The opinion of the court was delivered by: RICHARD ARCARA, District Judge
On March 9, 1998, the State of New York Department of Environmental
Conservation ("DEC") commenced a lawsuit in New York State Supreme Court
against Mahl Brothers Oil Company ("Mahl Bros."), seeking reimbursement
for costs the DEC incurred to clean up contamination on Mahl Bros.'
property in Springville, New York. Since defendant St. Paul Fire & Marine
Insurance Company ("St. Paul"), issued a general liability policy and an
umbrella insurance policy covering the property from 1981 to 1983, Mahl.
Bros, filed a third party complaint in the state court action naming St.
Paul as a third party defendant and seeking defense and indemnification
under the policies. Subsequently, St. Paul moved to sever the claims
against it from the claims DEC asserts against Mahl Bros. After the
motion to sever was granted in state court, St. Paul removed the action
between it and Mahl Bros, to this Court pursuant to 28 U.S.C. § 1441.
On July 11, 2002, this matter was referred to the Honorable Leslie G.
Foschio, United States Magistrate Judge pursuant to 28 U.S.C. § 636(b)(1).
On July 18, 2002, St. Paul filed a motion for summary judgment pursuant
to Fed.R.Civ.P. 56. On August 2, 2002, Mahl Bros. filed a motion to
remand this action to state court, and a motion pursuant to Fed.R.Civ.P.
56(f) seeking discovery necessary to defendant against St. Paul's summary
judgment motion. On September 2, 2003, Magistrate Judge Foschio filed a
joint Decision and Order and Report and Recommendation addressing all of
Magistrate Judge Foschio concluded that the motion to remand should be
denied because this Court properly had subject matter jurisdiction over
the matter. He next concluded that Mahl Bros.' Rule 56(f) motion for
discovery should be denied because there was no indication that further
discovery would lead to additional facts relevant to the defense of the
motion. Finally, he concluded that St. Paul's motion for summary judgment
should be granted because Mahl Bros, failed to timely notify St. Paul of
the potential claim against the insurance policies.*fn1
The parties filed objections to the Report and Recommendation on
September 18, 2003. Mahl Bros. also objected to Magistrate Judge
Foschio's Decision and Order with respect to the motion to remand.
were filed by both parties on October 10, 2003. The Court heard oral
argument on the objections on October 28, 2003.
For the reasons that follow, the Court adopts the primary conclusion in
the Report and Recommendation, and grants St. Paul's motion for summary
judgment.*fn2 The Court also finds without merit Mahl Bros.' objection
to Magistrate Judge Foschio's Decision and Order denying Mahl Bros.'
motion to remand.
The Court reviews de novo portions of a Report and Recommendation to
which objections have been filed. 28 U.S.C. § 636(b)(1)(B) and (C). When
a Magistrate Judge issues a Decision and Order on a non-dispositive
matter, a party may still object to the conclusions in the Decision and
Order. However, the Magistrate Judge's Decision and Order will stand
unless it is clearly erroneous or contrary to law.
28 U.S.C. § 636(b)(1)(A).
Magistrate Judge Foschio concluded in his Report and
Recommendation that this action was properly removed by St. Paul
and that the Court has diversity jurisdiction over the subject matter in
this case. No party objects to that conclusion. Mahl Bros. argues,
however, that judicial economy would best be served by remand of this
action to state court.*fn3 Mahl Bros. states that if both cases are
tried in state court, it will be spared duplicative discovery costs.
Considering and rejecting this judicial economy argument in his Report
and Recommendation, Magistrate Judge Foschio noted that the issues
involved in Mahl Bros. action against St. Paul are completely different
from the issues involved in the DEC litigation, and that Mahl Bros. will
not necessarily incur duplicative discovery costs. In its objections to
Magistrate Judge Foschio's Decision and Order, Mahl Bros. has provided no
basis for this Court to conclude that Magistrate Judge Foschio's decision
is clearly erroneous or contrary to law. Therefore, the objection is
Mahl Bros. objects to Magistrate Judge Foschio's conclusion that it
failed to timely notify St. Paul of a potential claim against the
insurance policies. Mahl Bros. argues that the issue of whether notice is
timely is one for the trier of fact and that Mahl. Bros. has raised a
genuine issue of material fact as to whether its proffered excuses for
delaying notification to St. Paul are reasonable under all of the facts
and circumstances of the case.
There are two insurance policies at issue in this case. The general
liability policy required Mahl Bros, to notify St. Paul of an occurrence
which may result in a claim against the policy "as soon as possible"
after the occurrence of the event. The umbrella policy required Mahl
Bros. to provide notice to St. Paul "as soon as practicable" after the
occurrence. The issue on this motion is whether Mahl Bros.3 provided
timely notice to St. Paul, and, if not, whether a genuine issue of
material fact exists as to the merit of any proffered excuse.
Under New York law, an insured has a duty to notify its insurer "upon
knowledge of facts sufficient to alert the insured to a reasonable
possibility of the existence of a potentially covered claim." TIG
Insurance Co. v. Town of Cheektowaga, 142 F. Supp.2d 343, 368 (W.D.N.Y.
2001). The insured's receipt of a potentially responsible party ("PRP")
letter has been held to trigger the duty to notify the insurer. Id. When
notice is delayed, the question of whether the delay is excusable is
generally one of fact for the jury, unless no excuse for the delay ...