whether that letter constitutes a "claim” under the policy. A prudent reaction to the filing of a discrimination charge presumably includes some internal investigation to determine whether the charge has merit. It does not, however, follow that any such investigation renders that which prompted it a "claim.”
      In any event, plaintiffs reaction to the charge appears to have consisted primarily of waiting for the EEOC to begin its investigation, something which did not take place for at least six months following the filing of Mrs. Johnson’s charge. See Stipulation of Facts, 4-6.

      . Defendant argues that this conclusion violates the principle that "an insured cannot insure against something which has already begun.” Appalachian Ins. Co. v. Liberty Mut. Ins. Co., 676 F.2d 56, 63 (3d Cir.1982). This argument misperceives the nature of a "claims made” policy. Such policies are designed to cover liabilities which the policyholder has already incurred (in the sense that the occurrence giving rise to the liability has taken place), but which have not yet ripened into claims. Thus, even though the "claim” may have its origins in events which took place prior to the effective date of the policy, the policyholder is insured as long as the "claim” is "first made" within the time period which the policy covers.
      Nor does this process require the insurer to insure against risks which have already materialized. The risk against which a "claims made" policy insures is the risk that a claim will be brought. Where, as here, the policyholder had not been asked to pay over money or to undertake affirmatively to remedy a supposed wrong, the risk that such demands might be made in the future was not yet resolved.

      . A number of cases in other jurisdictions have applied clauses excluding from coverage willful violations of penal statutes. Like Hassinger, these cases involve conduct which cannot sensibly be said to have been both intentional and in good faith. Stevens v. Home, 325 So.2d 459 (Fla.Ct.App.1975) (union members hung likeness of non-union employee in effigy; court denied coverage); Travelers Indent. Co. v. Nieman, 563 S.W.2d 724 (Ky.Ct.App.1977) (pharmacist repeatedly sold amphetamines to customer without prescription; coverage denied); Applewhite v. City of Baton Rouge, 380 So.2d 119 (La.Ct.App.1979) (police officers sexually assaulted citizen; coverage denied); American Home Assurance Co. v. Diamond Tours & Travel, Inc., 78 A.D.2d 801, 433 N.Y.S.2d 116 (App. Div.1980) (insurer not bound to defend travel agency against civil action for fraud). Cf. Schwamb v. Fireman’s Ins. Co., 41 N.Y.2d 947, 363 N.E.2d 356, 394 N.Y.S.2d 632 (1977) (Mem.) (insurer was bound to defend pharmacist from malpractice action where pharmacist was alleged to have refilled prescriptions without a doctor’s authorization; court stressed presence of negligence allegations).

      . The straightforward language of the policy suggests the third alternative. The word "will-fur in the policy exclusion modifies the phrase "violation of statute or ordinance.” "Violation,” in turn, has two components: (1) conduct by the insured, which (2) transgresses a legal standard. Applying "willful" to one of these elements but not the other would be, in my view, artificial.


author: KEVIN THOMAS DUFFY, District Judge:

text:
    FRENCH AMERICAN BANKING CORPORATION, Plaintiff, v. FLOTA MERCANTE GRANCOLOMBIANA, S.A., and Fireman’s Fund Insurance Company, Defendants.
    No. 83 Civ. 5095 (KTD).
    United States District Court, S.D. New York.
    April 29, 1985.

      Healy & Baillie, Cleary, Gottlieb, Steen & Hamilton, New York City, for plaintiff; Sirius C. Cook, James C. Blair, Joanne Zack, Loretta K. Davis, New York City, of counsel.
    Hendler & Murray, P.C., New York City, for defendants Fireman’s Fund Ins. Co.; Jerome Murray, Michael Maillet, New York City, of counsel.
   MEMORANDUM & ORDER

KEVIN THOMAS DUFFY, District Judge:

Plaintiff, French American Banking Corporation (“FABC”), commenced this action to recover approximately $4 million plus interest due and payable to it for bills of lading for shipments of coffee issued by defendant Flota Mercante Grancolombiana, S.A. (“Flota”). Flota pledged these bills of lading to FABC in connection with amounts FABC loaned to Colombian Coffee Company (“Colombian”). When Colombian defaulted on the loans, FABC made a demand on Flota for the coffee covered by the bills of lading or the value thereof. Flota denied the genuiness of the bills of lading. FABC alleges that Flota is liable for the bills of lading which were issued by or on behalf of Flota. Alternatively, FABC alleges that because the bills of lading were either forged or counterfeit, defendant Fireman’s Fund Insurance Company (“Fireman’s”) is liable on its Banker’s Blanket Bond issued to FABC. Fireman’s now moves pursuant to Fed.R.Civ.P. 56(b) for summary judgment dismissing the Amended Complaint as against it. Alternatively, Fireman’s moves to dismiss plaintiff's “Eighth Claim, Against Fireman’s” in which plaintiff asserts that Fireman’s breached its obligation of good faith in connection with the insurance contract. FABC opposes the motion filed by Fireman’s.

FABC moved pursuant to Fed.R.Civ.P. 15(a) for leave to file a Second Amended Complaint to assert a claim based on an advance of new value to Colombian on November 18, 1982 on the faith of seven bills of lading which are also claimed by Flota to be fictitious. By Stipulation and Order filed November 27, 1984, the plaintiff was granted leave to file a Second Amended Complaint in the form set forth in plaintiff’s motion to amend. Accordingly, plaintiff’s motion to amend is denied as moot.

FACTS

In January of 1981, FABC began to provide financing to Colombian; Colombian was granted an $8 million line of credit to finance the importation of coffee from Colombia. Most of the coffee imported by Colombian was purchased by it from Luis A. Duque Pena E. Hijos, Ltda. (“Duque Ltda.”) which is controlled by Luis Duque. Luis Duque’s two sons, Victor and Alberto Duque, were principals of Colombian. For the most part, the coffee was transported by truck to Colombian ports where it was loaded on ships, including ships owned by Flota. The bills of lading, which were issued by Flota once the coffee was on board, would be forwarded by Duque Ltda. to Colombian Coffee in New York, which used them to obtain financing from banks such as plaintiff.

The terms of the financing arrangement between FABC and Colombian were set forth in a letter dated January 19, 1981, a General Loan and Security Agreement, an Acceptance Agreement, a Continuing Letter of Credit Agreement, a Uniform Commercial Code (“UCC”) Financing Statement, and a guaranty executed by Duque Ltda. Through these documents, financing was made available for the inland portion of the shipment as well as the transportation of the coffee from Colombian ports to the United States.

FABC agreed to finance under letters of credit the inland transportation of coffee. Under the financing arrangement pertaining to inland transportation, FABC would issue a letter of credit for the account of Colombian in favor of Duque Ltda. which would be payable against the inland (truck) bill of lading issued at the Duque Ltda. mill. Duque Ltda. would then present to a bank in Colombia the bill of lading and an invoice. Upon notification of presentment to the Colombian bank, FABC would authorize the Colombian bank to make payment to Duque Ltda. FABC would then charge the account of Colombian for the amount. The inland bills of lading financing was for 85 percent of the coffee value; it was limited to an aggregate credit line of $4 million and made payable within 60 days which ordinarily was the maximum time that it took to ship the coffee from, the mill to the port.

FABC also provided financing with respect to the oceangoing portion of the shipment for 100 percent of the coffee value. The financing was advanced against ocean bills of lading issued by a steamship company, such as Flota, in a Colombian port. A representative of Colombian would deliver duly endorsed bills of lading to FABC which would then return them to Colombian in exchange for trust receipts which obligated Colombian to pay to FABC any proceeds it received upon the sale of the coffee. Furthermore, by a security agreement perfected by filing, Colombian granted FABC a general security interest in its accounts and inventory.

In or about July of 1982, Banco Nacional, a Colombian bank, collapsed causing liquidity problems for the Duque interests in Colombia. Thereafter, certain coffee proceeds that Colombian had been obligated to remit to FABC under trust receipts were diverted to Colombia. See Affidavit of Rodrigo Munoz, FABC’s officer in charge of the Colombian account at 7. Specifically, $987,000 of the $5 million diversion had been amounts owed FABC on the trust receipts. Id. At one point in July, approximately $9.3 million in financing to Colombian was outstanding.

By mid-November 1982, Colombian had reduced its indebtedness from $9.3 million to $4.4 million. Of the $4.9 million reduction, Colombian made a $2 million cash payment to FABC and supplied current bills of lading for $1.8 million for shipments to Germany and Japan to secure the existing indebtedness owed against overdue trust receipts. In November, FABC agreed to finance a single pre-sold coffee shipment to the United States for $2 million against receipt of seven bills of lading; these are among the bills of lading which Flota claims are fictitious. The bills of lading had been surrendered by FABC for trust receipts. FABC asserts that the decision to provide financing in November of 1982 was based on Colombian’s progress in reducing its indebtedness and Colombian’s plan to negotiate with another bank, Banque Worms, for a $5-10 million line of credit. By late December, the loans that were outstanding had been reduced to approximately $3.9 million. These loans were secured by $1.8 million in current bills of lading and approximately $2.2 million in current trust receipts.

On December 22, 1982, FABC agreed to finance, against bills of lading, another specific shipment of coffee to the United States in the amount of $1.3 million. The financing was conditioned on Colombian’s first supplying ocean bills of lading to cover coffee of a value of $537,000 which had been financed earlier but was covered only by inland bills of lading and on Colombian’s paying $880,000 which was due on existing trust receipts. On December 30, 1982, Colombian paid the $880,000 and delivered the two ocean bills of lading to cover most of the unaccounted-for coffee. However, because the bills of lading covering the shipment for which FABC was going to extend $1.3 million were for a shipment to Japan rather than the United States, as was originally agreed, FABC refused to finance one set of the Japanese destined bills of lading which lacked “on board” stamps.

In anticipation of the expected $1.3 million advance from FABC, Colombian had already drawn on and delivered to another bank, Societe Generale, a check for $653,-000 on December 30, 1982. Although FABC rejected the bills of lading which lacked the appropriate stamps, on January 3, 1983, it advanced Colombian $650,000 to cover the check to Societe Generale. On December 31, 1982, Colombian delivered to FABC three bills of lading with a stated value of $824,000 as a pledge of security for the $650,000 which was advanced on January 3, 1983. The three bills of lading proved to be fictitious.

On January 13, 1983, officials from FABC and Colombian met. Colombian informed plaintiff that on January 14, 1983, it would be paying the $1.8 million secured by bills of lading which had been pledged to FABC in November. (On January 14, 1983, such a payment was made). Colombian also indicated that the $2 million advanced in mid-November would be paid on January 17, 1983. Colombian, however, requested new financing that would enable it to continue its business to facilitate the January 17 repayment. Accordingly, plaintiff agreed tentatively to extend to Colombian $3 million against receipt of new bills of lading which would then be exchanged for trust receipts. Ultimately, however, the ten bills of lading covering coffee with a value of $3,193,000 were never exchanged for trust receipts. The ten bills of lading covered shipments to Europe and Japan but Colombian agreed to replace them with bills of lading covering shipments to the United States within fifteen days. The ten bills of lading pledged by Colombian on January 17, 1983 turned out to be fictitious.

On January 17, Colombian delivered to FABC a $2 million check drawn by General Coffee and made payable to Colombian to be applied to the mid-November $2 million loan. However, as there were insufficient funds in General Coffee’s account, FABC, on January 18, 1983, applied $2 million of the $3 million it had agreed to extend to pay off the November loan. Following the January 1983 financing, FABC made no further loans to Colombian but did collect an additional $818,000.

On May 13, 1983, plaintiff commenced an action against Colombian and others in the Supreme Court of the State of New York, and on May 18, 1983, plaintiff first notified Fireman’s of its alleged loss. Thereafter, on July 8, 1983, FABC commenced the present action against Flota alone. During this time, plaintiff was participating in bankruptcy proceedings in Florida involving the Duque group. On August 10,1983, plaintiff submitted its proof of loss to Fireman’s. Following additional correspondence between the parties, Fireman’s, by letter dated December 2, 1983, informed plaintiff that it could not acknowledge liability. By Memorandum and Order dated May 24, 1984, I granted plaintiff’s motion to add Fireman’s as a defendant. On May 30, 1984, plaintiff filed its Amended Complaint which included claims against Fireman’s for its loss allegedly resulting from its receipt of three bills of lading in December, 1982, and ten bills of lading in January, 1983. In the Second Amended Complaint, plaintiff also seeks to recover for its loss arising from its receipt of the seven bills of lading in November, 1982 and damages for Fireman’s alleged bad faith in processing plaintiff’s claim.

In addition to seeking recovery in an amount equal to the alleged value of the coffee represented by the bills of lading, plaintiff claims also that, in reliance on the bills of lading, it refrained from requiring payment of prior outstanding loans of $457,000. Fireman’s now moves for summary judgment arguing that FABC’s loss is not covered by the bond. For the reasons that follow, Fireman’s motion for summary judgment is denied.

DISCUSSION

The standard governing summary judgment motions is that the movant has the burden of establishing that there exists no disputed material fact and that it is entitled to judgment as a matter of law. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). Summary judgment must be denied if there is a genuine issue of material fact. Id.

A. Fireman’s Liability Under Banker’s Blanket Bond

I.

FABC’s claims against Fireman’s are predicated on Bankers Blanket Bond No. HF 242 1206, Insuring Agreement E. The policy insures plaintiff for:

[A] loss resulting directly from the Insured having, in good faith, for its own account or for the account of others,
(1) acquired, sold or delivered, or given value, extended credit or assumed liability, on the faith of, or otherwise acted upon, any original
(a) Security,
(b) Document of Title, ... which
(i) bears a signature ... which is a
Forgery, or
(ii) is altered, or
(iii) is lost or stolen; ...
(3) acquired, sold, or delivered, or given value, extended credit or assumed liability, on the faith of, or otherwise acted upon, any item listed in (a) through (d) above which is a Counterfeit.

See Affidavit of John J. Morrissey, Exh. A.

Fireman’s moves for summary judgment on plaintiff’s Seventh Claim asserting that even if the bills of lading were forged or counterfeit, plaintiff’s loss did not “result directly” from FABC having acquired or given value or extended credit on the faith of bills of lading which were forgeries or counterfeit. Fireman’s argues that plaintiff’s loss was an unsecured credit loss which took place in July of 1982 and that subsequent transactions were merely part of an effort to reduce gradually or to mitigate the loss and to obtain some type of security for the outstanding unsecured balances. FABC contends that the bond covers its loss because Insuring Agreement E provides also that the insured’s loss is covered if it resulted directly from the bank having “otherwise acted upon” forged or counterfeit bills of lading. The receipt of the fictitious bills of lading was “acted upon,” FABC argues, when further credit was extended to Colombian in January 1983 and when the bank, relying on the bills of lading, abstained from pursuing General Coffee on the check that was written on insufficient funds. Furthermore, FABC asserts that to the extent that Insuring Agreement E is ambiguous, such ambiguity should be construed against the insurer under the doctrine of contra proferentem. See National Screen Service Corp. v. United States Fidelity & Guaranty Corp., 364 F.2d 275, 279 (2d Cir.), cert, denied, 385 U.S. 958, 87 S.Ct. 394, 17 L.Ed.2d 304 (1966).

In opinions relied on by the plaintiff, two different state courts construed Insuring Agreement E or a like provision narrowly holding that the plaintiff’s loss was not caused by the forged documents; instead, these courts held, the loss was due to a bad business deal or credit risk. See Allen State Bank v. Traveler’s Indemnity Co., 270 So.2d 270, 273 (La.App.1972); Texas National Bank v. Fidelity and Deposit Co., 526 S.W.2d 770, 774 (Tex.Civ.App. 1975). In Allen State Bank, after the initial loans were made, the bank accepted, as collateral, promissory notes which proved to be fictitious. The court noted that the bank “gave nothing of value and extended no credit or in fact did anything referred to in coverage (E) predicated upon the fifty-one promissory notes____” 270 So.2d at 273. Thus, the court held that “[t]he bond is not a policy of credit insurance and does not protect the bank when it simply makes a bad business deal. The real cause of the loss ... in this case was [the debtor’s] failure to repay the loan and not any fraud perpetrated on the bank at the time the loan was made.” Id.

In Baltimore Bank & Trust Co. v. United States Fidelity & Guaranty Co., 436 F.2d 743 (8th Cir.1971), however, the opposite result was reached. There, the bank sought to recover for its loss on a loan sustained by reason of its acceptance in connection with the loan of a promissory note later determined to be fictitious. The bank’s lawsuit was based on Insuring Agreement E. The bank customer, over the course of one month, made deposits to his checking account totalling approximately $150,000 and wrote checks for approximately the same amount. Several of the checks which he deposited were later returned to the bank unpaid. As a result, the customer’s account became overdrawn in the amount of approximately $40,000. The customer, being unable to reimburse the bank for the deficiency, obtained two loans from the bank to cover it. One loan, obtained in March for approximately $31,000, was based on a 30-day promissory note. A second loan, obtained in April in the amount of approximately $8,000, was secured by a pledge of 50 shares of stock in a company substantially controlled by the customer. After being pressed to repay the loan but being unable to do so, the customer was permitted by plaintiff to “replace or pay off” the loans with two new notes supported by different collateral. The security for the prior notes was returned to the bank customer. Some of the new collateral in the form of promissory notes turned out to be forgeries. Id. at 745.

The Eighth Circuit, affirming the District Court’s grant of summary judgment to the bank, reasoned that the “effect of the transaction was to pay off the original notes by giving two new notes secured by different collateral. The transaction was in the nature of a novation and it was the substitution of a new legal obligation for an old one.” Id. at 746. The Court held that the Insuring Agreement should be construed broadly and in favor of the insured and noted that the term “ ‘blanket bond’ indicates wide coverage.” Id. The Court also noted that even if the debt were considered pre-existing, the bank’s acceptance of the fictitious notes is nevertheless the extension of value within the meaning of the Uniform Commercial Code § 3-303. Id.

Fireman’s argues that the holding in Baltimore Bank & Trust Co. does not apply because a novation did not occur when the plaintiff accepted the fictitious bills of lading since at all times the plaintiff reserved the right to call the entire debt into default. A novation is the “[s]ubstitution of [a] new contract between [the] same or different parties.” Black’s Law Dictionary 959 (5th ed. 1979). The elements of novation are “(1) a previously valid obligation; (2) an agreement of all parties to the new contract; (3) extinguishment of the old contract; and (4) a valid new contract supported by consideration.” See VJK Productions, Inc. v. Friedman Meyer Productions, Inc., 565 F.Supp. 916, 921 (S.D. N.Y.1983). Whether a novation has in fact occurred is a factual question the resolution of which depends on all the circumstances. See Capital National Bank v. Hutchinson, 435 F.2d 46, 50 (5th Cir.1970).

Three of the fictitious bills of lading received by FABC were delivered on December 81, 1982, in return for which the plaintiff credited the demand account of Colombian Coffee in the amount of $650,-000. The $650,000 credit had its origins in FABC’s agreement on December 22, 1982 to provide $1.3 million in financing to Colombian, which agreement never came to fruition due to Colombian’s tender of nonconforming bills of lading. However, FABC ultimately did loan Colombian $650,-000 against the three bills of lading in order to cover a check delivered to Societe Generale. The three bills of lading, with a stated value of $824,000, were pledged on December 31, 1982 to secure the loan for $650,000 made on January 3, 1983. I conclude that with respect to the three bills of lading received on December 31, 1982, plaintiff’s loss would appear to be covered by the blanket bond issued by Fireman’s. FABC’s loss resulted directly from FABC having, in good faith, “given value, extended credit or assumed liability, on the faith of, or otherwise acted upon” its receipt of the three bills of lading.

With respect to the seven bills of lading received in November of 1982, FABC has not suffered a loss because Colombian satisfied its $2 million debt to FABC out of the $3 million loaned in January of 1983. However, if under all the facts, it is determined that no novation occurred in January, then it may well be that plaintiff can recover under the bond for any loss resulting from its receipt in November of the seven bills of lading.

The loan made on January 17, 1983 was made with the understanding that Colombian, which was in the process of reducing its indebtedness to FABC, would use two of the three million dollars to repay the $2 million unsecured loan made in November. Arguably, FABC’s loss directly resulted from its receipt of the bills of lading if, in fact, it failed to pursue General Coffee on the $2 million check returned for insufficient funds in reliance on its receipt of apparently genuine bills of lading or if it is ultimately determined that a novation occurred on January 18,1983. In either case, FABC’s loss may be brought within the purview of Clause E to the Banker’s Blanket Bond.

Thus, as to the $650,000 advanced on January 3, 1983 and the $1 million advanced on January 18, 1983, FABC clearly gave new value on the faith of written instruments which proved to be fictitious. A question remains, however, as to whether FABC extended credit or value to Colombian or “otherwise acted upon” its receipt of the bills of lading when it advanced Colombian $2 million on January 18, 1983. If not, then factual issues surrounding the November transaction will require resolution.

II.

Fireman's argues also that FABC did not rely in good faith upon the bills of lading. Clause E provides that in order for FABC’s loss to be covered by the Banker’s Blanket Bond, it must result “directly from the Insured having, in good faith,” relied on the documents of title it received. See Marsh Investment Corp. v. Langford, 554 F.Supp. 800, 806 (E.D.La.1982) (“selective, calculated ignorance” shows a lack of good faith reliance), aff'd in part and vacated in part, 721 F.2d 1011 (5th Cir.1983).

Fireman’s asserts that FABC had a duty to inquire into the genuiness of the bills of lading because plaintiff’s receipt of the documents was not a part of an “arms-length financing of coffee imports.” It appears to be undisputed that FABC did not attempt to present the bills of lading at the port of destination or retain a shipping agency to do so. Similarly, FABC did not make inquiries or seek information relating to the coffee shipments supposedly represented by the bills of lading. Fireman’s cites to the overall financial instability of Colombian at or about the time of the loans as further support for its proposition that FABC had a duty of inquiry which it breached. By way of explanation for FABC’s inaction, Fireman’s argues that FABC already suffered its loss and therefore had nothing to lose by accepting the bills of lading.

Good faith has been defined in the Uniform Commercial Code § 1-201(19) as meaning “honesty in fact in the conduct of transaction concerned.” See Chemical Bank v. Haskell, 51 N.Y.2d 85, 91-92, 411 N.E.2d 1339, 432 N.Y.S.2d 478 (1980) (subjective good faith test). Summary judgment is generally inappropriate when the outstanding issue or question involves intent or motive. See Landmark Land Co. v. Sprague, 701 F.2d 1065, 1070 (2d Cir. 1983). Under the circumstances of this case, factual issues clearly remain as to FABC’s motive. As plaintiff notes, several banks in addition to FABC accepted fictitious bills of lading in connection with loans made to Colombian.

Contrary to Fireman’s argument, FABC did not necessarily act in bad faith when it extended credit to Colombian despite Colombian’s diversion of funds to Colombia. Given the history of a banking relationship between FABC and Colombian and the reduction of Colombian’s indebtedness to FABC, it may not have been imprudent for FABC to extend Colombian further financing. In addition, it appears that after learning of the diversion, FABC initiated an inquiry into the business of the Duque family and was reassured of their good reputation and importance in Colombia. See Affidavit of Rodrigo Munoz at 8. I note also that after learning of the diversion and faced with a commercial decision similar to that faced by FABC, other banks loaned Colombian additional amounts.

On the whole, then, Fireman’s has not made a showing sufficient to raise any doubts as to FABC’s good faith. In fact, on the balance, from the parties’ submissions, it would appear that FABC did not have reason to be and in fact was not suspicious of the genuiness of the bills of lading.

With respect to FABC’s actions once it received the bills of lading, I reject Fireman’s offer as evidence that FABC acted in bad faith the fact that FABC held the bills of lading for several months. First, holding the bills of lading is irrelevant to the issue of whether FABC acted in good faith when it agreed to provide financing based on the bills of lading. Second, as FABC suggests, the use of guarantees obviates the need for simultaneous surrender of the bills of lading upon delivery of the goods. Finally, Fireman’s does not suggest, and it is unlikely the case, that the reasonable commercial practice requires an inquiry into the genuiness of the bills of lading or the shipment that the bills purportedly represent. Accordingly, Fireman’s motion for summary judgment dismissing plaintiff’s claims against Fireman’s on the Banker’s Blanket Bond is denied.

B. FABC’s Claim of Bad Faith

In its “Eighth Claim, Against Fireman’s,” FABC alleges that Fireman’s breached its implied obligation to conduct itself in good faith toward the plaintiff by failing to promptly consider plaintiff’s claim and by making excessive demands for documentation in support of plaintiff’s claim after concluding to deny plaintiff’s claim. Fireman’s moves pursuant to Fed. R.Civ.P. 12(b)(6) and 56(b) to dismiss the Eighth Claim.

In order to establish bad faith on the part of the insurer, an “extraordinary showing of a disingenuous or dishonest failure to carry out a contract” must be demonstrated. See Gordon v. Nationwide Mutual Insurance Co., 30 N.Y.2d 427, 285 N.E.2d 849, 334 N.Y.S.2d 601, 609 (1972), cert, denied, 410 U.S. 931, 93 S.Ct. 1374, 35 L.Ed.2d 593 (1973). FABC discovered its loss on May 13, 1983 and notified Fireman’s of its loss on May 19, 1983. Its proof of loss was filed on August 10, 1983 and by letter dated September 28, 1983, counsel for plaintiff requested that Fireman’s indicate its position on coverage. By letter dated December 2, 1983, Fireman’s indicated to plaintiffs counsel that it could not acknowledge plaintiffs right to recovery under the terms of the bond. Plaintiff asserts that Fireman’s reached this conclusion prior to its December 2,1983 letter but failed to so inform plaintiff.

With the standard governing summary judgment motions and the nature of contractual bad faith claims in mind, I conclude, after reviewing the relevant affidavits and documents that there is no factual basis to support plaintiff’s contention that the requested documentation was frivolously sought or unnecessary or that Fireman’s was dilatory in informing plaintiff of its decision on coverage. Fireman’s motion is granted and plaintiff’s Eighth Claim is dismissed.

Accordingly, Fireman’s motion for summary judgment is denied but its motion to dismiss plaintiff’s Eighth Claim, against Fireman’s alleging bad faith, is granted.

SO ORDERED.

      . The amounts owing in excess of the $8 million line of credit were advanced after Colombian was granted in mid-July 1982 a $1.5 million credit overline. The overline was extended to finance a particular shipment of coffee pre-sold to General Foods in excess of Colombian’s usual export quota.

      . Contrary to prior practice, FABC did not surrender the bills against trust receipts and in January of 1984, Colombian paid $1.8 million against the surrender of the bills.

      . The Ninth Claim in plaintiffs Second Amended Complaint, filed pursuant to Stipulation, is based on the seven November 1982 bills of lading which, plaintiff asserts, were claimed by Flota to be fictitious in an October 24, 1984 deposition of Salvatore A. Conte, Flota’s general traffic manager in charge of documentation.

      . The rule of contra proferentem is not applicable in this case because it is only employed to resolve ambiguity after all other aids to construction are exhausted. See Schering Corp. v. Home Insurance Co., 712 F.2d 4, 10 n. 2 (2d Cir.1983).

      . At the time of the Baltimore Bank & Trust Co. case, Insuring Agreement E provided coverage for losses occurring "through” rather than "resulting directly from” the insured’s having acted upon a forged or counterfeit security or document of title. "Through” has been defined as "by means of, in consequence of, by reasons of, by the intermediary of, and because of.” See Texas National Bank, 526 S.W.2d at 774 (citation omitted). “Resulting directly from” is not sufficiently dissimilar to provide a basis upon which to distinguish Baltimore Bank & Trust Co. from the instant situation.