Aff.") PP 1-2). Graf avers that he calculates premium rates for insureds based primarily upon employee count and office locations, and that he determined the premium rate for U.S. Express of $ 1,400 "based upon the seven employees emanating from the Boston office only." He maintains that the premium would have been substantially higher if the policy covered more than seven employees or other geographic offices. (Id. PP 8-10). Graf further alleges that because no request was made to increase the staff size or add other geographic offices as named insureds, the policy covered only the operations of U.S. Brokers (BOS) and U.S. Express in Boston, operating at the Chelsea Street address. (Id. P 13). This testimony is corroborated by that of Jay Sorci, the President of TIS, who testified to his understanding that the only place of business of the insured entity -- during the seven or eight years they handled the account -- was Boston. (Sorci Dep. at 43).
Ben Llaneta, claims counsel for Intercargo, testified at deposition that he determined that "all the claims that were turned in were generated by a U.S. Express entity other than the one in Boston which we insured." (Llaneta Dep. at 13-14). He indicated that at the time, he "was really unaware whether there was another U.S. Express entity out there other than U.S. Express Boston," and that U.S. Brokers (BOS)/U.S. Express was "just a Boston operation." (Id. at 15). Llaneta also testified that Mailly had informed him that "she had no authority whatsoever to procure insurance for any other U.S. Express entities but for what she's running in Boston or for U.S. Brokers for the matter." (Id. at 29).
While Llaneta characterized policies antedating Policy No. 90121 as "irrelevant to this case," (Id. at 15), U.S. Express urges the court to consider its relationship with Intercargo from 1985, when U.S. Brokers (BOS) first took out a policy. The 1985 policy was issued by Old Republic Insurance (apparently the predecessor corporation to Intercargo), and named U.S. Brokers (BOS), a "Division of U.S. Express Inc." and located at 25 Maverick Square in East Boston, Massachusetts, as the insured. (Amato Aff. Ex. 7). The insurance application, which Mailly completed, indicated that the insured had other branch offices in New York and Los Angeles; it identified Murray, Mailly and Carol Murray as principals; and it stated that the insured had a total of seven employees.
The policy effective June 11, 1986 was signed by Mailly, but filled out by John Haigh, the agent for TIS. (Mailly Dep. at 43).
It again identified the insured as U.S. Brokers (BOS), a division of U.S. Express Inc., and indicated that there were branch offices in New York and Los Angeles, but declared a total of four employees.
The 1987 application -- completed in part by Haigh -- identified the insured as U.S. Brokers (BOS), located at the Chelsea Street address, but the portion inquiring as to branch offices is blank and five employees are listed. (Amato Aff. Ex. 11 & 12). The 1988 application is substantially the same, but the form includes a space for the insured's IATA (International Air Transportation Association) license number; here, it is identified as 33-7-2859, which indisputably is the license number of U.S. Express. (Amato Aff. P 23 & Ex. 13). The June 1989 application also was signed, but not completed, by Mailly, and it also contained the IATA license number of U.S. Express. (Amato Aff. Ex. 15 & 16).
A. Choice of Law
Federal courts sitting in diversity jurisdiction must look to the choice of law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). New York courts traditionally have resolved choice of law issues involving insurance policies by considering the following factors: the location of the insured risk; the insured's principal place of business; where the policy is issued and delivered; the location of the broker or agent placing the policy; where the premiums were paid; and the insurer's place of business. Olin Corp. v. Insurance Co. of N. Am., 743 F. Supp. 1044, 1049 (S.D.N.Y. 1990), aff'd, 929 F.2d 62 (2d Cir. 1991); see also Philips Consumer Elecs. Co. v. Arrow Carrier Corp., 785 F. Supp. 436, 442 (S.D.N.Y. 1992), aff'd, 999 F.2d 537 (2d Cir. 1993); Avondale Indus., Inc. v. Travelers Indemnity Co., 774 F. Supp. 1416, 1423 (S.D.N.Y. 1991).
Intercargo contends that Massachusetts law governs this action because the policy was issued in Massachusetts and the application for the policy was made and delivered in Massachusetts. While U.S. Express does not expressly disagree that Massachusetts law is controlling, it relies primarily on New York law in formulating its arguments. Considering the factors traditionally relevant to a choice of law determination, as listed above, it appears that the insured risk is not confined to one situs; that U.S. Brokers (BOS) is located in Massachusetts, while U.S. Express is located in New York; that the policy indeed was issued and delivered in Massachusetts; that TIS, Intercargo's agent, is located in Illinois;
and that Intercargo is located in Illinois. In light of the above factors, and because Intercargo has relied mainly upon Massachusetts law and U.S. Express has not disputed this reliance (and, in fact, has cited several Massachusetts cases in its papers), this court will apply Massachusetts law.
B. Summary Judgment Standards
Summary judgment is appropriate when the moving party establishes that there exist no genuine issues of material fact that bar the court from granting judgment as a matter of law. Fed. R. Civ. P. 56. Once the moving party has carried its burden under Rule 56, the nonmoving party must "come forward with 'specific facts showing that there is a genuine issue for trial. ' . . . Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no 'genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). Therefore, summary judgment may be granted if "the evidence is merely colorable, . . . or is not significantly probative." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986) (cites omitted).
C. Is Plaintiff Intercargo's Insured Under the Policy?
Intercargo argues that U.S. Express is not an insured under the policy, while U.S. Express maintains that the policy clearly and unambiguously includes it as an insured. Further, U.S. Express argues, even if this court were to find the language of the policy ambiguous, reference to extrinsic evidence to determine the meaning of the contract clearly raises issues of fact sufficient to defeat this motion for summary judgment.
It is axiomatic that "before the general principle regarding the duty to defend applies, it must be shown that the person claiming coverage is, in fact, an insured." Allan D. Windt, Insurance Claims and Disputes, § 4.05 at 144 (2d ed. 1988). An ambiguity exists in an insurance contract when the language therein is susceptible of more than one meaning. Jefferson Ins. Co. of N.Y. v. City of Holyoke, 23 Mass. App. Ct. 472, 503 N.E.2d 474, 476 (Mass. App. Ct. 1987). Even if the challenged words are clear and unambiguous in their usual and ordinary sense, they "may be ambiguous when read in the context of the entire insurance contract, or as applied to the subject matter." Id. at 477 (emphasis added). In Massachusetts, the interpretation of an insurance contract is a question of law for the court. Id.; Kelleher v. American Mut. Ins. Co. of Boston, 32 Mass. App. Ct. 501, 590 N.E.2d 1178, 1180 (Mass. App. Ct. 1992). In the event the court finds the language of the contract is not clear and unambiguous, it may resort to extrinsic evidence to interpret the contract. Jefferson Ins. Co., 503 N.E.2d at 476 n.6.
Upon review of the insurance contract and the endorsement incorporated therein adding U.S. Express as a named insured, this court finds that the identity of the insured under the policy is ambiguous. While it is true, as plaintiff argues, that U.S. Express is named as an insured without qualification, it also is true that subsequent to the addition of U.S. Express as a named insured, all other terms and conditions of the policy remained unchanged. Therefore, the only address listed on the policy was that at Chelsea Street in East Boston; the number of employees listed was seven; and the premium remained $ 1,400. Because in the context of the entire insurance contract the identity of the insured is subject to more than one meaning, resort to extrinsic evidence is required.
Both Intercargo and U.S. Express rely to a large extent on the two affidavits submitted by Louise Mailly. As an initial matter, "a party may not, in order to defeat a summary judgment motion, create a material issue of fact by submitting an affidavit disputing his own prior testimony." Trans-Orient Marine Corp. v. Star Trading & Marine, Inc., 925 F.2d 566, 572 (2d Cir. 1991), on remand, 783 F. Supp. 207 (S.D.N.Y.), aff'd, 970 F.2d 895 (2d Cir. 1992). This rule has been extended to the testimony and affidavits of non-party witnesses, as well. E.g., Adelman-Tremblay v. Jewel Cos., Inc., 859 F.2d 517, 521 (7th Cir. 1988). In any event, this court finds that Mailly's second affidavit does not in any material sense controvert the clear averments contained in the first and in her testimony at deposition: that when she added U.S. Express to the policy, Mailly neither intended to request nor requested insurance for any entity other than the seven employee operation in East Boston, Massachusetts. The fact that Mailly was aware that her insurance costs might increase, as evidenced by her communication to Murray, fails to raise a material question regarding her intent in adding the name "U.S. Express" to the policy. Moreover, Mailly's allegation that she was pressured by the attorneys for Intercargo to sign the first affidavit does not cast into doubt the validity of the assertions contained in that affidavit, given her testimony at deposition that the affidavit contained what she knew to be the truth. (Mailly Dep. at 95-96).
On the other hand, it is clear from the evidence before the court that U.S. Express and U.S. Brokers (BOS) are separate corporations, engaged in different businesses at different locations with different employees. U.S. Express has conceded that it did not pay any premiums to Intercargo and that it did not notify Intercargo about the changes in staff size and the location of its offices. In addition, U.S. Express has utterly failed to refute the testimony of Graf and Llaneta that the only entity covered by the policy was the seven employee operation in Boston. (Graf Aff. PP 9-10; Llaneta Dep. at 29). In short, the extrinsic evidence presented by the parties fails to raise a genuine issue of material fact concerning whether U.S. Express was Intercargo's insured under the policy, and summary judgment in Intercargo's favor is appropriate.
D. Is the Policy Void for Nondisclosure?
Summary judgment also is required based on Intercargo's alternative argument that even if U.S. Express is considered an insured under the policy, the policy is void by reason of U.S. Express's nondisclosure in the application. This issue is governed by statute in Massachusetts; the relevant provision reads as follows:
no . . . misrepresentation . . . made in the negotiation of a policy of insurance by the insured or on his behalf shall be deemed material or defeat or avoid the policy or prevent its attaching unless such misrepresentation . . . is made with actual intent to deceive, or unless the matter represented . . . increased the risk of loss.
Mass. Gen. L. ch. 175, § 186. This section is a codification of the common law principle that a material misrepresentation by an applicant can invalidate an insurance policy; statements misleading the insurer as to the nature of the risk typically are considered material. Shapiro v. American Home Assurance Co., 584 F. Supp. 1245, 1249 (D. Mass. 1984) (cites omitted); see also Christiania Gen. Ins., 979 F.2d 268 at 278 ("A fact is material so as to void ab initio an insurance contract if, had it been revealed, the insurer . . . would either not have issued the policy or would have only at a higher premium."). A failure to disclose is generally considered as much a misrepresentation as a false affirmative statement. See Schondorf v. SMA Life Assurance Co., 745 F. Supp. 866, 870 (E.D.N.Y. 1990); Garde by Garde v. Country Life Ins. Co., 147 Ill. App. 3d 1023, 498 N.E.2d 302, 308, 101 Ill. Dec. 120 (Ill. App. Ct. 1986).
Intercargo has asserted that U.S. Express failed to disclose material information on the application for the policy. Specifically, Intercargo contends, U.S. Express did not disclose in the policy that its place of business is in New York; that it conducts business in fifty states and throughout the world; and that its New York office has at least fifteen employees. Rather, it continued to maintain that it was located in Boston and had only seven employees, notwithstanding the requirement in the policy that Intercargo be notified in writing of changes in the name or number of protected persons, and that a change in staff size might require an additional premium or a refund.
Massachusetts courts have held that whether a false statement increases risk ordinarily is a question of fact for the jury. Shapiro, 584 F. Supp. at 1249 (citing Davidson v. Mass. Casualty Ins. Co., 325 Mass. 115, 89 N.E.2d 201 (Mass. 1949)). However, certain misrepresentations -- such as a false statement in an insurance application that the applicant does not have cancer -- have been found to increase the risk of loss as a matter of law. Id. (citing Pahigian v. Manufacturers' Life Ins. Co., 349 Mass. 78, 206 N.E.2d 660 (Mass. 1965); Lennon v. John Hancock Mut. Life Ins. Co., 339 Mass. 37, 157 N.E.2d 518 (Mass. 1959)). I find that the misrepresentations alleged in this case are more like those in the Davidson line of cases -- they involve questions of fact. Nonetheless, U.S. Express has pointed to no evidence that would generate a material question regarding whether its nondisclosures in the policy increased Intercargo's risk of liability. It has not controverted Graf's testimony that the $ 1,400 premium rate was based on the existence of seven employees only, or that the premium would have been substantially higher if the policy covered additional employees or other offices. (Graf Aff. PP 9-10). In fact, U.S. Express has conceded that it did not notify Intercargo in writing of any changes in staff size, notwithstanding the express statement in the policy that increases or decreases in staff size may result in an increase or decrease in the premium. Accordingly, U.S. Express has not raised a question of material fact concerning whether the nondisclosures increased the risk of loss and therefore were "material" within the meaning of the statute.
See Mutual Benefit Life Ins. Co. v. JMR Elecs. Corp., 848 F.2d 30, 32 (2d Cir. 1988) ("The materiality determination normally presents an issue of fact for the jury, but 'where the evidence concerning the materiality is clear and substantially uncontroverted, the matter is one of law for the court to determine.'") (cites omitted).
E. Is Intercargo Estopped to Deny Coverage?
However, U.S. Express does try to defeat Intercargo's right to decline coverage by claiming that it should be estopped to deny coverage "as a result of it's (sic) reckless and careless underwriting policies with respect to it's (sic) policy number 90201." (Pl.'s 3(g) Statement P 10).
U.S. Express appears to be asserting a theory based on waiver, rather than estoppel. Massachusetts courts have recognized that
An insurance company is obliged to provide coverage to an insured who has violated a provision of the policy if the company has waived its right to assert the policy breach as a ground for denying liability. Waiver consists of the insurer's voluntary or intentional relinquishment of a known right. . . . An insurer's intention to waive a ground for not providing coverage may be inferred from the circumstances. . . . One class of waiver case involves a claimed breach of an insured's duty to the insurer, such as the failure promptly to notify the insurance company of a claim or the failure of an insured to cooperate with the insurance company. . . . Another class of waiver case involves claimed misrepresentations by the insured that led the insurer to provide insurance coverage.