The opinion of the court was delivered by: Leisure, District Judge:
Plaintiffs Journal Publishing Company and Albuquerque
Publishing Company (collectively referred to as "Journal
Publishing") commenced this action against defendants American
Home Assurance Company and National Union Fire Insurance
Company (collectively referred to as "American Home"),*fn1
seeking recovery under two insurance policies issued by
defendants for attorneys' fees incurred by plaintiffs in the
defense of a libel suit. The Court's jurisdiction arises from
the diversity of citizenship of the parties.*fn2 This matter
is before the Court on the parties' cross-motions for summary
American Home issued two umbrella insurance policies to
Journal Publishing, covering liability in excess of the amount
covered by Journal Publishing's primary policy and covering
occurrences not covered by the primary insurer. The first
policy was issued on January 8, 1974, effective through January
28, 1977. That policy was renewed by a second policy issued on
January 28, 1977, effective through January 28, 1978. The terms
of the policies were identical. See Plaintiffs' Exhibit 5.
Employers Reinsurance Corporation ("Employers") was Journal
Publishing's primary insurer during that time period and the
parties agree that the Employers policy did not cover defense
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 ...