United States District Court, E.D. New York
For the Plaintiff: Brian J. Davis, Esq., of Counsel, Law Office of Brian J. Davis P.C., Garden City, NY.
For the Defendant: Meryl R. Lieberman, Esq., Brian Margolies, Esq., of Counsel, Traub Lieberman Straus & Shrewsberry LLP, Hawthorne, NY.
MEMORANDUM OF DECISION AND ORDER
ARTHUR D. SPATT, United States District Judge.
The Plaintiff in this case, B& A Demolition and Removal, Inc. (" B& A" ) seeks a declaratory judgment against the Defendant Markel Insurance Company, LLC (" Markel" ), affirming that Markel has an obligation to indemnify B& A in a lawsuit presently pending in New York State Supreme Court. Presently before the Court is the Defendant's motion for summary judgment. For the reasons set forth below, the motion is granted.
This derivative action relates to a case commenced on April 13, 2009 in New York Supreme Court, Nassau County, by Parabit Realty LLC and Parabit Systems Inc. (collectively, " Parabit" ) against the Town of Hempstead, B& A, and several other defendants (the " Parabit Lawsuit" ). Parabit owns a building at 35 Debevoise Avenue in Roosevelt, New York, and alleges in the Parabit Lawsuit that B& A and the Town of Hempstead are responsible for having damaged that building during construction of an adjacent structure.
When the Parabit Lawsuit was filed, B& A held insurance with the present Defendant Markel that covered the type of claim that Parabit had asserted against B& A. However, it was not until November 17, 2009, approximately seven months after Parabit commenced that lawsuit, that B& A notified Markel of the pending claims. Under the parties' insurance contract (the " Policy" ), B& A's notice to Markel of the Parabit Lawsuit was not timely--although B& A alleges that this delay did not prejudice Markel. On December 2, 2009, Markel disclaimed liability to B& A under their insurance contract, based on this delay in providing notice. On December 10, 2010, just over a year later, B& A commenced the present suit in New York Supreme Court, Nassau County, seeking to compel Markel to honor its coverage. The case was then removed to this Court.
B& A bases its lawsuit on a relatively new provision of the New York Insurance Law, N.Y. Ins. L. § 3420(a), which took effect on January 17, 2009. Prior to that date, an insurer was permitted to issue contracts that allowed it to deny coverage to an insured based on an untimely notice of claim--even when the delay did not prejudice the insurer. However, under the new rule, insurance contracts must provide that an insurer may avoid coverage based on untimely notice only if the insurer is prejudiced by the delay. B& A
contends that the new rule governs the parties' insurance contract, and that to deny coverage, Markel must show that it was prejudiced by B& A's late notice. Markel maintains that the old rule controls, and that the untimeliness of B& A's notice is reason enough to disclaim liability. B& A recognizes that if the old rule governs, then coverage is appropriately denied.
The determination of whether this Policy is governed by the new rule or the old rule depends entirely on when the policy was " issued or delivered" . This is because the relatively new provision of the New York Insurance Law does not apply retroactively and applies only to insurance policies that were issued or delivered on or after January 17, 2009. Therefore, the Court will now set forth the relevant facts as to the initiation of the parties' relationship and the timeline regarding the issuance of the Policy.
" It is common for an insured and an insurer to negotiate and enter into a contract of insurance through intermediaries."
MacLaren Europe Ltd. v. ACE American Ins. Co., 908 F.Supp.2d 417, 2012 WL 5426686, at *1 (S.D.N.Y. Nov. 5, 2012). Two brokers were involved in the underwriting and negotiation process for this Policy. The Halland Companies (" Halland" ) was the retail broker, while Gremesco Corporation (" Gremesco" ) was the wholesale broker. Generally speaking, Markel does not communicate directly with the prospective insured or with the retail broker when a policy is applied for. Rather, Markel interacts solely with a wholesale broker such as Gremesco. According to Markel, it has a business relationship with Gremesco but Gremesco is not its agent. In this regard, Markel emphasizes that it does not provide Gremesco with the authority to bind coverage or calculate premiums. Instead, Markel contends that a wholesale broker such as Gremesco is merely an " intermediary[y] that help[s] to facilitate negotiations between [Markel] and the prospective insured." (Deft's Motion at 3.)
Presented to the Court is the deposition testimony of Lisa Spezzano, a longtime employee of Gremesco. (See Margolies Aff., Ex. 13.) Spezzano was the Gremesco representative who was involved in the delivery of the Policy after it was issued by Markel. She testified that a retailer such as Halland is a company that gets business directly from the insured, and then the retailer will approach Gremesco. She stated that Gremesco is " actually a go between an insured and an insurance company." (Id. at 6:18-25.) Spezzano also explained that Halland could not communicate directly with Markel to purchase an insurance policy, but was required to utilize a wholesale broker such as Gremesco to obtain a policy quote and eventually purchase coverage.
Also presented to the Court is the deposition testimony of Patrick Erickson, who was the Halland representative who represented B& A with regard to the Markel insurance policy. According to Erickson, he " put together a submission which was submitted to Gremesco. Gremesco submitted it on to Markel. Markel came up with promulgation rates. Gremesco then forwarded the promulgation with the rate indication from Markel to [him]. [He] discussed it with [his] insured, turned around and sent Gremesco an e-mail to bind coverage." (Margolies Aff., Ex. 14, at 18:20-19:9.) Erickson confirmed that he never dealt directly with Markel because, to the best of his knowledge, it did not have relationships directly with retail brokers. He stated that he went to Gremesco because it was one of a group of wholesalers that he utilized to access the surplus lines marketplace or wholesale marketplace.
The Policy was bound by Markel and effective on October 13, 2008. This was the date insurance coverage began. The binder was then released by Markel to Gremesco on October 22, 2008. A binder is a temporary or interim policy until a formal policy is issued. The parties do not dispute that coverage was considered to be in effect at that time, regardless of the fact that a copy of the Policy had not yet been delivered to Gremesco. Unfortunately, it does not appear to the Court that the Policy being effectuated resolves the relevant question of when the Policy was " delivered" .
On December 1, 2008, Markel transmitted a copy of the Policy to Gremesco via e-mail. (See Calascibetta Aff. at ¶ 10, Ex. 3.) Specifically, Spezzano testified that she forwarded a copy of the Policy to Halland on December 1, 2008. She explained that while she did not recall sending this Policy to Halland, she was confident of this transmittal because she recorded an entry on Gremesco's internal computer system. According to Markel, this was its standard practice for transmitting copies of polices to wholesale brokers, as opposed to sending the policy directly to the retail broker or to the insured. (Spezzano Dep., at 42:1-12.) Spezzano testified that it is the wholesale broker's responsibility to forward a copy of the policy to the retail broker.
However, Halland denies receipt of the email and/or a copy of the Policy that was purportedly attached to it. Specifically, Erickson testified that the Policy was not delivered to Halland on that date, but rather was sent on February 18, 2009 after many repeated requests. Erickson acknowledged that Spezzano may have attempted to send the Policy on December 1, 2008, but that he never received this message. According to Erickson, " [e]ither it was never sent or it was too large to be accepted by my computer system." (Erickson Dep., at 13:11.)
Therefore, both sides acknowledge that there is a factual dispute concerning the delivery of the policy from Gremesco to Halland. The Court will now assess the legal effect of this factual dispute.
A. Legal Standard on a Motion for Summary ...