Term “Entrustment” in a Policy Exclusion (In the Context of Entrustment of Property to Another) Interpreted to Encompass Entire Leased Premises

The First Department determined that preclusion of coverage for “dishonest or criminal acts” committed by persons to whom the subject property was “entrusted” encompassed the removal of fixtures from premises leased by the insured:

Plaintiffs leased the insured premises to a tenant, which converted the premises into a youth hostel, removed the kitchen cabinets and appliances to turn the kitchens into additional dormitory areas, and, when the hostel closed, did not return the cabinets or appliances … . Plaintiffs argue that the term “entrustment” in the policy pertains solely to chattels and not to fixtures … . However, in Abrams v Great Am. Ins. Co. (269 NY 90, 92 [1935]), the Court of Appeals explained that an insurance contract’s language “must be given its ordinary meaning,” and “common words” in a policy such as entrusted are not “used as words of art with legalistic implications” (id.). Accordingly, Abrams taught, when a contract indicates that the property is entrusted, it can be understood that the parties mean that possession of property is willingly “surrender[ed] or deliver[ed] or transfer[red],” to be “used for the purpose intended by the owner . . . . The controlling element is the design of the owner rather than the motive of the one who obtained possession” (id.). Here, we find that the terms of the policy at issue do not limit what can be entrusted, that property may be entrusted to another under a triple net lease agreement, and that the entrustment refers to the entirety of the premises unless otherwise specified.  Lexington Park Realty LLC v National Union Fire Ins Co of Pittsburgh PA, 2014 NY Slip Op 05817, 8-14-14