The opinion of the court was delivered by: MICHAEL A. TELESCA
Plaintiffs in these consolidated diversity actions brought suit seeking a declaration that they are covered under Prudential Reinsurance Policy PSL00001 ("the Policy"). Both plaintiffs and defendant have moved for summary judgment. For the reasons set forth below, I hold that neither plaintiff is entitled to coverage under the policy and therefore deny plaintiffs' motions for summary judgment. Defendant's motion for summary judgment, dismissing both complaints is granted.
Calocerinos & Spina Consulting Engineers ("C&S") and Mueser-Rutledge Consulting Engineers ("Mueser") are suing Prudential Reinsurance ("Prudential") seeking a determination that they should be afforded under professional liability policy number PSL00001 ("the Policy"), issued on September 15, 1982. This Policy covered professional malpractice liability for the Combined Sewer Overflow Abatement Project ("CSOAP"), a major sewer system upgrade project for the City of Rochester. C&S is listed as a named insured under the prime design professionals policy endorsement and Mueser, Wentworth, Johnston & DeSimone (a direct predecessor of plaintiff Mueser-Rutledge) is listed as a sub design professional. LST Joint Venture ("LST")
and H&A of New York, Geotechnical Consultants ("H&A") are also listed as named insureds on the policy.
The policy period was originally to run for six years, between September 15, 1982 and September 15, 1988, and included a discovery endorsement (Endorsement #3), which lasted three years beyond the policy's cancellation date. By later endorsement, and in consideration for a return premium of $ 270,490, the policy was cancelled effective September 15, 1985. The discovery endorsement was not cancelled, however, and went into effect on that date.
In January 1984, Iacobelli Construction Co., a tunneling contractor on the CSOAP, first notified C&S that it believed the conditions that it was encountering while tunnelling a portion of the project differed materially from those indicated by the bid documents. By May 1984, Iacobelli had demanded compensation under the contract for the additional expenses it had allegedly incurred. In December 1988, Iacobelli filed suit against C&S and others claiming that C&S had negligently designed the CSOAP and failed to discover and report excessive water flows in the tunnel drilling line. Iacobelli Construction Co. v. County of Monroe et al., 88-1398T ("Iacobelli"). C&S first notified Prudential of the suit on December 22, 1988 and demanded coverage. In February 1989, Prudential refused coverage to C&S, maintaining that its claim was not covered. In June 1992, H&A, LST, and Mueser were impleaded into Iacobelli and each promptly notified Prudential of the suit.
In July 1992, Prudential assumed the defense of both H&A and LST, although it has since reserved its rights while continuing to defend. Following Prudential's decision to defend, C&S renewed its demand for coverage and Mueser also demanded coverage. These actions followed Prudential's subsequent refusal of coverage to both plaintiffs. Because they involved common questions of fact and law, they were consolidated by stipulation and order in May 1993.
Plaintiff C&S amended its complaint in September 1993 to add Continental Casualty as a plaintiff. Continental is an insurer of C&S, and has provided a defense for C&S in Iacobelli. It claims that Prudential has the primary coverage obligation, however, and that Prudential must reimburse it for defense costs. Because Continental's rights derive from those of C&S, I refer to both as a single entity.
The basis for jurisdiction in both actions is diversity pursuant to 28 U.S.C. § 1332. Both C&S and Mueser are citizens of New York, Continental is a citizen of Illinois, and Prudential is a citizen of Delaware and New Jersey. Plaintiffs seek declaratory relief pursuant to 28 U.S.C. § 2201. The amount in controversy exceeds $ 50,000.
MOTIONS FOR SUMMARY JUDGMENT
1. Standard for Summary Judgment
Both Plaintiffs and Defendants have moved for summary judgment. 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 of material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. Rule 56(c). When a party that does not bear the burden of proof moves for summary judgment, it must show that no reasonable jury could find for the party with the burden of proof on at least one essential element of their claim, because "a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). The moving party is not required to produce evidence showing an absence of a genuine issue of fact, even on issues on which the non-moving party bears the burden of proof, but rather "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." Id. at 325, 106 S. Ct. at 2554.
2. Coverage under the Policy
Defendant seeks dismissal of both complaints. It argues that the Policy was explicitly a "claims made" policy, and applies only to claims reported to Prudential during the policy period and the three-year discovery clause period which followed. Because the Policy was cancelled on September 15, 1985, it argues that the last date of coverage under the discovery clause was September 15, 1988. Therefore, because C&S did not report the claim to Prudential until December 1988 (after Iacobelli was filed), it has no obligation to provide coverage. For ...