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United States District Court, S.D. New York

June 30, 2005.


The opinion of the court was delivered by: LEWIS KAPLAN, District Judge


Plaintiff moves for summary judgment declaring an insurance policy void. The question is whether the policy, notwithstanding a clause barring assignment, was in effect at the date of a loss that followed the sale of the covered business. As a reasonable juror could find that the insurer's agent knew of the sale of the business and that the insurer nevertheless "renewed" the policy and continued to accept premium payments, the motion is denied.


  In 1995, Meir Ackerman and Eugene Loevinger formed Old Williamsburg Candle Corp. ("OWC NY"), a Brooklyn based candle company incorporated in New York.*fn1 In 2001, OWC NY sought to acquire a marine insurance policy from One Beacon Insurance Company ("One Beacon") to cover the transport and storage of its inventory.*fn2 Loevinger discussed the matter with Yechiel Bromberg, the principal of Elite Insurance Agency ("Elite"), an insurance brokerage and agency that is party to two agency agreements with One Beacon.*fn3 Ultimately, One Beacon issued a marine insurance policy (the "Policy") as of April 29, 2001.*fn4 Underwriter Emanuel Palmieri executed the Policy on One Beacon's behalf. By its terms, the Policy is "continuous" and "in force until cancelled by either party giving the other (30) days written notice."*fn5 The Policy provides further that it "shall be void if assigned or transferred without the written consent of [One Beacon]."*fn6 At the time the Policy was issued, its warehouse endorsement covered inventory in two Brooklyn warehouses, one at 300 Liberty Avenue and the other at 143 Alabama Avenue.*fn7

  On March 19, 2001, OWC NY executed an Asset Purchase Agreement ("APA" or "Agreement") pursuant to which OWC NY agreed to sell to New Williamsburg Candle Corp., a Delaware corporation ("OWC DE") "certain of the assets and [OWC NY's] candle business, as a going concern,"*fn8 including "all rights of [OWC NY] under leases, contracts, plans, commitments, licences, policies and permits."*fn9 The next day, OWC DE changed its name to Old Williamsburg Candle Corp.*fn10 Ackerman and Loevinger signed six-month employment contracts with OWC DE to assist in the transition.*fn11

  While the Policy did not expire by its terms, it came up for "renewal" around this time. One Beacon "renews" the Policy on its anniversary date by issuing a new endorsement if necessary to adjust premiums. In a letter dated March 28, 2002, Palmieri enlisted Bromberg's help to "review with the assured their coverage to determine if any changes are required for th[e] policy's renewal" in anticipation of the anniversary date, April 29, 2002.*fn12 Bromberg assisted One Beacon, but he never advised Palmieri that any changes were necessary*fn13 even though he ordinarily tells the insurer of changes in management or ownership as soon as such information is received.*fn14

  The extent of Bromberg's knowledge during this period concerning the sale of the candle business is uncertain. Loevinger says that he told Bromberg prior to the Policy's renewal that he was selling the business via a sale of assets and "that a new group of corporate officers were taking over the management and ownership of Old Williamsburg Candle Corp."*fn15 Bromberg equivocated substantially in his deposition.*fn16 He admitted, however, that he met OWC DE's comptroller, Yaniv Mazor, before the renewal date.*fn17 Mazor was introduced to him "[a]s a controller [sic] for the Israeli operations [sic] that was buying the business or merging with [Loevinger] for the business."*fn18 Prior to the closing of the APA on March 19, 2002, Mazor and Bromberg apparently discussed OWC DE's insurance needs over the telephone.*fn19 Furthermore, Bromberg apparently "brief[ed] [Mazor] onto what the renewal premiums and coverages [would be]" and Mazor signed "a finance contract" for Bromberg even though Bromberg previously had dealt exclusively with Loevinger.*fn20 Saliently, Bromberg acknowledged that he specifically asked Loevinger, presumably around this time, whether the name of the company was staying the same; Loevinger answered that it was.*fn21

  One Beacon issued a new endorsement effective April 29, 2002.*fn22 One Beacon subsequently continued to accept premium payments, albeit from OWC DE rather than OWC NY. On December 22 or 23, 2002, Mazor and Bromberg discussed "[m]oving one million dollars of inventory [coverage from one warehouse] to a different [and new] location"*fn23 because OWC DE "needed more space" for storage.*fn24 In an endorsement effective December 23, 2002 and executed by Palmieri, the Policy was amended to move one million dollars of liability coverage from the warehouse at 300 Liberty Avenue to that at 315 Liberty Avenue, across the street.*fn25 Three days later, on December 26, 2002, OWC DE suffered serious loss to the inventory located in two adjacent warehouses due to "[e]xtensive fire."*fn26 The next day, OWC DE submitted a claim under the Policy to One Beacon through Elite.*fn27

  One Beacon subsequently brought this action against OWC NY and OWC DE, seeking a declaration that it has no obligation to indemnify under the Policy.*fn28 One Beacon now moves for summary judgment against OWC DE.


  A. Summary Judgment Standard

  "[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial."*fn29 In deciding such a motion, a district court must resolve all ambiguities and make all reasonable inferences in favor of the nonmoving party.*fn30 At the same time, "conclusory statements, conjecture, or speculation by the party resisting the motion will not defeat summary judgment."*fn31

  B. The Merits*fn32

  The Policy provides that "[t]his policy shall be void if assigned or transferred without the written consent of the Company."*fn33 One Beacon argues that the Policy was voided by its assignment to OWC DE and moves for summary judgment on that basis. Plaintiff urges that OWC DE is not covered because (1) the assignment clause unambiguously required written consent to the Policy's assignment and is enforceable, (2) OWC NY and OWC DE are distinct legal entities,*fn34 (3) OWC NY assigned the Policy to OWC DE,*fn35 and (4) One Beacon never gave written consent. Though the argument initially is compelling,*fn36 that is not the end of the tale.

  The evidence would permit a trier of fact to conclude that Bromberg was told prior to the closing and, in any case, prior to the "renewal" of the Policy that the business was being sold. While defendant's evidence that Bromberg was told that the transaction would be structured as a sale of assets and thus would involve an assignment of the Policy is equivocal, the Court is obliged for purposes of this motion to infer that Bromberg was told the structure of the deal. In any case, "whatever is notice enough to excite attention, and put a party upon his guard and call for inquiry, is notice of everything to which such inquiry might have led."*fn37 The trier here would be entitled to find either that Bromberg was told or that he was on sufficient notice to make him chargeable with knowledge that the Policy would be assigned. In consequence, the motion boils down to whether One Beacon is chargeable with Bromberg's knowledge, actual and constructive, and, if so, the consequences of such knowledge.

  1. One Beacon Is Chargeable With the Knowledge of its Agent

  An agent's knowledge is imputed to the principal so long as the agent acts within the scope of his agency.*fn38

  "[A]n agency relationship `results from a manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and the consent by the other to act.'"*fn39 The agency agreements between One Beacon and Elite characterized Elite as its agent.*fn40 They authorized Elite to accept, bind, issue or endorse policies to the extent authorized in attached statements of binding authority; to collect premiums; and, subject to certain limits, to effect any necessary changes on policies in force even once the agreements were terminated.*fn41 Moreover, at the time of the Policy's renewal, Palmieri of One Beacon instructed Bromberg to "review with the assured their coverage to determine if any changes are required for th[e] policy renewal."*fn42 Hence, even bearing in bind that the "characteriz[ation] as [an] `insurance agent?' or `broker?' is not dispositive of the agency issue,"*fn43 the evidence is quite sufficient to justify conclusions that Elite was One Beacon's agent and that Bromberg's knowledge concerning the sale of OWC NY's business was acquired within the scope of his agency. 2. One Beacon May Not Avoid the Policy

  Were a trier of fact to conclude that Bromberg knew of the assignment and that this knowledge was chargeable to One Beacon, One Beacon could not avoid the Policy. This conclusion may be reached by different paths.

  First, "where the insurer has the absolute right to terminate a policy on its anniversary date, each renewal of the policy is deemed the issuance of a new policy."*fn44 Here, One Beacon had that right. It nevertheless "renewed" the Policy, and it arguably did so while chargeable with knowledge that the Policy had been assigned to OWC DE. In that event, the renewal would have constituted the issuance of a new policy, thus making the March 19, 2002 assignment immaterial.

  The same conclusion would result as a matter of equitable estoppel. Where an insurance carrier knowingly conceals or misstates facts with the intention or the expectation that such conduct will be relied upon, and the insured substantially changes its position to its detriment in reasonable reliance upon the false impression thus created, the carrier is estopped from taking a position inconsistent with that which was misstated or concealed.*fn45 A trier would be entitled to find that that is exactly what occurred here. One Beacon renewed the Policy while it was chargeable with knowledge that the Policy had been assigned notwithstanding the anti-assignment clause. It thus created the impression that the Policy was in force, an impression that it intended the insured to rely upon when making premium payments. The insured, ignorant of the alleged voidability of the Policy, paid the premiums and abstained from procuring other coverage.

  One Beacon seeks to avoid the consequences of these facts by contending that it did not deliberately mislead OWC DE. That is immaterial. "An innocent misleading of another party may estop one from claiming the benefits of his or her deception."*fn46 Conclusion

  The record betrays genuine issues of fact relating to Elite's agency status and the extent of Bromberg's knowledge. These issues are material to the outcome of the suit and, accordingly, plaintiff's motion for summary judgment is denied.


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