Court Opinion

ID: 2807648
Source: CourtListenerOpinion
Date Created: 2015-06-11 20:01:45.960537+00
Date Added: 2024-06-11T08:34:01.271346
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT

                                     _____________

                                      No. 14-3624
                                     _____________

                             PNY TECHNOLOGIES INC;
                           PNY TECHNOLOGIES EUROPE,
                                                Appellants

                                             v.

                     TWIN CITY FIRE INSURANCE COMPANY

                     On Appeal from the United States District Court
                               for the District of New Jersey
                           (District Court No.: 2-11-cv-04647)
                      District Judge: Honorable Stanley R. Chesler

                       Submitted under Third Circuit LAR 34.1(a)
                                   On June 1, 2015

                              (Opinion filed: June 11, 2015)

          Before: RENDELL, HARDIMAN, and VANASKIE, Circuit Judges

                                      O P I N I O N*

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
RENDELL, Circuit Judge:

       Appellants PNY Technologies, Inc., and PNY Technologies Europe (collectively,

“PNY”) appeal from the District Court’s order granting summary judgment to Appellee

Twin City Fire Insurance Company (“Twin City”) in a coverage dispute regarding

insurance policies (the “Policies”) that Twin City issued to PNY. The District Court held

that Twin City was not obligated to cover PNY’s liabilities under certain contracts

because the Policies specifically excluded coverage for contract liability. We will affirm.

       The Chief Financial Officer (“CFO”) of PNY Europe entered into contracts for

foreign exchange transactions with four banks. The contracts resulted in substantial

losses and the banks demanded payment from PNY pursuant to those contracts. PNY

notified Twin City of the banks’ demands and requested coverage, urging that its CFO

did not have authority to enter into such foreign exchange contracts, and, as a result, the

contractual liability exclusion in the Policies should not apply. That exclusion bars

coverage for any claim “based upon, arising from, or in any way related to any actual or

alleged . . . liability under any contract or agreement, provided that this exclusion shall

not apply to the extent that liability would have been incurred in the absence of such

contract or agreement.” (J.A. 69; J.A. 116.) Twin City denied coverage in reliance on,

inter alia, this exclusion.

        PNY brought this action alleging breach of contract and seeking a declaratory

judgment that Twin City was obligated to provide coverage under the Policies. The

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District Court granted summary judgment to Twin City because it held that the

contractual liability exclusion barred PNY’s claims.1

         “We review a grant of summary judgment de novo,” Post v. St. Paul Travelers Ins.

Co., 691 F.3d 500, 514 (3d Cir. 2012), and “[w]e review the District Court’s

interpretation of the insurance policies de novo,” Alexander v. Nat’l Fire Ins. of Hartford,

454 F.3d 214, 219 n.4 (3d Cir. 2006). Under New Jersey law,2 “[i]nsurance

policies . . . ‘will be enforced as written when [their] terms are clear.’” Mem’l Props.,

LLC v. Zurich Am. Ins. Co., 46 A.3d 525, 532 (N.J. 2012) (quoting Flomerfelt v.

Cardiello, 997 A.2d 991, 996 (N.J. 2010)). “Exclusionary clauses are presumptively

valid and are enforced if they are ‘specific, plain, clear, prominent, and not contrary to

public policy.’” Flomerfelt, 997 A.2d at 996 (quoting Princeton Ins. Co. v. Chunmuang,

698 A.2d 9, 17 (N.J. 1997)).

         PNY argues that the contractual liability exclusion does not apply because the

CFO was not authorized to execute the foreign exchange contracts and, as a result, the

contracts are invalid. This argument lacks merit because the exclusion applies to “any

actual or alleged . . . liability under any contract.” The exclusion thus encompasses any

alleged liability under any contract. PNY’s alleged liability stems from the contracts and,

1
  The District Court also held that PNY’s claims did not qualify for coverage because
they were not “entity claims for wrongful acts” as defined by the Policies. We need not
reach the entity claim issue because the contractual liability exclusion provides sufficient
basis to affirm.
2
    The parties agree that New Jersey law governs the Policies.
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even if those contracts were deemed invalid, PNY’s liability would still have been

alleged under the contracts and the contractual liability exclusion would still apply.

       PNY further urges that the exclusion does not apply because PNY’s liability is

based on the CFO’s malfeasance, not on the contracts. In support of this argument, PNY

relies upon Houbigant, Inc. v. Fed. Ins. Co., 374 F.3d 192 (3d Cir. 2004), in which we

held that a contractual liability exclusion did not apply to tort claims involving trademark

infringement. In that case, the insurer, Federal Insurance (“Federal”) had insured two

entities (the “Insureds”) whom Houbigant had licensed to manufacture and sell its

products and use its trademarks. Houbigant filed claims against the Insureds alleging that

they had breached the license agreements and infringed Houbigant’s trademarks. Federal

denied coverage to the Insureds, who then assigned their indemnification rights to

Houbigant. When Houbigant sued Federal, Federal argued that the insurance policy at

issue excluded coverage for injury “arising out of breach of contract.” Id. at 202.

Applying New Jersey law, we held that the exclusion did not apply to Houbigant’s tort

claims because “[a]lthough the relationship between Houbigant and the Insureds is

contractual, the actions of the Insureds were independently tortious.” Id. at 203 (footnote

omitted). PNY’s reliance on Houbigant is misplaced because there the liability arose out

of the tortious acts; here the liability relates solely to losses under the contracts. Thus, the

contractual liability exclusion squarely applies.

       Accordingly, we will affirm.

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