Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


September 22, 2004.


The opinion of the court was delivered by: VICTOR MARRERO, District Judge


Plaintiff United States Liability Insurance Company ("U.S. Liability") brings this diversity action against its insured, Winchester Fine Art Services, Inc. ("Winchester"); and Jason Denny and Lindon F. McKenzie (the "Claimants"). Also named as defendants are Winchester's primary insurer, Utica National Insurance Group ("Utica"); Citi Capital Commercial Leasing Corp.; and Winchester employee Michael D. Petrovich ("Petrovich"). U.S. Liability seeks a declaratory judgment to disclaim coverage for an underlying personal injury action now being litigated in New York State court that the Claimants brought against Winchester.

U.S. Liability has moved for summary judgment with respect to all of the claims and counterclaims at issue. Winchester and the Claimants oppose this motion and have responded with their respective cross-motions for summary judgment on all the claims. The crux of the parties' dispute centers on whether Winchester provided U.S. Liability with timely notice of the underlying personal injury action in accordance with the terms of Winchester's excess liability insurance policy with U.S. Liability (the "Excess Policy"). U.S. Liability asserts that notice was untimely under New York law and under the terms of the Excess Policy, and as such, it is entitled to disclaim coverage. Winchester responds that it did not provide notice sooner because it never formed a good-faith belief that the personal injury action would implicate the Excess Policy. Winchester argues that U.S. Liability was itself untimely in disclaiming coverage and should be precluded from so doing. The Claimants assert that U.S. Liability may not disclaim coverage because they (the Claimants) notified U.S. Liability of the claim after diligent efforts to discover the existence of the Excess Policy.

  As discussed in greater detail below, the Court holds as a matter of law that: (1) Winchester failed to timely notify U.S. Liability of the underlying personal injury action in compliance with the terms of the Excess Policy and applicable New York law; (2) the Claimants did not cure Winchester's delay in notifying U.S. Liability; and (3) U.S. Liability properly denied coverage to both Winchester and the Claimants, and thus, did not waive its right to do so. Accordingly, the Court grants U.S. Liability's motion for summary judgment in its entirety and denies Winchester's and the Claimants' cross-motions for summary judgment in their entirety.


  The facts of this case are not materially in dispute. On April 9, 2001, Petrovich was driving an automobile for Winchester when he was involved in an automobile accident with the Claimants. At the time of the accident, Winchester was insured by a primary liability insurance policy issued by Utica that provided liability coverage up to $750,000. Winchester also was insured by the Excess Policy with U.S. Liability. The Excess Policy provided coverage for liability in excess of the primary policy limit, up to a maximum of $4 million. The notice provision of the Excess Policy provides as follows: Notice of Occurrence, Claim, offense, or Suit

Whenever it appears that an occurrence, claim, offense, or suit is likely to involve payment under this policy, written notice shall be given to us or our authorized representative by you or your designated representative as soon as practicable.
(Affidavit of Mark Shockley, dated May 19, 2004, at Ex. A.) The Excess Policy also provides that U.S. Liability has the right to participate in the defense of any claim that may involve payment under the policy and that both Winchester and Utica must cooperate with U.S. Liability with regard to any such defense. (See id.)

  By letter dated April 17, 2001, the Claimants notified Utica of the automobile accident and stated that they had incurred serious injuries therefrom. The letter also requested information on whether Winchester carried any excess or umbrella insurance. In a subsequent letter dated January 29, 2002, the Claimants informed Utica that they had undergone surgery for their injuries and requested that Utica produce a sworn statement with regard to whether Winchester carried excess liability insurance. The January 29 letter also provided information on a verdict in an unrelated case with similar injuries and noted that the amount of the jury's damage in the unrelated case exceeded Utica's coverage amount in this case. The letter further stated that the Claimants' injuries were serious, that Winchester was entirely liable for those injuries, and that the property damage arising from the accident was extensive.

  On March 27, 2002, the Claimants initiated a personal injury action against Winchester, Citi Capital, and Petrovich in New York State Supreme Court, Bronx County for the injuries sustained in the accident (the "state court action"). In their complaint, the Claimants demanded $5 million each in compensation for their injuries.*fn2 Utica is undertaking Winchester's defense in the state court action and has retained counsel in the matter (hereinafter "Winchester's trial counsel").

  By letter dated April 17, 2002, the Claimants forwarded copies of their medical records to Utica. These records indicated that the Claimants had undergone surgery and described additional injuries sustained from the accident. For a third time, the Claimants requested that Utica provide information regarding excess insurance coverage and that if there were no such coverage, that Winchester provide a sworn statement to that effect. The letter further notified Utica of the commencement of the state court action and included a copy of the complaint. The record reflects that Utica did not respond to the Claimants' repeated requests for information regarding excess insurance coverage.

  As part of discovery in the state court action, the Claimants issued a Notice To Produce to Winchester's trial counsel, dated November 13, 2002, that requested all information regarding any excess or umbrella coverage in effect at the time of the accident that may be available to satisfy all or part of any judgment that may be entered in the state court action. The Claimants also submitted a Bill of Particulars to Winchester's trial counsel on or about November 13, 2002 detailing the injuries they sustained in the accident and the concomitant surgeries that would be required.*fn3 On or about January 24, 2003, the Claimants submitted a Supplemental Bill of Particulars that indicated that one of the Claimants' injuries would lead to osteoarthritis necessitating a knee replacement, and estimated that future medical costs for this Claimant alone would reach between $351,695 and $453,745, not including adjustments for inflation. Following a preliminary conference in the state court action held on January 9, 2003, the state court issued a Preliminary Conference Order that erroneously indicated that Winchester had $1 million in primary insurance coverage. The Order did not indicate that Winchester owned an excess insurance policy. In response to this Order, Winchester's trial counsel later corrected the information regarding the coverage limit by indicating that the limit of its primary coverage with Utica was, in fact, $750,000. Again, Winchester's trial counsel did not mention that Winchester had an excess policy in place at the time of the accident.

  By letter dated February 11, 2003, the Claimants again requested information regarding any excess insurance coverage from Winchester's trial counsel, including an affidavit if no such coverage existed. This request, like the previous requests, went unanswered. The February 11 letter also made reference to a telephone conversation the previous day between counsel for the Claimants and Winchester's trial counsel where they discussed excess coverage.

  The correspondence regarding excess insurance coverage would not end there. By letter dated February 28, 2003, Frederick C. Aranki ("Aranki"), the principal trial attorney defending Winchester in the state court action, provided Utica with the last of several case status reports. In the February 28 report, Aranki stated that he was not aware of any applicable excess insurance policy carried by Winchester, and that he was in the process of preparing an affidavit from Winchester's president to so attest.*fn4 No such affidavit is in the record. This representation regarding excess coverage was confirmed in a March 7, 2003 letter from the Claimants to Utica (with a copy to Aranki), which indicated that Aranki had informed counsel for the Claimants in a telephone conversation that there was no excess coverage in effect at the time of the accident and that an affidavit to that effect was forthcoming.*fn5 The March 7, 2003 letter also described the extensiveness of the Claimants' injuries and the significant property damage to the vehicle.

  By letter dated March 5, 2003, Winchester, through its general corporate counsel (hereinafter "Winchester's corporate counsel"), informed U.S. Liability of the state court action and forwarded copies of the Complaint and Summons.*fn6 In this notice, Winchester indicated that it had only recently been advised that the Claimants had stated that the claim would exceed the primary coverage amount, and thus, U.S. Liability was being notified "as a precaution." Approximately one week later, U.S. Liability requested relevant documents pertaining to the state court action, including the pleadings, Bills of Particulars, and the various status reports that Winchester's trial counsel prepared for Utica as part of its defense of Winchester. U.S. Liability received these documents from Winchester's trial counsel on or about April 2, 2003. The cover letter to U.S. Liability suggested that Winchester was construing U.S. Liability's request for these documents as a tacit acknowledgment from U.S. Liability that it would be providing excess insurance coverage in the state court action. By letter dated April 1, 2003, Winchester first informed the Claimants of the existence of the Excess Policy.

  On or about April 14, 2003, approximately two weeks after receiving the documents, U.S. Liability informed Winchester and the Claimants' counsel by letter (with copies to all the other parties in the state court action) that it was disclaiming coverage for Winchester's failure to comply with the notice provision of the Excess Policy.*fn7 This notice further informed the Claimants that they had failed to cure Winchester's untimely notice because the Claimants were not the first to notify U.S. Liability of the state court action. Notwithstanding U.S. Liability's disclaimer, the Claimants notified U.S. Liability by letter dated May 20, 2003, of their intent to avail themselves of the excess coverage.

  U.S. Liability thereafter initiated the instant action seeking a declaration by this Court that it is not obligated to defend or indemnify Winchester for the state court action due to Winchester's untimely notice. Pending before the Court is U.S. Liability's motion for summary judgment on this claim pursuant to Federal Rule of Civil Procedure 56. Both Winchester and the Claimants oppose U.S. Liability's motion and have each cross-moved for summary judgment asserting that U.S. Liability received timely notice of the state court action and did not timely disclaim coverage. Thus, Winchester and the Claimants claim that U.S. Liability is required to defend and indemnify Winchester under the terms of the Excess Policy. II. DISCUSSION


  The Court may grant summary judgment only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show 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." Fed.R. Civ. P. 56(c). The Court ascertains which facts are material by considering the substantive law of the action, for only those "facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Even if a dispute of the material facts exists, summary judgment will be granted unless the dispute is "genuine," i.e., "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Id. at 249.

  The initial burden rests with the moving party to demonstrate the absence of any genuine issues of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party satisfies its burden, the non-moving party must provide "specific facts showing that there is a genuine issue for trial" in order to survive the motion for summary judgment. Fed.R. Civ. P. 56(e); see also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); Shannon v. New York City Transit Auth., 332 F.3d 95, 98-99 (2d Cir. 2003). The Second Circuit has granted summary judgment where a party failed to show any dispute over the facts that would entitle her to equitable tolling of the time requirements for her Title VII claim. See Boos v. Runyon, 201 F.3d 178, 185 (2d Cir. 2000). In considering a motion for summary judgment, the Court must view the evidence in a light that is favorable to the non-moving party and draw all reasonable inferences in favor of that party. See Williams v. R.H. Donnelley, Corp., 368 F.3d 123, 126 (2d Cir. 2004). However, the Court must refrain from weighing the evidence and restrict its inquiry to whether there are triable issues of material fact. See Anderson, 477 U.S. at 249. Against this standard, the Court considers the issues raised by the parties' arguments in their respective moving papers.


  The first question raised by the pending motions for summary judgment is whether as a matter of law, Winchester provided timely notice of the state court action to U.S. Liability under the terms of the Excess Policy. U.S. Liability argues that Winchester's notice was untimely and thus, Winchester did not fulfill a condition precedent to coverage. On this issue, U.S. Liability asserts that Winchester had mounting indications that damages in the state court action were "likely to involve payment" under the Excess Policy well before March 5, 2003, the date it ultimately provided notice of the action. First, U.S. Liability points to the ad damnum clause of the complaint in the state court action, which alleges $5 million in damages for each of the two Claimants.

  Second, U.S. Liability cites to the earlier status reports, in particular, to the reports dated September 9, 2002 and December 9, 2002; and to the Bills of Particulars, all of which discussed the extent of the Claimants' injuries and expressed the opinion that Winchester would likely be liable for those injuries. U.S. Liability claims that these documents, and other documents exchanged during discovery, provided Winchester with a clear basis upon which to conclude that the Excess Policy would likely be implicated months before Winchester actually provided notice of the potential claim. In response, Winchester argues that it never formed a good-faith belief that the damages in the state court action would exceed the primary coverage amount, and thus, it was not required to provide notice to U.S. Liability under the Excess Policy. Winchester's President, Frank Sapeinza ("Sapeinza"), attests that although he received notice of the accident the day it occurred, he did not believe that the resulting injuries were serious based on Petrovich's account. (See Affidavit of Frank Sapeinza, dated June 8, 2004, at ¶¶ 4-8.) Sapeinza further attests that Winchester first received actual notice of the state court action in or about May 2002, about two months after the action was filed. (See id. at ¶ 9.)

  Winchester places heavy reliance on the advice of its trial counsel during the progression of the state court action. Specifically, Winchester cites to other portions of the status reports where its trial counsel opined that the Claimants' injuries were not serious and were likely not extensive in terms of monetary damages. According to Winchester, the first time it had any indication that the Claimants' counsel believed that the damages in the state court action would exceed $750,000 was after receipt of the last of these status reports. This report, dated February 28, 2003, discussed the Supplemental Bill of Particulars received by Winchester's trial counsel about a month earlier. Based on the revised Bill of Particulars, the report approximated the upper limit of the damages for one of the two Claimants to be in excess of $450,000. Nevertheless, Winchester's trial counsel opined in the February 28 report (as he did in the previous reports) that the damages would not exceed the primary coverage limit. According to Winchester, it nevertheless provided U.S. ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.