Home by letter, of the commencement of the Marchiondo Action.
American Home created a claims file on the Marchiondo Action on
September 15, 1975, and maintained that file throughout the
litigation. In March 1983, the Marchiondo jury returned a
verdict in favor of Journal Publishing on the libel claims.
On March 8, 1984, Journal Publishing made a written claim
against American Home for indemnification under the umbrella
policies of its legal costs incurred in the defense of the
Marchiondo Action. On March 31, 1984, Mr. Marchiondo's appeal
was denied and that action was concluded. American Home
notified Journal Publishing by letter on January 24, 1985 that
it denied coverage for legal fees under the umbrella policies.
Plaintiffs commenced this action on June 15, 1987, for recovery
of over $2.5 million in legal costs incurred from 1975 through
1984 in defending the Marchiondo Action. Defendants American
Home have now moved for summary judgment, claiming that
plaintiffs failed to comply with the twelve month definite
claim condition of the policies and thus cannot recover.
Plaintiffs have cross-moved for summary judgment, arguing that
the policies cover defense costs and thus defendants are
obligated to reimburse them.
Rule 56(c) provides that summary judgment "shall be rendered
forthwith if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to
judgment as a matter of law." "'Summary judgment is appropriate
when, after drawing all reasonable inferences in favor of the
party against whom summary judgment is sought, no reasonable
trier of fact could find in favor of the non-moving party.'"
Horn & Hardart Co. v. Pillsbury Co., 888 F.2d 8, 10 (2d Cir.
1989), quoting Murray v. National Broadcasting Co.,
844 F.2d 988, 992 (2d Cir.), cert. denied, 488 U.S. 955, 109 S.Ct. 391,
102 L.Ed.2d 380 (1988).
The substantive law governing the case will identify those
facts which are material, and "[o]nly disputes over facts that
might affect the outcome of the suit under the governing law
will probably preclude the entry of summary judgment. . . .
While the materiality determination rests on the substantive
law, it is the substantive law's identification of which facts
are crucial and which facts are irrelevant that governs."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct.
2505, 2510, 91 L.Ed.2d 202 (1986). "[T]he judge's function is
not himself to weigh the evidence and determine the truth of
the matter but to determine whether there does indeed exist a
genuine issue for trial." Id. at 249, 106 S.Ct. at 2510; see
also R. C. Bigelow, Inc. v. Unilever N.V., 867 F.2d 102, 107
(2d Cir.), cert. denied, sub nom. Thomas J. Lipton, Inc. v.
R.C. Bigelow, Inc., ___ U.S. ___, 110 S.Ct. 64, 107 L.Ed.2d 31
The party seeking summary judgment "always bears the initial
responsibility of informing the district court of the basis for
its motion" and identifying which materials it believes
"demonstrates the absence of a genuine issue of material fact."
Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548,
2552, 91 L.Ed.2d 265 (1986); see also Trebor Sportswear Co. v.
Limited Stores, Inc., 865 F.2d 506, 511 (2d Cir. 1989). "[T]he
burden on the moving party may be discharged by 'showing' —
that is, pointing out to the district court — that there is an
absence of evidence to support the nonmoving party's case."
Celotex, supra, 477 U.S. at 325, 106 S.Ct. at 2553. Indeed,
once a motion for summary judgment is properly made, the burden
then shifts to the nonmoving party, who "must set forth facts
showing that there is a genuine issue for trial." Anderson,
supra, 477 U.S. at 250, 106 S.Ct. at 2511. The nonmoving party
"must do more than simply show that there is some metaphysical
doubt as to the material facts." Matsushita Elec. Industrial
Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348,
1355, 89 L.Ed.2d 538 (1986) (citations omitted).
In general, where the Court is faced with an issue of
contract interpretation in a motion for summary judgment, it
will analyze the language of the contract according to "its
plain meaning giving due consideration to 'the surrounding
circumstances [and] apparent purpose which the parties seek to
accomplish.'" Thompson v. Gjivoje, 896 F.2d 716, 721 (2d Cir
1990), quoting William C. Atwater & Co. v. Panama R.R. Co.,
246 N.Y. 519, 524, 159 N.E. 418 (1927). "In an action on a contract
. . . summary judgment is perforce improper unless the terms of
the agreement are 'wholly unambiguous.'" Wards Co. v. Stamford
Ridgeway Associates, 761 F.2d 117, 120 (2d Cir. 1985), quoting
Heyman v. Commerce & Industry Ins. Co., 524 F.2d 1317, 1320 (2d
Cir. 1975). "The mere assertion of an ambiguity [by the
nonmoving party] does not suffice to make an issue of fact.
Ambiguity resides in a writing when — after it is viewed
objectively — more than one meaning may reasonably be ascribed
to the language used." Thompson, supra, 896 F.2d at 721
Under New Mexico law, as in most states, an ambiguity in an
insurance policy, unlike in other contracts, is ordinarily
construed in favor of the insured. See Atlas Assurance Co. v.
General Builders, Inc., 93 N.M. 398, 401, 600 P.2d 850, 853
(Ct. App. 1979); see also, Vargas v. Pacific Nat'l Life
Assurance Co., 79 N.M. 152, 155, 441 P.2d 50, 53 (1968); Couey
v. Nat'l Benefit Life Ins. Co., 77 N.M. 512, 518, 424 P.2d 793,
796 (1967). Thus, as a matter of substantive state insurance
contract law, ambiguities in an insurance policy are to be
construed by the Court against the insurer. See e.g. McCormick
and Company, Inc. v. Empire Ins. Group, 878 F.2d 27, 30 (2d
Cir. 1989); Vella v. Equitable Life Assurance Society of the
U.S., 887 F.2d 388, 391 (2d Cir. 1989); Uniroyal Inc. v. Home
Ins. Co., 707 F. Supp. 1368, 1376 (E.D.N.Y. 1988).
A) Defendant's Motion For Summary Judgment
Defendants have moved for summary judgment on the grounds
that plaintiffs failed to comply with Condition 10 of the
insurance policies and are thus precluded from recovery under
those policies. Condition 10 states:
10. Loss Payable. Liability of the Company under
this policy with respect to any occurrence shall
not attach unless and until the insured, or the
Insured's underlying insurer, shall have paid the
amount of underlying limits on account of such
occurrence. The insured shall make a definite claim
for any loss for which the Company may be liable
under the policy within twelve (12) months after
the insured shall have paid an amount of ultimate
net loss in excess of the amount borne by the
insured or the insured's underlying insurer or
after the insured's Liability shall have been fixed
and rendered certain either by final judgment
against the insured after actual trial or by
written agreement of the insured, the claimant and
the Company. If any subsequent payment shall be
made similarly from time to time, such losses shall
be due and payable within thirty (30) days after
proof of loss and been furnished to the Company in
a satisfactory form. (emphasis added).
Assuming, for the purposes of defendants' motion, that the
policies cover defense costs, the parties agree that under
Condition 10 the insured must make a "definite claim" for loss
within twelve months after a certain event in order to obtain
coverage. However, the parties vigorously dispute when the
actual loss occurred, whether a definite claim was made and
whether the insurer must prove substantial prejudice in
addition to a breach of Condition 10. The "ultimate net loss"
at issue is the legal costs incurred by plaintiffs in the
defense of the Marchiondo Action.