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HARTFORD ACC. & INDEM. v. COM'L. UNION

September 24, 1991

HARTFORD ACCIDENT AND INDEMNITY COMPANY, PLAINTIFF,
v.
COMMERCIAL UNION INSURANCE COMPANY AND MINUTEMAN PRESS INTERNATIONAL, INC., DEFENDANTS.



The opinion of the court was delivered by: Wexler, District Judge.

MEMORANDUM AND ORDER

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 plaintiff's claim.

BACKGROUND

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 the "exclusion"):

  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.

STANDING

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, ...

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