United States District Court, Southern District of New York
April 18, 1990
STEPHEN J. DILORENZO AND HELINDA DILORENZO, PLAINTIFFS,
EDWARD HOLLE INSURANCE AGENCY, LOUIS CARLETTO AND THE TRAVELERS INDEMNITY COMPANY, DEFENDANTS.
The opinion of the court was delivered by: Robert P. Patterson, Jr., District Judge.
OPINION AND ORDER
Plaintiffs have sued defendants for negligence and breach of
contract with respect to an excess liability insurance policy
issued by defendant Travelers Indemnity Company ("Travelers").
In their complaint, plaintiffs claim that defendants are liable
for a $200,000 gap in coverage between the Travelers policy and
plaintiffs' primary liability policy. Travelers has moved for
summary judgment pursuant to Rule 56 of the Federal Rules of
Civil Procedure. Plaintiffs have cross-moved for summary
judgment on the first and second causes of action of the
In 1983, Travelers issued a PLUS excess liability insurance
policy to plaintiffs Stephen and Helinda DiLorenzo. The policy
was renewed annually through November 18, 1986. The parties
dispute the events leading up to the issuance of the policy,
but the following facts appear to be undisputed.
Defendant Louis Carletto is an insurance broker employed by
the Edward Holle Insurance Agency ("Holle"), which is a
sole-proprietorship operated by defendant Edward Holle and an
authorized agent of Travelers. Before 1983, Holle, acting
through Carletto, had sold at least one other insurance policy
to plaintiffs. In or about September 1983, plaintiff Stephen
DiLorenzo, after discussions with Carletto, submitted to Holle
a written application for a Travelers PLUS excess liability
policy on the Travelers application form. The policy for which
Mr. DiLorenzo applied was an umbrella policy that would insure
plaintiffs for liability on their home and two automobiles up
to $1,000,000, subject to certain deductible amounts. The
application contained the following language:
This policy is subject to the deductible amounts
shown below. It is understood and agreed by the
insured that primary insurance policies applicable
to all exposures listed in Item 3 must be
maintained with limits equal to or greater than
the deductible amounts. Failure to do so will
result in a serious gap in coverage.
Auto Liability $300,000 each occurrence
All Other Liability $100,000 each occurrence
If the insured maintains primary auto insurance
with limits of $250,000/$500,000 bodily injury and
$25,000 property damage, then the deductible
amount applicable to auto liability shall be such
Mr. DiLorenzo signed the application form directly below a
declaration that he had read the application and understood the
applicable deductible amounts. Holle forwarded the application
to Travelers. After normal processing, Travelers issued the
umbrella policy for which Mr. DiLorenzo had applied. Holle did
not participate in the underwriting of the policy.
In language identical to the above-quoted portion of the
application form, Item 6 of the Declarations page of the
Travelers policy issued to plaintiffs stated that the policy
was subject to a deductible of "$300,000 each occurrence" for
automobile liability. Following 1983, the DiLorenzos received
annual policy renewal notices for their Travelers PLUS excess
liability policy, each of which contained language stating:
Important reminder — your PLUS policy provides
excess insurance. You must maintain underlying
insurance policies with limits at least equal to
the PLUS policy deductible amounts in order to
avoid a serious gap in coverage.
Since 1980, plaintiffs had purchased primary automobile
liability insurance from a different insurer, Allstate
Insurance Company ("Allstate"). Plaintiffs had not obtained
this policy through Holle or Carletto. The Declaration Sheet
for the plaintiffs' Allstate policy indicated that that policy
provided coverage of $100,000 each person and $300,000 each
In August, 1986, plaintiffs' car was involved in an accident
which resulted in serious injury to one Dawn Keske. Ms. Keske
filed a lawsuit in New York Supreme Court against Mr.
DiLorenzo. After a jury verdict of liability on the part of Mr.
DiLorenzo, the parties to that action settled the damages issue
for an amount in excess of $764,000. Allstate contributed
$100,000 pursuant to plaintiffs' primary automobile liability
policy, while Travelers disclaimed liability for any amounts
below $300,000, resulting in a gap of $200,000 in plaintiffs'
coverage. This lawsuit followed.
In an affidavit submitted in connection with this motion, Mr.
DiLorenzo states that, before he submitted the application for
the Travelers policy, Carletto had represented to plaintiffs
that the policy would give them coverage of up to $1,000,000
for their automobiles. In an affidavit of his own, Carletto
states that neither he nor Holle ever advised plaintiffs that
they were buying full insurance coverage on their automobiles
up to $1,000,000. Mr. DiLorenzo also contends that plaintiffs
gave Carletto a copy of their Allstate insurance policy
Declarations Sheet, and that Carletto told them that there
appeared to be no problem with coverage. Carletto denies that
plaintiffs ever gave him their Allstate policy or any portion
Travelers now moves for summary judgment dismissing
plaintiffs' claims against it or, in the alternative, summary
judgment on its cross-claim against Holle and Carletto for
indemnification. Plaintiffs cross-move for summary judgment in
their favor on their claims against Holle and Carletto.
Summary judgment under Fed.R.Civ.P. 56 will be granted only
if the movant shows that (1) there is no genuine issue as to
any material fact, and (2) movant is entitled to judgment as a
matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 106
S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In
deciding a motion for summary judgment, the "fundamental maxim"
is that the court "`cannot try issues of fact; it can only
determine whether there are issues to be tried.'" Donahue v.
Windsor Locks Bd. of Fire Comrs, 834 F.2d 54, 58 (2d Cir. 1987)
(quoting Heyman v. Commerce & Industry Ins. Co., 524 F.2d 1317,
1319-20 (2d Cir. 1975)). "Moreover, in determining whether a
genuine issue has been raised, a court must resolve all
ambiguities and draw all reasonable inferences against the
moving party." Id. at 57.
With respect to Count I of the complaint, which alleges that
defendants Holle and Carletto were negligent in obtaining the
coverage requested by plaintiffs, there are unresolved issues
of fact which preclude the entry of summary judgment. An
insurance broker, such as Holle and Carletto, must act with
reasonable care in obtaining insurance for the insured. 68 New
York Jurisprudence 2d Insurance § 440 at
545-46 (1989); Neil Plumbing & Heating Construction Corp. v.
Providence Washington Insurance Co., 125 A.D.2d 295, 508
N YS.2d 580 (2d Dept. 1986); MacDonald v. Carpenter & Pelton,
Inc., 31 A.D.2d 952, 298 N.Y.S.2d 780 (2d Dept. 1969); Blonsky
v. Allstate Insurance Co., 128 Misc.2d 981, 491 N.Y.S.2d 895,
897 (1985). See also Lazzara v. Howard A. Esser, Inc.,
802 F.2d 260, 266 (7th Cir. 1986) (applying Illinois law). Whether a
person acted reasonably is an issue of fact for the jury. Since
the parties dispute whether Holle and Carletto were the agents
of Travelers or of plaintiffs, whether plaintiffs asked
Carletto to obtain continuous coverage up to $1,000,000, rather
than an excess policy providing coverage only over and above
$300,000, and whether Carletto was made aware of the applicable
limits of the Allstate policy, the Court cannot hold as a
matter of law that Holle and Carletto did or did not fulfill
their duty to act with reasonable care. Accordingly,
plaintiffs' cross-motion for summary judgment is denied as to
Count I of the complaint.
With respect to Count II of the complaint, which alleges that
Holle and Carletto breached a contract with plaintiffs to
obtain continuous coverage up to $1,000,000, summary judgment
is also inappropriate. The parties dispute whether they ever
made such an agreement. While Mr. DiLorenzo asserts in his
affidavit that plaintiffs asked Carletto to obtain a policy
that would provide full automobile insurance coverage up to
$1,000,000, Carletto, in his affidavit, categorically denies
that plaintiffs ever made such a request. Whether the alleged
contract ever existed, then, is in dispute and Count II cannot
be decided as a matter of law. Plaintiffs' motion for summary
judgment, then, is also denied as to Count II of the complaint.
Count III alleges that Travelers breached a duty and a
contract with plaintiffs by issuing the excess insurance policy
when it knew or should have known that the underlying Allstate
policy was insufficient. Plaintiffs have come forward with no
evidence that Travelers knew anything at all about the Allstate
policy, and the language of the Travelers policy is clear and
unequivocal that it is the duty of the insured, not Travelers,
to maintain adequate underlying coverage. Nor have plaintiffs
cited any authority for the proposition that Travelers had a
duty to determine the sufficiency of plaintiffs' underlying
coverage or to discover the gap in coverage. Indeed, in
Lazzara v. Howard A. Esser, Inc., 802 F.2d at 274 (applying
Illinois law), cited by plaintiffs, the court stated "[a]n
insurer . . . does not have the duty of reviewing the adequacy
of an insured's coverage, even when it knows of facts that
indicate that the coverage is inadequate." Finally, plaintiffs
do not dispute that Travelers issued the policy for which, with
the help of Holle and Carletto, they applied.
Plaintiffs argue, however, that the Travelers policy's
requirement of primary coverage of "$300,000 each occurrence"
is ambiguous, because it is unclear whether this requirement is
met by plaintiffs' Allstate policy, which provided coverage in
the amount of "$100,000 each person — $300,000 each
occurrence."*fn3 However, even reading this ambiguity in
plaintiffs' favor does not make Travelers liable under its
policy, since Travelers is only obligated by the terms of its
policy to pay for damages in excess of the "minimum retained
limit." The "minimum retained limit" is, in this case,
$300,000.*fn4 Thus, whether plaintiffs are held to have met
the deductible requirement or not, Travelers is still only
liable under the policy for damages in excess of
$300,000, and are not contractually obligated to pay for the
$200,000 difference between Allstate's obligation under its
policy and the minimum retained limit of the Travelers policy.
Accordingly, as to Count III of the complaint, Travelers'
motion for summary judgment is granted.
In Count IV of the complaint, plaintiffs allege that
Travelers is vicariously liable for the negligence of Holle and
Carletto. The parties agree that an insurance broker can be the
agent for both the insurer and the insured, Rose Inn Corp. v.
National Union Fire Insurance Co., 229 A.D. 349, 243 N.Y.S. 249
(3d Dept. 1930), aff'd, 258 N.Y. 51, 179 N.E. 256 (1932), and
that the insurer may be held liable for the acts of its agent
committed in the course of the agency. See Neil Plumbing &
Heating Construction Corp. v. Providence Washington Ins., 508
N YS.2d at 582, citing Brown v. Poritzky, 30 N.Y.2d 289, 332
N YS.2d 872, 283 N.E.2d 751 (1972). Travelers argues that it
cannot be held liable for the acts of Holle and Carletto
because their acts in this case were not within the scope of
their agency relationship with Travelers. The facts necessary
to determine Travelers' liability, however, are in dispute. The
parties have submitted affidavits which disagree, for example,
over what actions Holle and Carletto took, and whether they
were acting as agents for plaintiffs or Travelers when they
took those actions. Accordingly, summary judgment is
inappropriate at this time as to Count IV of the complaint.
Finally, Travelers argues that it should be granted summary
judgment on its cross-claim for indemnification against Holle
and Carletto if it is found to be liable to plaintiffs. Under
Connecticut law,*fn5 in order to be entitled to indemnity, one
must establish that (1) the other tortfeasor was negligent, (2)
the other tortfeasor's negligence was the immediate cause of
the injury, (3) the other tortfeasor was in control of the
situation to the exclusion of the party seeking indemnity, and
(4) the party seeking indemnity was unaware of the negligence,
had no reason to anticipate it, and could reasonably rely on
the other tortfeasor not to be negligent. Kaplan v. Merberg
Wrecking Corp., 152 Conn. 405, 415, 207 A.2d 732 (1965). Issues
of fact exist with respect to these requirements and,
accordingly, Travelers' motion for summary judgment on its
cross-claim for indemnification is denied.
Travelers' motion for summary judgment is granted in part and
denied in part. Plaintiffs' cross-motion for summary judgment
is denied in its entirety. Plaintiffs' motion to amend the
caption is granted.