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Crucible Materials Corp. v. Certain Underwriters at Lloyd's London

February 2, 2010

CRUCIBLE MATERIALS CORPORATION, PLAINTIFF,
v.
CERTAIN UNDERWRITERS AT LLOYD'S LONDON & LONDON MARKET COMPANIES, DEFENDANTS.



The opinion of the court was delivered by: David N. Hurd United States District Judge

MEMORANDUM-DECISION & ORDER

I. INTRODUCTION

More than twelve years ago, plaintiff Crucible Materials Corporation ("plaintiff" or "Crucible") filed suit for, inter alia, the alleged breach of an excess liability insurance contract issued in 1968 ("the 1968 policy"). Plaintiff's complaint also included a claim for declaratory relief pursuant to 28 U.S.C. § 2201 declaring the parties' rights and obligations under the 1968 policy. Following four written district court opinions and an appellate decision from the Second Circuit, see Crucible Materials Corp. v. Aetna Cas. & Sur. Co., No. 5:97-CV-759, 2007 WL 1827473 (N.D.N.Y. June 22, 2007), vacated sub nom., Crucible Materials Corp. v. Certain Underwriters at Lloyd's London, 330 F. App'x 223 (2d Cir. 2009);*fn1 Crucible Materials Corp. v. Aetna Cas. & Sur. Co., 228 F. Supp. 2d 182 (N.D.N.Y. 2001) (Munson, Senior J.); Crucible Materials Corp. v. Aetna Cas. & Sur. Co., No. 5:97-CV-759, 2000 WL 748104 (N.D.N.Y. June 5, 2000) (Munson, Senior J.); Crucible Materials Corp. v. Aetna Cas. & Sur. Co., No. 97-CV-759, 1998 WL 404239 (N.D.N.Y. July 15, 1998) (Munson, Senior J.), the only remaining defendants are Certain Underwriters at Lloyd's London and London Market Companies ("defendants" or "London").*fn2

Defendants move for summary judgment pursuant to Federal Rule of Civil Procedure 56. Plaintiff opposes. Defendants' motion was considered without oral argument.

II. BACKGROUND

The parties are presumed to be familiar with the facts underlying plaintiff's claims in light of the number of written opinions already issued. Nevertheless, a brief recitation of the procedural history is helpful for identifying the legal issues relevant to defendants' present motion.

Plaintiff's claims center around two different types of insurance coverage issued by its insurance carriers: (1) primary liability insurance and (2) excess liability insurance. (See Pl'.s Third Am. Compl., Dkt. No. 104, ¶ 11.) Primary liability insurance protects the insured against a specified level of future losses, whereas excess liability insurance protects the insured from losses beyond the underlying insurance level. Here, plaintiff obtained primary liability insurance, first-layer excess liability insurance, and second-layer excess liability insurance. In 2001, the judge to whom this case was previously assigned granted summary judgment in favor of plaintiff's primary liability and first-layer excess liability insurance provider--then-defendant Travelers Casualty and Surety Company*fn3 (hereinafter "Travelers")--as a result of plaintiff's failure to provide reasonable notice of its insurance claim. Crucible Materials Corp., 228 F. Supp. 2d at 198. The remaining parties were asked to submit additional briefing on the limited issue of whether the second-layer excess liability insurance providers, including the present defendants, could be held liable notwithstanding the decision to dismiss all claims against the primary liability insurance provider. Id. at 200. As Senior District Judge Munson explained: "Rather than resolve this issue sua sponte, the court seeks additional briefing from the parties that specifically addresses whether Crucible is entitled to excess coverage where all claims against the general liability carrier have been dismissed." Id.

In response to the court's request, the parties simultaneously filed supplemental briefs on July 20, 2001. (See Defs.' Supplemental Trial Br., Dkt. No. 179 (hereinafter "Defs.' Supplemental Br."); Pl.'s Mem. Regarding Trigger of the Excess Liability Policies., Dkt. No. 184 (hereinafter "Pl.'s Supplemental Br.")) At that time, the parties agreed that the relevant issue was whether Travelers's successful late notice defense precluded defendants from being held liable for breach of the 1968 policy. (See Defs.' Supplemental Br. at 2; Pl.'s Supplemental Br. at 6.)

In support of their position, defendants explained that "[q]uestions of coverage will generally depend upon the terms and conditions of the insurance policy." (Defs.' Supplemental Br. at 2). As a preliminary matter, defendants argued that plaintiff could not prove the terms and conditions of the 1968 policy because none of the parties were in possession of a copy of the policy agreement. (Id.) Alternatively, even under plaintiff's purported terms and conditions of the 1968 policy, defendants contended that excess liability coverage applied only in the event the primary liability insurance providers "paid or have been held liable to pay the full amount of their respective ultimate net liability . . . ." (Id. at 3-4 (quoting Ex. 2 to Defs.' Supplemental Br., Dkt. No. 179, 12.)) In light of the dismissal of the claims against plaintiff's primary and first-layer excess liability insurance provider, defendants argued their obligations, if any, to plaintiff under the 1968 policy never matured because Travelers neither paid nor was held liable to pay the full amount of its respective net liability due to its successful late notice defense.

In contrast, plaintiff argued it was entitled to second-layer excess liability coverage despite the dismissal of its claims against its primary and first-layer excess liability insurance provider so long as it "establishes at trial that it has satisfied the terms of coverage set forth in the excess policies." (Pl's. Supplemental Br. at 6.) Although plaintiff conceded that it no longer possessed a copy of the 1968 policy, it argued that the policy's terms and conditions were nonetheless capable of being proven because the policy incorporated by reference the terms and conditions set forth in § 2.2 of Travelers's first-layer excess indemnity policy. (Id.) Pursuant to § 2.2 of that policy, "[t]he limits of liability of any underlying insurance policy shall be deemed applicable irrespective of (1) any defense which the underlying insurer may assert because of the Insured's failure to comply with any condition of the policy subsequent to an occurrence, or (2) the inability of the underlying insurer to pay by reason of bankruptcy or insolvency." (Id. (emphasis in original)) Based upon its position that the 1968 policy incorporated this language by reference, plaintiff asserted there was a triable issue of fact as to whether the 1968 policy provided insurance coverage for excess liabilities notwithstanding Travelers's successful late notice defense. (Id. at 7.)

In light of the simultaneous filing of the parties' supplemental briefs on July 20, 2001, none of the parties were apprised of the opposing arguments prior to filing their memorandums of law. In particular, defendants were unaware that plaintiff intended to rely upon the position that the 1968 policy incorporated by reference the terms of Travelers's first-layer excess liability policy. (See Defs.' Mot. for Leave to File Mem. of Law in Opp'n, Dkt. No. 231-1, 2.) As a result, plaintiff and defendants filed response briefs to each other's supplemental briefs on September 12, 2001. (See Pl.'s Resp. Mem. of Law, Dkt. No. 189; Defs.' Resp. Mem. of Law, Dkt. No. 231-2.*fn4 ) Both response briefs addressed, inter alia, the incorporation by reference issue. For example, plaintiff's response brief reiterated the same position expressed in plaintiff's supplemental brief, i.e., that § 2.2 of the Travelers first-layer excess policy "is equally applicable to the excess liability policy Underwriters issued to Crucible in 1968 because this language was incorporated by Underwriters into the 1968 policy." (Pl.'s Resp. Mem. of Law, Dkt. No. 189, 2 (citing Pl.'s Supplemental Br. at 7 n.13.)) Defendants argued in their response brief that plaintiff failed to produce any evidence to support its position that the 1968 policy incorporated by reference § 2.2 of the Travelers first-layer excess policy. (Defs.' Resp. Mem. of Law, Dkt. No. 231-2, 3-6.) During a conference on October 22, 2001, Judge Munson informed the parties that he would consider the excess liability issue based upon their submissions and issue a written decision. (See Minute Entry, Dkt. No. 194.)

Following a stipulated delay, the case was reassigned to the undersigned on December 13, 2006. (See Order, Dkt. No. 213.) At that time, four motions were pending: (1) plaintiff's motion for reconsideration of the 2001 summary judgment decision in favor of Travelers; (2) defendants' motion for summary judgment based upon the dismissal of all claims against Travelers; (3) defendants' motion for reconsideration of the 2001 decision to deny in part their motion for summary judgment; and (4) defendants' motion to strike one of plaintiff's exhibits submitted in support of its motion for reconsideration. Oral argument was heard on May 30, 2007, in Utica, New York, and decision was reserved on all motions.

On June 22, 2007, defendants' motion for summary judgment based upon the dismissal of all claims against Travelers was granted and plaintiff's motion for reconsideration was denied. Crucible Materials Corp., 2007 WL 1827473, at *2. Prior to that decision, plaintiff conceded that its right to excess liability coverage given the dismissal of its primary insurance provider rested upon its contention that the 1968 policy incorporated by reference the terms and conditions of the Travelers first-layer excess policy. (See Pl.'s Supplemental Br. at 6-7; Pl.'s Resp. Mem. of Law, Dkt. No. 189, 2.) After determining that plaintiff could not produce any evidence showing that the 1968 policy incorporated by reference the terms of the Travelers first-layer excess liability policy, summary judgment was granted in favor of defendants, and their remaining motions were denied as moot. Crucible Materials Corp., 2007 WL 1827473, at *1-2.

On July 19, 2007, plaintiff appealed the summary judgment decision in favor of defendants to the Second Circuit. (Notice of Appeal, Dkt. No. 221.) On May 14, 2009, the Second Circuit vacated and remanded the summary judgment decision on the basis that summary judgment was improperly granted sua sponte. Crucible Materials Corp., 330 F. App'x at 225-26. The Court of Appeals reasoned that "[p]rior to the District Court's June 22, 2007 decision and order, neither side briefed the issue of whether there existed a dispute as to the terms of the 1968 policy." Id. at 226. Having determined that plaintiff "was not afforded adequate notice that the District Court had under advisement the question of an asserted failure to prove the terms of the 1968 policy," the court reinstated plaintiff's claims against defendants. Id.

III. DISCUSSION

In accordance with the mandate of the Second Circuit, defendants now move for summary judgment as to plaintiff's reinstated claims. Defendants contend summary judgment is warranted on three separate grounds: first, that plaintiff is not entitled to excess liability coverage under the 1968 policy because there is insufficient evidence to support plaintiff's contention that the 1968 policy incorporated by reference § 2.2 of the Travelers policy; second, that plaintiff's losses do not meet the attachment point of the 1968 policy under either Pennsylvania or New York allocation law; and third, that, as a matter of law, plaintiff did not provide reasonable notice of its insurance claim for the Trent Tube site.

A. Summary Judgment Standard

Summary judgment is warranted when the pleadings, depositions, answers to interrogatories, admissions, and affidavits reveal no genuine issue as to any material fact. FED. R. CIV. P. 56; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509-10 (1986). All facts, inferences, and ambiguities must be viewed in a light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356 (1986); Mandell, 316 F.3d at 377. Initially, the burden is on the moving party to demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2458 (1986). After the moving party has satisfied its burden, the non-moving party must assert specific facts demonstrating there is a genuine issue to be decided at trial. FED. R. CIV. P. 56(e)(2); Liberty Lobby, Inc., 450 U.S. at 250, 106 S.Ct. at 2511. The non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., 475 U.S. ...


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