The opinion of the court was delivered by: STEIN
SIDNEY H. STEIN, U.S. District Judge.
This action stems from events beginning in 1985, when Morgan Stanley Mortgage Capital, an affiliate of plaintiffs Morgan Stanley Group, Inc., and Morgan Stanley & Co., Inc. (collectively, "Morgan Stanley"), was involved in the sale and purchase of participation interests in a $ 56 million loan from Siscorp, an Oklahoma corporation, to Fourth and Broadway Associates Ltd., made for the acquisition and renovation of a ten-story department store building in downtown Los Angeles. Morgan Stanley's role in the transaction is disputed. Morgan Stanley was previously sued by two banks which purchased participation interests in the loan, Whitestone Savings and The Banking Center; both actions settled prior to trial. Plaintiffs brought this action seeking insurance coverage pursuant to an Investment Counselors' Errors and Omissions and Fiduciary Liability insurance policy it purchased from defendant New England Insurance Co. Plaintiffs allege that defendant ITT New England Insurance Management Co., Inc., is the successor in interest to New England Insurance Co.
The parties have cross-moved for summary judgment. The crux of their dispute is whether the claims made against plaintiffs for their actions in connection with the Siscorp transaction are covered by the investment counselors' insurance policy issued by defendants.
Defendants also, in the alternative, seek an order declaring that plaintiffs' claims for coverage were made in 1986, and are covered, if at all, by policy FW000186; plaintiffs cross-move for an order declaring that the policy covering the period March 5, 1987 to March 5, 1988, policy FW000262, applies to their claims. These two policies both contain the same provision for investment counselors' coverage.
The policies provide, inter alia, that the insurer, New England Insurance Co., agrees to pay "loss which the Insured shall become legally obligated to pay, from any claim made against the Insured during the Policy Period, by reason of any actual or alleged negligent act, error or omission committed in the scope of the Insured's duties as investment counselors." (Compl., Exh. A; Exh. 3 in Support of Defendants' Motion for Summary Judgment). The term "investment counselors" is undefined in the policies.
I. The Cross-Motions for Summary Judgment
"Summary judgment may be granted only when the moving party demonstrates that 'there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" Allen v. Coughlin, 64 F.3d 77, 79 (2d Cir. 1995) (quoting Fed. R. Civ. P. 56(c)).
In Uniroyal v. Home Ins. Co., 707 F. Supp. 1368 (E.D.N.Y. 1988), Judge Jack Weinstein provided a step-by-step analysis of the interpretation of insurance contracts at the summary judgment stage. First, as with any other contract, "if the policy is unambiguous, its interpretation is strictly a question of law for the court" and summary judgment is proper. Id. at 1374; see also Brass v. American Film Technologies, Inc., 987 F.2d 142, 148-49 (2d Cir. 1993). Whether a contract is ambiguous is a question of law for the Court. Brass, 987 F.2d at 149.
If the policy is ambiguous, "the court should afford the parties an opportunity to adduce extrinsic evidence as to their intent." Uniroyal, 707 F. Supp. at 1374. The opportunity to produce extrinsic evidence "might result in three outcomes relevant under New York law: extrinsic evidence offered that raises a question of credibility or presents a choice among reasonable inferences; extrinsic evidence offered that fails to raise credibility or present such a choice; or no extrinsic evidence offered. New York law requires submission to the factfinder in the first situation, but a construction by the court as a matter of law in the second and third situations." Id.
Defendants seek summary judgment on the grounds that plaintiffs' actions in the underlying transaction, as a matter of law, are not covered by the policies they issued. Defendants contend that the term "investment counselors" was meant to refer to Morgan Stanley's role in providing services pursuant to a contract and for a fee, and that the term cannot reasonably encompass Morgan Stanley's role in the Siscorp transactions because plaintiffs judicially admitted in the prior litigation that they acted solely as brokers in the Siscorp transactions.
Defendants' motion for summary judgment is denied on the grounds that even if, as defendants contend, plaintiffs have judicially admitted that they acted solely as brokers in the Siscorp loan transactions, the policies could arguably still cover plaintiffs' claims since by their terms, the policies refer to "any claim made against the Insured during the Policy Period, by reason of any actual or alleged negligent act, error or omission committed in the scope of the Insured's duties as investment counselors." (Compl., Exh. A; Exh. 3 in Support of Defendants' Motion for Summary Judgment) (emphasis added). Defendants do not contend that plaintiffs have judicially admitted that the claims made against them by Whitestone and The ...