The opinion of the court was delivered by: Wexler, District Judge.
In the above-referenced action, trial was scheduled for July
of 1991. On July 29, 1991, the parties appeared for trial and
submitted documents and a statement of stipulated facts for
trial, ("S.F."), although no live witnesses were called.
Thereafter, each party submitted a reply memorandum. Following
a brief recitation of the background facts, the Court will turn
to address both the issue of standing and the merits of
This case involves a dispute between two insurance companies
as to which is liable for an underlying claim. The incident
which gave rise to the claim occurred on February 11, 1986,
when Michael Jutt, an employee of Minuteman Press
International, Inc. ("Minuteman"), was vacationing off the
Florida coast. During the vacation Jutt sustained an injury
while aboard a boat owned by Minuteman, the "Sea Duce."
Apparently, Jutt, along with his father and brothers, was
fishing ". . . when a fish approached the boat and the captain
fired a shot from an M-16 rifle. The shot was fired close to
Mr. Jutt's left ear and he allegedly sustained permanent injury
to his left as well as the right [ear]." S.F.*fn1 at para. 2.
Plaintiff Hartford Accident and Indemnity Company
("Hartford") had issued an "Umbrella Liability Policy" to
Minuteman, under policy number 12RHUTV1915, with limits of five
million dollars. Hartford's umbrella policy comes into effect
when an underlying policy reaches its limits, or when an
underlying policy does not apply. Defendant Commercial Union
Insurance Company ("Commercial Union") issued a policy of
marine insurance covering the Sea Duce. The policy issued by
Commercial Union contains the following provision (hereinafter
Notwithstanding, anything contained herein to the
contrary, it is further understood and agreed that
this company will not pay for any loss, damage,
expense or claim with respect to paid employees of
the assured and paid members of the crew.
See S.F. at para. 5. Both policies were in full force and
effect at the time of the accident.
Subsequently, Jutt filed suit against Minuteman; Commercial
Union denied coverage and refused to defend Minuteman in that
action. Hartford provided Minuteman with a defense in the
action, eventually settling out of court for the sum of
$145,000. More particularly, Minuteman paid Jutt $10,000 as
part of its self-insured reduction, and Hartford paid the
balance of $135,000.
On or about March 12, 1987, Commercial Union instituted a
declaratory judgment action against Minuteman. That action was
discontinued on April 5, 1988, when Minuteman signed a general
release which abandoned Minuteman's right to contest Commercial
Union's denial of Jutt's claim.
Subsequently, Hartford instituted the current action against
Commercial Union for breach of a fiduciary obligation. As noted
above, neither plaintiff nor defendant presented witnesses at
trial; both submitted a stipulation of facts and schedule of
documents which included various letters, agreements, policies,
and depositions. In addition, plaintiff's counsel read into the
record those portions of the depositions which both plaintiff
and defendant agreed were important. The two issues pending
herein are whether Hartford has standing to sue, and whether
Commercial Union is liable to Hartford for the settlement of
the Jutt claim.
Commercial Union charges that Hartford does not have standing
to sue. Both parties agree that Hartford could not sue on a
theory of equitable subrogation, inasmuch as Minuteman's
release waived any rights to which Hartford might be entitled
under such a theory. Rather, Hartford is suing for a breach of
the fiduciary duty which a primary carrier of insurance owes to
an excess carrier. See Hartford Accident and Indemnity Co. v.
Michigan Mutual Ins. Co., 61 N.Y.2d 569, 475 N.Y.S.2d 267,
463 N.E.2d 608 (1984) (recognizing a direct duty between primary
and excess insurance carriers).
As to this theory, Commercial Union makes two arguments.
First, it claims that it is not a primary insurer under the
Hartford policy. To substantiate this, Commercial Union points
to the fact that its policy is not listed on the Extension
Schedule of Underlying Insurance Policies annexed to the
Hartford policy. However, this is not dispositive of the issue
since the Commercial Union policy was obtained after the
Hartford policy was written. To this point it must be noted
that among the conditions of the Hartford policy, section 7,
entitled "Other Insurance" states:
The insurance afforded by this policy shall be
excess insurance over any other valid and
collectible insurance (except when purchased
specifically to apply in excess of this insurance)
available to the insured, whether or not described
in the Extension Schedule of Underlying Insurance
Policies, and applicable to any part of ultimate
net loss, ...