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Chartis Seguros Mex., S.A. v. HLI Rail & Rigging, LLC

United States District Court, S.D. New York

August 20, 2013

CHARTIS SEGUROS MEXICO, S.A. de C.V., as subrogee of PROLEC GE INTERNATIONAL, S. de R.L., de C.V., Plaintiff,
v.
HLI RAIL & RIGGING, LLC, FRESH MEADOW MECHANICAL CORP., and KANSAS CITY SOUTHERN RAILWAY COMPANY, Defendants. HLI RAIL & RIGGING, LLC, FRESH MEADOW MECHANICAL CORP., Third-Party Plaintiffs, -
v.
- FIREMAN'S FUND INSURANCE COMPANY and CITY UNDERWRITING AGENCY, INC., Defendants

Page 757

For Chartis Seguros Mexico, S.A. de C.V., as subrogor of Prolec GE Internacional, S. De R.L., De C.V., Plaintiff: Lawrence Caruso Glynn, LEAD ATTORNEY, Caruso Glynn, LLC, New York, NY.

For HLI Rail & Rigging, LLC, Fresh Meadow Mechanical Corp., Defendants: Kevin James Harrington, LEAD ATTORNEY, Harrington Ocko & Monk, LLP, White Plains, NY; Michael Walter Freudenberg, Harris Beach PLLC (Plattsburgh), Plattsburgh, NY.

For Kansas City Southern Railway Company, Defendant: Fredric S. Newman, LEAD ATTORNEY, Eve Samara Moskowitz, Juan Alden Skirrow, Hoguet Newman Regal & Kenney, LLP, New York, NY; Merritt Maverick Clements, PRO HAC VICE, Winstead Sechrest & Minick, Dallas, TX.

For Kansas City Southern Railway Company, Cross Claimant: Fredric S. Newman, LEAD ATTORNEY, Eve Samara Moskowitz, Hoguet Newman Regal & Kenney, LLP, New York, NY.

For HLI Rail & Rigging, LLC, Cross Defendant: Kevin James Harrington, LEAD ATTORNEY, Harrington Ocko & Monk, LLP, White Plains, NY; Michael Walter Freudenberg, Harris Beach PLLC (Plattsburgh), Plattsburgh, NY.

For HLI Rail & Rigging, LLC, Fresh Meadow Mechanical Corp., Cross Claimants: Kevin James Harrington, LEAD ATTORNEY, Harrington Ocko & Monk, LLP, White Plains, NY; Michael Walter Freudenberg, Harris Beach PLLC (Plattsburgh), Plattsburgh, NY.

For Kansas City Southern Railway Company, Cross Defendant: Fredric S. Newman, LEAD ATTORNEY, Eve Samara Moskowitz, Hoguet Newman Regal & Kenney, LLP, New York, NY; Merritt Maverick Clements, Winstead Sechrest & Minick, Dallas, TX.

For HLI Rail & Rigging, LLC, Fresh Meadow Mechanical Corp., ThirdParty Plaintiffs: Kevin James Harrington, LEAD ATTORNEY, Harrington Ocko & Monk, LLP, White Plains, NY; Michael Walter Freudenberg, Harris Beach PLLC (Plattsburgh), Plattsburgh, NY.

For Fireman's Fund Insurance Company, ThirdParty Defendant: Christopher W. Martin, Patrick Kemp, Robert Glen Wall, PRO HAC VICE, Martin, Disiere, Jefferson & Wisdom, Austin, TX; Ethan D. Carlyle, PRO HAC VICE, Martin, Disiere, Jefferson & Wisdom, Houston, TX; Eugene T. Boule, Wilson Elser Moskowitz Edelman & Dicker LLP (Albany NY), Albany, NY.

For City Underwriting Agency, ThirdParty Defendant: Howard Steven Kronberg, Stephen Carson Cunningham, LEAD ATTORNEYS, Keidel, Weldon & Cunningham LLP, White Plains, NY.

For City Underwriting Agency, Cross Claimant: Howard Steven Kronberg, Stephen Carson Cunningham, LEAD ATTORNEYS, Keidel, Weldon & Cunningham LLP, White Plains, NY.

For Fireman's Fund Insurance Company, Cross Defendant: Eugene T. Boule, Wilson Elser Moskowitz Edelman & Dicker LLP (Albany NY), Albany, NY; Patrick Kemp, Martin, Disiere, Jefferson & Wisdom, Austin, TX.

OPINION

Page 758

ORDER AND OPINION

Andrew L. Carter, Jr., United States District Judge.

A train derailment has set off a chain reaction of lawsuits and cross-claims. The

Page 759

present motion was brought by Third-Party Defendant, Fireman's Fund Insurance Company (" FFIC" ) to sever and compel arbitration of the cross-claim brought by Third-Party Defendant City Underwriting Agency (" CUA" ). CUA brings a cross motion to stay arbitration should be stayed pending decision of the underlying third-party claim.

For the reasons set forth below, FFIC's motion to compel arbitration of CUA's cross-claim is GRANTED. Its motion to sever the cross-claim is denied in part and granted in part. CUA's motion to stay arbitration is DENIED.

BACKGROUND

I. The Derailment

On March 14, 2010, a train operated by Kansas City Southern Railway (" KCSR" ) transporting cargo, including two electric transformers, owned by Prolec GE International (" Prolec" ), derailed in Texas. The transformers were allegedly damaged beyond repair or use. Prolec and its subrogee, Chartis Seguros, thus commenced a lawsuit against KCSR, HLI Rail & Rigging (" HLI" )--the company responsible for the transport--and Fresh Meadow Mechanical Corporation (" Fresh Meadow" ), which operates HLI as a wholly-owned subsidiary.[1]

Prior to the derailment, Fresh Meadow had obtained an insurance policy offered by FFIC, through its insurance broker CUA. HLI was a " named insured" on Fresh Meadow's insurance policy.[2] HLI/Fresh alleges that CUA assured them that the insurance would cover the transport. CUA is an agent for FFIC and allegedly gave the assurance without actually receiving the goahead from FFIC. After the derailment, FFIC denied HLI/Fresh's claim because its policy excluded coverage for the property of others when the insured is acting as a carrier for hire or arranger of transportation.

II. The Third-Party Complaint

On July 11, 2012, HLI/Fresh filed a third-party complaint against CUA and FFIC, alleging breach of contract, negligent misrepresentation and, as to CUA only, negligence. On August 23, 2012, CUA filed its answer in which it also asserted a cross-claim against co-defendant FFIC. The cross-claim states:

Third-Party defendant CUA, at all times relevant to the procurement of the subject policies of insurance through [FFIC] acted within the scope of their authority as an agent of FFIC.
If it is adjudged that the third-party defendant CUA is liable to third-party plaintiff while acting as an agent for FFIC as alleged in third-party plaintiffs' Third-Party Complaint, which liability is herein denied, and third-party plaintiffs recover judgment against the third-party defendant, then such liability and judgment will have been brought about by reason of the acts, omissions, breach of fiduciary duty and/or breach of contract of third-party defendant FFIC.

CUA Answer, Cross-Claim ¶ ¶ 51-52 (Dkt. No. 80).

On or about August 31, 2012, FFIC also demanded indemnification from CUA. On September 13, ...


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