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NWL Holdings, Inc. v. Discover Property & Casualty Insurance Co.

March 30, 2007


The opinion of the court was delivered by: Hurley, Senior District Judge


Plaintiff NWL Holdings, Inc. (d/b/a National Wholesale Liquidators) ("Plaintiff") moves for an Order, pursuant to Federal Rule of Civil Procedure ("Rule") 56, (1) declaring that defendant Discover Property & Casualty Insurance Company ("Defendant") was obligated to defend Plaintiff with respect to claims asserted against it in a state court action; and (2) granting judgment to Plaintiff in the sum of $131,652.79 to reimburse it for the expenses and attorneys' fees incurred in defending the state court action. For the reasons that follow, the Court grants Plaintiff's motion for a declaratory judgment and the matter is referred to Magistrate Judge William D. Wall for a report and recommendation as to the appropriate amount of fees to be awarded Plaintiff.


The material facts, drawn from the Complaint and the parties' Local 56.1 Statements, are undisputed unless otherwise noted.

Defendant issued a policy of Commercial General Liability Insurance to Plaintiff, effective May 11, 2003. In the policy, Defendant agreed to indemnify and defend Plaintiff against claims for "bodily injury" caused by an "occurrence" as defined in the policy. Occurrence is defined as "an accident including continuous or repeated exposure to substantially the same general harmful conditions." (Pl.'s Ex. 3, Policy at 14.) The policy contained an exclusion from coverage for "Expected or Intended Injury" which provides that the "Bodily Injury . . . expected or intended from the standpoint of the insured is not covered." (Id. at 2.)

In or around January 2004, Nawaz Malik ("Malik"), a former employee of Plaintiff, commenced an action in the New York State Supreme Court, Queens County, against Plaintiff and its former employee Muhammad Akram ("Akram"). Malik alleged that he was sexually assaulted by Akram at work and asserted five causes of action, viz. (1) sexual harassment under state law; (2) retaliation based upon his complaints of sexual harassment; (3) intentional infliction of emotional distress; (4) assault; and (5) battery. Plaintiff notified Defendant of the state court action and according to Defendant, it sent Plaintiff a letter, dated February 17, 2004, disclaiming coverage under the policy. Plaintiff denies receipt of this letter.

Thereafter, Malik, through different counsel, commenced a second lawsuit against Plaintiff in April 2004. This action contained the same causes of action as the first lawsuit but added claims for negligent supervision, hiring and retention. On July 8, 2004, Defendant's coverage counsel issued a letter to Plaintiff disclaiming coverage for all of the claims in the second action except for the negligent hiring, retention and supervision claim. (See Pl.'s Ex. 9.) According to Plaintiff, on an undisclosed date, the second action was withdrawn and voluntarily discontinued.

According to Plaintiff, the first Malik action was settled for $299,999 and Plaintiff has paid this amount to Malik. Plaintiff contends that its expenditures and attorneys' fees with regard to the first Malik action total $131,652.79.

Plaintiff now moves for an Order declaring that Defendant was obligated to defend it in the first Malik action and seeks reimbursement for the expenses and fees it incurred in defending that action. Plaintiff does not seek indemnification for the amount of monies paid in settlement.


I. Summary Judgment Standard

Summary judgment pursuant to Federal Rule of Civil Procedure 56 is only appropriate where admissible evidence in the form of affidavits, deposition transcripts, or other documentation demonstrates the absence of a genuine issue of material fact, and one party's entitlement to judgment as a matter of law. See Viola v. Philips Med. Sys. of N. Am., 42 F.3d 712, 716 (2d Cir. 1994). The relevant governing law in each case determines which facts are material; "only disputes over 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). No genuinely triable factual issue exists when the moving party demonstrates, on the basis of the pleadings and submitted evidence, and after drawing all inferences and resolving all ambiguities in favor of the non-movant, that no rational jury could find in the non-movant's favor. Chertkova v. Conn. Gen'l Life Ins. Co., 92 F.3d 81, 86 (2d Cir. 1996) (citing Fed. R. Civ. P. 56(c)).

To defeat a summary judgment motion properly supported by affidavits, depositions, or other documentation, the non-movant must offer similar materials setting forth specific facts that show that there is a genuine issue of material fact to be tried. Rule v. Brine, Inc., 85 F.3d 1002, 1011 (2d Cir. 1996). The non-movant must present more than a "scintilla of evidence," Delaware & Hudson Ry. Co. v. Consolidated Rail Corp., 902 F.2d 174, 178 (2d Cir. 1990) (quoting Anderson, 477 U.S. at 252), or "some metaphysical doubt as to the material facts," Aslanidis v. U.S. Lines, Inc., 7 F.3d 1067, 1072 (2d Cir. 1993) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)), and cannot rely on the allegations in his or her pleadings, conclusory statements, or on "mere assertions that affidavits supporting the motion are not credible." Gottlieb v. County of Orange, 84 F.3d 511, 518 (2d Cir. 1996) (internal citations omitted).

The district court considering a summary judgment motion must also be "mindful of the underlying standards and burdens of proof," Pickett v. RTS Helicopter, 128 F.3d 925, 928 (5th Cir. 1997) (citing Anderson, 477 U.S. at 252), because the evidentiary burdens that the respective parties will bear at trial guide district courts in their determination of summary judgment motions. Brady v. Town of Colchester, 863 F.2d 205, 211 (2d Cir. 1988). Where the non-moving party will bear the ultimate burden of proof on an issue at trial, the moving party's burden under Rule 56 will be satisfied if he can point to an absence of evidence to support an essential element of the non-movant's claim. Id. at 210-11. Where a movant without the underlying burden of proof offers evidence that the non-movant ...

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