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Jp Morgan Chase & Co., et al., Plaintiffs-Appellants v. Indian Harbor Insurance Company

June 12, 2012

JP MORGAN CHASE & CO., ET AL., PLAINTIFFS-APPELLANTS,
v.
INDIAN HARBOR INSURANCE COMPANY, ET AL., DEFENDANTS, ARCH INSURANCE COMPANY, ET AL., DEFENDANTS-RESPONDENTS. JP MORGAN CHASE & CO., ET AL., PLAINTIFFS-RESPONDENTS, -- INDIAN HARBOR INSURANCE COMPANY, ET AL., DEFENDANTS-APPELLANTS, ARCH INSURANCE COMPANY, ET AL., DEFENDANTS.



Appeals from orders of the Supreme Court, New York County (Barbara R. Kapnick, J.), entered May 31, 2011, which granted the motions by Arch Insurance Company, St. Paul Mercury Insurance Company, Twin City Fire Insurance Company, Lumbermens Mutual Casualty Company and Swiss Re International SE for summary judgment dismissing the amended complaint as against them with prejudice, and from an order, same court and Justice, entered on or about May 31, 2011, which denied the motion by Indian Harbor Insurance Company, Houston Casualty Company and Travelers Indemnity Company to compel production of certain documents.

The opinion of the court was delivered by: Degrasse, J.

JP Morgan Chase & Co. v Indian Harbor Ins. Co.

Decided on June 12, 2012

Appellate Division, First Department

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Luis A. Gonzalez,P.J. Richard T. Andrias Leland G. DeGrasse Rosalyn H. Richter Sheila Abdus-Salaam, JJ.

DEGRASSE, J.

Plaintiff alleges that defendants breached their contractual obligations to provide indemnification under excess insurance policies they issued. Plaintiff's predecessor, Bank One Corporation, purchased $175 million in "claims made" bankers professional liability insurance and securities action claim coverage for the period October 1, 2002 to October 1, 2003. Bank One's insurance program was structured as a tower of follow-the-form coverage in excess of a self-insured retention. Defendant Indian Harbor Insurance Company was the primary carrier while defendants Houston Casualty Company, Arch Insurance Company, St. Paul Mercury Insurance Company, Twin City Fire Insurance Company, Lumbermens Mutual Insurance Company, Swiss Re International SE and nonparties Federal Insurance Company, American Zurich Insurance Company and Gulf Insurance Company provided excess coverage. The carriers and the tiers of coverage they provided are listed in descending order as follows: Tier/ Insurance CompanyCoverage Limits Seventh Excess - Swiss Re$50 million in excess of $150 million Sixth Excess - Federal$10 million in excess of $140 million Fifth Excess - Lumbermens, St. Paul and Arch$30 million in excess of $110 million, with a "quota share" apportionment of $10 million among the three carriers Fourth Excess - Twin City$15 million in excess of $95 million Third Excess - Zurich$15 million in excess of $80 million Second Excess - Gulf$15 million in excess of $65 million First Excess - Houston$15 million in excess of $50 million Primary - Indian Harbor 50% of loss up to $50 million subject to a maximum coverage limit of $25 million

In November 2002, actions were brought against Bank One and some of its affiliates in connection with their roles as indenture trustee and otherwise with regard to certain notes issued by NPF XII, Inc. and NPF VI, Inc. Plaintiff's entities (the JP Morgan entities) were defendants in some of the actions as well as other related actions in which the Bank One entities were not defendants. Between July and November 2004, while the NPF litigation was still pending, the Bank One entities were merged into the JP Morgan entities. Between February 2006 and March 2008, plaintiff settled six actions that were part of the NPF litigation for an aggregate of $718 million. Plaintiff's theory of recovery in this action is that the portion of the settlement attributable to claims made against the heritage Bank One entities, as opposed to claims based on the conduct of the premerger JP Morgan entities, exceeded the combined limits of the policies in the Bank One tower of insurance.

Before bringing this action, plaintiff settled with Federal for the sum of $17 million. That settlement agreement covered Federal's liability under the Bank One program as well as claims under separate policies issued by Federal's affiliate, Executive Risk Indemnity, Inc., under a different insurance program. The agreement provided for no allocation of the settlement as between plaintiff's claims against Federal and those against Executive Risk. As shown above, Swiss Re is the only carrier that was higher than Federal in the Bank One tower.

After commencing this action, plaintiff entered into another $17 million settlement, this time with Zurich and its affiliate, Steadfast Insurance Company. This settlement covered plaintiff's $15 million claim under Zurich's policy in the Bank One tower as well as a $13.4 million claim against Steadfast under separate insurance covering unrelated litigation. After that settlement, plaintiff amended the complaint so as to drop Zurich as a defendant.

Twin City moved for summary judgment, asserting that plaintiff could not establish the occurrence of express conditions precedent to coverage under Twin City's policy. Invoking their own policy provisions, Swiss Re, Lumbermens, St. Paul and Arch also moved for summary judgment on similar grounds. The motion court granted all of the motions for summary judgment on the basis of its construction of the various policies. We affirm.

The parties agree that Illinois law governs the disposition of the motions for summary judgment. Under the law of that state, the construction of an insurance policy is a question of law that requires a court to ascertain the intent of the parties to the contract (Outboard Marine Corp. v Liberty Mut. Ins. Co., 154 I11 2d 90, 108, 607 NE2d 1204, 1212 [1992]). Accordingly, insurance policies are construed ...


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