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February 18, 1992

ALBERT T. CHANDLER, as executor of the estate of FREDERICK W.A. KNIGHT, Plaintiff, against H.E. YERKES AND ASSOCIATES, INC., and ROBERT FRANCIS O'LEARY, Defendants.


The opinion of the court was delivered by: PETER K. LEISURE

LEISURE, District Judge,

 In this diversity action, defendant, H.E. Yerkes and Associates, Inc. ("Yerkes"), now moves the Court, pursuant to Fed. R. Civ. P. 56(c), for summary judgment. Plaintiff, Albert T. Chandler ("Chandler"), as executor of the estate of Frederick W.A. Knight ("Knight"), opposes the summary judgment motion, claiming that there exist disputed issues of material fact. For the foregoing reasons, defendant's summary judgment motion is denied.


 This lawsuit has its roots in Knight's efforts, between 1976 and 1983, to purchase, insure and ship a collection of 222 Thai Buddha and fable god statues (the "Buddhas"). In 1983, after Knight bought a $ 30 million insurance policy for the Buddhas from the U.S. Fire Insurance Company ("U.S. Fire"), the Aliakmon Runner, which was carrying the Buddhas, sank in deep waters in the Indian Ocean. However, after the loss, U.S. Fire disclaimed coverage, based on a failure by the insured to disclose that an earlier policy covering the Buddhas, issued by a London insurer, had been cancelled after an appraiser determined the statues to be replicas.

 Since then, Knight has been involved in a series of lawsuits, seeking to recover from the insurance carrier, his attorneys and various insurance brokers. These suits have spawned a series of five Opinions, familiarity with which is assumed, which, inter alia, dismissed Knight's suits against the insurers and his attorneys, and allowed the substitution of Chandler as plaintiff in the instant action after Knight's death in June 1989. See Knight v. U.S. Fire Ins. Co., 651 F. Supp. 477 (S.D.N.Y.) (Knight I) (granting insurer summary judgment motion), aff'd, 804 F.2d 9 (2d. Cir. 1986) (Knight II), cert. denied, 480 U.S. 932, 94 L. Ed. 2d 762, 107 S. Ct. 1570 (1987); Haight, Gardner, Poor & Havens v. Knight, N.Y.L.J. at 12, col.1 (Sup. Ct. N.Y. Co. Mar. 8, 1988), aff'd, 150 A.D.2d 993, 543 N.Y.S.2d 601 (1st Dept. 1989) (dismissing Knight legal malpractice counterclaims); Knight v. H.E. Yerkes & Assoc., Inc., 675 F. Supp. 139 (S.D.N.Y. 1987) (dismissing Yerkes third-party complaint); Knight v. H.E. Yerkes & Assoc., Inc., 135 F.R.D. 67 (S.D.N.Y. 1991) (granting motion to substitute plaintiff and rejecting motion to dismiss for failure to prosecute). Having failed in his attempts to recover from his insurer and his attorneys, Knight has now brought suit against Yerkes and Robert Francis O'Leary ("O'Leary"), claiming that these insurance brokers failed to procure effective coverage for the Buddhas.

 The events leading up to this litigation began between 1976 and 1979, when Knight purchased the Buddhas in Thailand for approximately $ 65,000. Subsequently, a Thai appraiser hired by Knight valued the Buddhas at $ 20 million, in 1980, and at $ 30 million, in 1981. Yerkes, a wholesale insurance broker by trade, first became involved in these transactions in 1980, when he was approached by Knight's broker, O'Leary, concerning procurement of a $ 20 million policy to cover the Buddhas during a voyage from Singapore to Holland. Yerkes was successful in locating an insurer that was willing to accept the risk, contingent on an inspection of the Buddhas by an expert of its own choosing. However, Knight did not pursue this coverage.

 In 1982, Yerkes was again approached by O'Leary, on Knight's behalf, concerning the purchase of insurance in the United States. Thereafter, Yerkes successfully brokered an insurance contract for $ 30 million, with U.S. Fire, to cover the Buddhas on a journey from Singapore to Marseilles, and then to Paris. Although this policy lapsed when the Buddhas were not shipped, another $ 30 million policy was purchased from U.S. Fire in October 1982, for a voyage from Singapore to Piraeus, Greece.

 In February 1983, the Aliakmon Runner departed from Singapore, carrying the cargo of Buddhas. Soon thereafter, apparently as the result of a fire and explosion in the ship's engine room, the vessel sank in the Indian Ocean. Although all crew members were picked up safely by another ship, the Buddhas sank with the vessel. After the loss, however, the insurers declined coverage, voiding the policy ab initio because of the failure to disclose that the London policy had been cancelled. The denial of coverage for failure to disclose the cancellation was upheld by the Hon. Constance Baker Motley, United States District Judge of this Court, and affirmed on appeal.

 After the suits against Knight's insurers and attorneys were dismissed, Knight initiated this action against the insurance brokers. Yerkes now moves for summary judgment, raising four arguments. Yerkes first contends that it did not owe a duty to Knight, because it did not have a brokerage contract with plaintiff and did not act as his insurance broker or agent. Yerkes thus contends that, because it dealt with O'Leary, rather than with Knight, it cannot be held liable to Knight. The next argument raised by Yerkes asserts that this suit must fail because Knight did not rely to his detriment on Yerkes' actions. Rather, claims defendant, Knight would have shipped the Buddhas to Piraeus in 1983 regardless of whether insurance had been procured.

 Yerkes' third argument asserts that, even if a duty was owed to Knight, the duty was not breached. The first basis for this argument relies on the claim that the cancellation of the London insurance policy, which was the basis for the disclaimer of coverage after the loss of the Buddhas, was not communicated to Yerkes. In further support of the claim that no duty was breached, Yerkes argues that insurance for the Buddhas could not have been procured, because no insurer would have written an appropriate policy at a reasonable premium. The fourth and final basis for Yerkes' summary judgment motion relies on the principle of equitable estoppel. Here, Yerkes argues that Knight should be equitably estopped from bringing this suit because defendant cooperated with and turned his files over to plaintiff during the course of Knight's earlier, unsuccessful suit against his insurer.


 A. Summary Judgment Standard

 Federal Rule of Civil Procedure 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 if, '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.'" United States v. All Right, Title & Interest in Real Property, etc., 901 F.2d 288, 290 (2d Cir. 1990) (quoting Murray v. National Broadcasting Co., 844 F.2d 988, 992 (2d Cir.), cert. denied, 488 U.S. 955, 102 L. Ed. 2d 380, 109 S. Ct. 391 (1988)).

 Summary judgment may be granted "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). The substantive law governing the case identifies the material facts, and "only disputes over facts that night affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." *fn1" Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Herbert Constr. Co. v. Continental Ins. Co., 931 F.2d 989, 993 (2d Cir. 1991). "The 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." Anderson, supra, 477 U.S. at 249; see also R.C. Bigelow, Inc. v. Unilever N.V., 867 F.2d 102, 107 (2d Cir.), cert. denied, 493 U.S. 815, 110 S. Ct. 64, 107 L. Ed. 2d 31 (1989). In determining whether there exist disputed issues of material fact, "the court must resolve any ambiguities and draw all inferences against the moving party. Even though both parties . . . agree that there are no issues of fact, the court may still find that factual issues exist." Cargill, Inc. v. Charles Kowsky Resources, Inc., 949 F.2d 51, 55 (2d Cir. 1991)

 The moving party "always bears the initial responsibility of informing the district court of the basis for its motion" and identifying which materials it believes "demonstrate the absence of a genuine issue of material fact." Celotex, supra, 477 U.S. at 323. "The 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; see Binder v. Long Island Lighting Co., 933 F.2d 187, 191 (2d Cir. 1991).

 Once a motion for summary judgment is properly made, the burden shifts to the nonmoving party, which "'must set forth specific facts showing that there is a genuine issue for trial.'" Anderson, supra, 477 U.S. at 250 (quoting Fed. R. Civ. P. 56(e)). "Conclusory allegations will not suffice to create a genuine issue. There must be more than a 'scintilla of evidence,' and more than 'some metaphysical doubt as to the material facts.'" Delaware & H. Ry. v. Consolidated Rail Co., 902 F.2d 174, 178 (2d Cir. 1990) (quoting Anderson, supra, 477 U.S. at 252, and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986)), cert. denied, 111 S. Ct. 2041 (1991).

 B. Merits of Yerkes Summary Judgment Motion

 1. Duty of Yerkes as Wholesale Broker

 The Court first turns to Yerkes' assertion that it owed no duty to Knight because it was a wholesale broker that did not deal directly with plaintiff. It appears to the Court that the crux of this claim is that Knight was not in privity with Yerkes, and therefore cannot maintain a suit against it. In fact, the principle of privity does limit the rights of parties to maintain suits in the insurance context. See, e.g., Mercantile & General Reinsurance Co. v. Spanno Corp., 151 Misc. 2d 311, 573 N.Y.S.2d 102, 104 (Sup. Ct. N.Y. Co. 1991) (finding no privity of contract between insured and insurer's reinsurer); Velastequi v. Exchange Ins. Co., 132 Misc.2d 896, 505 N.Y.S.2d 779, 780-81 (Civ. Ct. Kings Co. 1986) (finding no privity of contract between insured and insurer's adjustor).

 However, the purported lack of privity between Knight and Yerkes is not dispositive of the instant action in its current procedural posture. In support of the argument that a wholesale broker owes no duty to the insured, Yerkes relies primarily on Talking Togs of Broadway v. Mutual Fire and Inland Ins. Co., No. 3488/86 (Sup. Ct. N.Y. Co., June 23, 1988), aff'd, 149 A.D.2d 993, 540 N.Y.S.2d 400 (1st Dept. 1989) (citing Moshiko, Inc. v. Seiger & Smith, Inc., 137 A.D.2d 170, 529 N.Y.S.2d 284 (1st Dept.), aff'd, 72 N.Y.2d 945, 533 N.Y.S.2d 52, 529 N.E.2d 420 (1988)). However, both Talking Togs and Moshiko turned on the fact that the wholesale broker had merely relayed information to the insurer, which issued a policy that conformed in all respects to the broker's requests. Neither of these cases stands for the proposition that a wholesale insurance broker cannot be held liable for the alleged failure to fully inform an insurer of all the information in its possession.

 Moreover, the Court believes that the issue whether Yerkes was acting as an agent for Knight or O'Leary is a question of fact that has not been conclusively resolved on the current record. Cf. Citibank, N.A. v. Nyland (CF8) Ltd., 878 F.2d 620, 624 (2d Cir. 1989) (holding principal liable to third party for tort of agent despite lack of privity between principal and third party). Thus, because Yerkes has not demonstrated as a matter of law that there was no contract or agency relationship between ...

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