56 N.Y.2d 650 (1982)
If the language of an insurance policy is susceptible to two reasonable interpretations, a court may consider extrinsic evidence to determine the parties’ intent at the time of contracting.
Summary
This case addresses whether summary judgment was appropriately granted to Hartford and INA, insurance companies, regarding coverage under excess bonds issued to the Newin Corporation. Newin Corporation sought to recover losses sustained after advancing funds to cover losses caused by the bankruptcy of Ira Haupt & Co. The dispute centered around the interpretation of a “deductible” clause in the Newin Bonds. The insurers argued the clause was a standard excess clause, requiring exhaustion of Haupt’s primary fidelity bonds before the Newin bonds were triggered. The New York Court of Appeals reversed the Appellate Division’s order, holding that the clause was ambiguous and that extrinsic evidence regarding the parties’ intent should be considered, thus precluding summary judgment.
Facts
The “Salad-oil Swindle” led to the collapse of Allied Crude Vegetable Oil Refining Corp. and the bankruptcy of Ira Haupt & Co.
New York Stock Exchange, Inc. and its subsidiary, Newin Corporation, advanced $9.5 million to Haupt’s customers who suffered losses due to the bankruptcy.
Haupt had fidelity bonds to protect its customers from fraudulent acts.
Hartford and INA issued “excess” bonds (Newin Bond I and Newin Bond II) to Newin Corporation to cover losses exceeding Haupt’s coverage.
Procedural History
The plaintiffs sued Hartford and INA to recover under the Newin Bonds.
The defendants Hartford and INA moved for partial summary judgment, which was granted by the lower court.
The Appellate Division affirmed the grant of partial summary judgment.
The New York Court of Appeals reversed the Appellate Division’s order, denying the motion for partial summary judgment.
Issue(s)
Whether the “deductible” clause in the Newin Bonds was unambiguous and required the exhaustion of the face amount of Haupt’s primary fidelity bonds before coverage under the Newin Bonds was triggered, thereby entitling Hartford and INA to summary judgment.
Holding
No, because the deductible clause was ambiguous, and extrinsic evidence was needed to determine the parties’ intent, precluding summary judgment.
Court’s Reasoning
The court reasoned that the rights and obligations of parties under insurance contracts are generally determined by the specific language of the policies. However, if the policy language is susceptible to two reasonable meanings, extrinsic evidence of the parties’ intent at the time of contracting is admissible.
The court found that the phrase “available to cover such loss” in the deductible clause was ambiguous. Hartford and INA argued it meant the face amount of Haupt’s bonds had to be exhausted, while Newin Corporation argued it meant funds actually available from Haupt’s bonds to cover plaintiffs’ losses.
Plaintiffs submitted affidavits from individuals involved in negotiating and drafting the Newin Bonds, asserting that the clause was intended to permit recovery after funds were no longer available from Haupt, even if the face value of Haupt’s bonds was not exhausted.
Because the plaintiffs demonstrated that the deductible clause was, at the very least, ambiguous, a material question of fact regarding the parties’ intent was presented. Therefore, the defendants’ motions for summary judgment should have been denied.
The court cited Hartford Acc. & Ind. Co. v Wesolowski, 33 NY2d 169, 172, reiterating the principle that extrinsic evidence is admissible when policy language is susceptible to multiple interpretations. The court also noted that, as in Glick & Dolleck v Tri-Pac Export Corp., 22 NY2d 439, 441, the presence of a factual dispute precludes summary judgment.