The opinion of the court was delivered by: Robert P. Patterson, Jr., District Judge.
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.
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 ...