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Lumbermens Mutual Casualty Co. v. Flow International Corporation

United States District Court, Second Circuit

June 21, 2013

LUMBERMENS MUTUAL CASUALTY COMPANY, Plaintiff,
v.
FLOW INTERNATIONAL CORPORATION; FLOW AUTOCLAVE SYSTEMS, INC.; FLOW PRESSURE SYSTEMS; ABB PRESSURE SYSTEMS; AVURE TECHNOLOGIES AB; and AVURE TECHNOLOGIES, INC., Defendants. FLOW AUTOCLAVE SYSTEMS, INC.; FLOW PRESSURE SYSTEMS; ABB PRESSURE SYSTEMS; AVURE TECHNOLOGIES AB; and AVURE TECHNOLOGIES, INC., Plaintiffs,
v.
LUMBERMENS MUTUAL CASUALTY COMPANY and KEMPER INSURANCE COMPANIES, Defendants.

ABRAHAM E. HAVKINS, ESQ., GREGG S. SCHARAGA, ESQ., STEVEN H. ROSENFELD, ESQ., LINDA FRIDEGOTTO, ESQ., HAVKINS ROSENFELD RITZERT & VARRIALE, LLP, Attorneys for Lumbermens Mutual Casualty Company & Kemper Insurance Company New York, NY,

SHELLY L. DIBENEDETTO, ESQ., ROBERT J. SMITH, ESQ., COSTELLO, COONEY, & FEARON, PLLC, Attorneys for Flow International Corporation, Flow Autoclave Systems, Inc., Flow Pressure Systems, ABB Pressure Systems, Avure Technologies AB, & Avure Technologies, Inc. Syracuse, NY.

DECISION and ORDER

DAVID N. HURD, District Judge.

I. INTRODUCTION

Plaintiff Lumbermens Mutual Casualty Company ("Lumbermens" or "plaintiff") brought this declaratory action against defendant Flow International Corporation ("Flow International"); and defendants Flow Autoclave Systems, Inc. ("Flow Autoclave"), Flow Pressure Systems ("Flow Pressure"), ABB Pressure Systems, Avure Technologies AB, and Avure Technologies, Inc. (collectively the "Flow entities")[1] (collectively with Flow International, "defendants"). This case, Civil Action No. 5:08-CV-865, is the lead case.

In a separate action, the Flow entities asserted claims against Lumbermens, Kemper Insurance Companies ("Kemper"), Crucible Materials Corporation ("Crucible"), Travelers Property Casualty Company of America ("Travelers"), and Zurich American Insurance Company ("Zurich"). Lumbermens and Kemper responded with counterclaims against the Flow entities. That case, Civil Action No. 5:08-CV-915, is the member case.

Plaintiff and defendants previously moved for summary judgment in the lead case. Those motions were granted in part and denied in part. See Lumbermens Mut. Cas. Co. v. Flow Int'l Corp. , 844 F.Supp.2d 286 (N.D.N.Y. 2012). The lead complaint's remaining causes of action seek a declaration that no coverage exists: (1) due to the Professional Liability Exclusion ("PLE"); (2) for claims arising out of the loss of the Pressurized Containment System ("PCS"); and (3) for property damage caused by the Flow entities' work. No party moved with respect to the member case. Accordingly, the following claims remain in the member complaint: (1) breach of contract based on Lumbermens' and Kemper's duty to defend the underlying actions; (2) a declaration as to the rights and obligations of the parties and a declaration that Lumbermens has an indemnification obligation in the underlying lawsuits; and (3) attorneys' fees and disbursements resulting from the alleged breach of contract. The member case's counterclaims seek a declaration that no coverage exists: (1) due to the PLE; (2) for claims arising out of the loss of the PCS; and (3) for property damage caused by the Flow entities' work.[2]

II. BACKGROUND

It is assumed the parties are familiar with the underlying facts as detailed in the February 17, 2012, Memorandum-Decision and Order. See Lumbermens , 844 F.Supp.2d at 289-98.

III. DISCUSSION

Following the Memorandum-Decision and Order, trial was scheduled for February 11, 2013 in Utica, New York, with jury selection to commence on February 5, 2013. After reviewing the numerous pre-trial in limine motions made by both parties, the trial was adjourned without date and a hearing was held on February 6, 2013, at which time all motions were heard. Decision was reserved.

A. Plaintiff's Motions in Limine

1. Preclude Christopher Thomas, Esq. from testifying

Lumbermens moves to preclude defendants from calling Christopher Thomas, Esq., who has represented Crucible in the underlying actions since 2002. Plaintiff contends he was never disclosed as a witness until defendants' September 24, 2012, pre-trial disclosures.

Under Federal Rule of Civil Procedure 37(c)(1), a failure to timely and properly disclose a witness results in precluding that witness's testimony unless the failure was substantially justified or is harmless. The failure is harmless when there is no prejudice to the party entitled to the disclosure. Lumbermens was well aware of Attorney Thomas's role in the underlying litigation and the knowledge he possesses, and has not shown how it would be prejudiced. This motion will be denied.

2. Preclude testimony of Joseph Tedorski and Peter Kahn

Lumbermens moves to preclude defendants from using at trial the depositions of Joseph Tedorski, the adjuster for the underlying Travelers claim, and Peter Kahn, the Certified Public Accountant for the Travelers and Zurich claims. Lumbermens contends their testimony is irrelevant, confusing, hearsay, and was never disclosed during discovery. Plaintiff also asserts it never had an opportunity to cross examine these witnesses.

According to defendants, plaintiff was present at the Tedorski deposition, as the insurer for the Flow defendants, and waived its right to appear at the Kahn deposition. Tedorski and Kahn's testimony is relevant as it goes to the amount of damages sustained at the Crucible plant, and supports defendants' argument that there can be no allocation from the underlying settlement. Further, their testimony is not offered to prove the truth of the claims in the underlying actions, just that they were asserted, and thus the testimony is not hearsay. This motion will be denied.

3. Preclude defendants from using Kibble & Prentice (K&P) documents

Lumbermens asserts that documents in Exhibit D-10 were improperly withheld during discovery. Plaintiff subpoenaed documents from K&P, defendants' insurance broker. K&P objected to the subpoena, claiming inter alia, privilege based on the insurance brokerclient relationship. Instead of forwarding the responsive documents to plaintiff, K&P sent documents to defense counsel, who removed documents on the basis of both privilege and work prepared in anticipation of litigation, and forwarded the remaining documents to plaintiff. Plaintiff contends it never ...


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