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MAHL BROTHERS OIL CO. v. ST. PAUL FIRE & MARINE INS. CO.

February 19, 2004.

MAHL BROTHERS OIL CO., INC. Plaintiff,
v.
ST. PAUL FIRE & MARINE INS. CO., Defendant



The opinion of the court was delivered by: RICHARD ARCARA, District Judge

DECISION AND ORDER

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. Page 2

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 the motions.

  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. Responsive papers Page 3 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.

  DISCUSSION

  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).

 Remand Motion

  Magistrate Judge Foschio concluded in his Report and Page 4 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 denied.

 Summary Judgment Motion

  Mahl Bros. objects to Magistrate Judge Foschio's conclusion that it Page 5 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 ...


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