The opinion of the court was delivered by: Lewis A. Kaplan, District Judge
The plaintiff insurance carrier here seeks to recover damages from its agent and the agent's principal for a loss it sustained in a previous action by its insured. It alleges, broadly speaking, that the agent breached its duties to the carrier when it failed to disclose facts concerning the insured that, the carrier claims, would have led it to deny coverage. The matter is before the Court on defendants' motion for summary judgment dismissing the complaint.
The Circumstances Underlying the Previous Action
In describing the circumstances that gave rise to the previous action, I assume the truth of the allegations of the complaint here and supplement them with undisputed facts established on this motion.
In 1995, Meir Akerman and Eugene Loevinger formed Old Williamsburg Candle Corp. ("OWC NY"), a Brooklyn based candle company incorporated in New York.*fn1 In 2000, OWC NY sought to acquire a marine insurance policy from plaintiff One Beacon Insurance Company ("One Beacon") to cover the transport and storage of its inventory.*fn2 It discussed the matter with defendant Yechiel Bromberg, the principal of defendant Elite Insurance Agency ("Elite"), an insurance brokerage and agency that had two agency agreements with One Beacon.*fn3 Ultimately, One Beacon issued a marine insurance policy (the "Policy") as of April 29, 2001.*fn4 By its terms, the Policy was "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 three Brooklyn warehouses, including one at 300 Liberty Avenue and one at 143 Alabama Avenue.*fn7
On August 16, 2001, OWC NY executed an Asset Purchase Agreement ("APA" or "Agreement") pursuant to which OWC NY agreed to sell to New Williamsburg Candle Corp. ("OWC DE"), a Delaware corporation owned by an Israeli citizen, its name and all of its assets, inventory and business operations associated with its candle-making operations.*fn8 The transaction closed (except as to inventory) on March 19, 2002.*fn9 Accordingly, the OWC NY assigned the policy in question to OWC DE on that date.*fn10
On March 21, 2002, OWC DE changed its name to Old Williamsburg Candle Corp.*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. One month prior to the April 29, 2002 policy anniversary date, One Beacon's underwriter, Palmieri, asked Bromberg to advise if any changes were required to the policy.*fn12 Bromberg did not inform One Beacon of the sale of the business.*fn13
On December 26, 2002, a fire erupted at the premises at 300 Liberty Avenue and 143 Alabama Avenue. The buildings and their contents, including inventory owned by OWC DE, were damaged or destroyed.*fn14
In 2003, One Beacon brought suit in this Court against OWC NY and OWC DE. Insofar as it is relevant here, the complaint sought a declaration that Old Beacon was not obliged to indemnify OWC DE for any loss because it was not an insured under the policy.*fn15 OWC DE counterclaimed for damages for breach of the policy. Alternatively, in the event it were determined that OWC DE was not an insured under the policy, it sought reformation to reflect OWC DE as the named insured.*fn16
The case was tried before me in 2005. Insofar as the decision is pertinent here, I made the following findings and conclusions in ...