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Sils Brokerage Corp. v. U.S. Underwriters Insurance Co.

United States District Court, E.D. New York

March 27, 2014

SILS BROKERAGE CORP., Plaintiff,
v.
U.S. UNDERWRITERS INSURANCE COMPANY, Defendant. U.S. UNDERWRITERS INSURANCE COMPANY, Third-Party Plaintiff,
v.
PETER LEWIARZ a/k/a PIOTR LEWIARZ a/k/a PETER LAWIARZ and BARBARA LEWIARZ Third-Party Defendants.

MEMORANDUM AND ORDER

DORA L. IRIZARRY, District Judge.

Plaintiff Sils Brokerage Corp. ("Sils") brings this action against U.S. Underwriters Insurance Company ("U.S. Underwriters") seeking damages for an alleged breach of contract and a declaratory judgment that U.S. Underwriters had an obligation to defend Sils in an underlying state court insurance broker malpractice action. Defendant filed a motion for summary judgment seeking a declaration that it has no duty to defend, reimburse costs, or indemnify Sils, third-party defendants Peter Lewiarz ("Lewiarz") and Barbara Lewiarz, or any other party.

For the reasons set forth below, U.S. Underwriters' motion for summary judgment is denied.

BACKGROUND

I. Procedural History

Sils initiated the instant action in New York State Supreme Court, Queens County. On November 9, 2010, U.S. Underwriters removed the action to this Court, (Decl. of Steven Verveniotis ("Verveniotis Decl."), Ex. C at 1, Doc. No. 45-4.). On November 16, 2010, U.S. Underwriters filed its Answer. (Verveniotis Decl., Ex. D, Doc. No. 45-5.) On January 19, 2011, U.S. Underwriters filed a Third-Party Complaint against Peter and Barbara Lewiarz. (Verveniotis Decl., Ex. E, Doc. No. 45-6.) On April 8, 2011, Lewiarz answered the Third-Party Complaint. (Verveniotis Decl., Ex. F, Doc. No. 45-7.)

U.S. Underwriters moved for summary judgment. ( See Notice of Motion for Summary Judgment, Doc. No. 44; Motion for Summary Judgment, Doc. No. 45; Mem. in Support, Doc. No. 46.) Sils opposed the motion for summary judgment. ( See Decl. in Opp., Doc. No. 47; Mem. in Opp., Doc. No. 48; Rule 56.1 Statement, Doc. No. 49.) On January 13, 2012, U.S. Underwriters submitted reply papers in support of the motion for summary judgment. ( See Reply in Support, Doc. No. 52.) Lewiarz, the third-party defendant, did not submit papers in response to the motion for summary judgment.

II. Factual Background

This case arises out of a claim made by Sils pursuant to an errors and omissions insurance policy based on the allegations asserted against it in Lewiarz, et al. v. Travco Insurance Co., et al., No. 15-08, pending in New York State Supreme Court, Schoharie County (the "Underlying Action"). The Underlying Action was initiated by Lewiarz based on a denial of coverage for the losses to his property that were sustained in a fire in 2006. (Verveniotis Decl., Ex. G at 5, Doc. No. 45-8.)

In 2001, a property located in Schoharie County, owned by Lewiarz, was destroyed by a fire. (Jacob Rabinowitz Decl. ("Rabinowitz Decl."), Ex. A at 2, Doc. No. 48-1.) The property was insured by Travelers Insurance Co. ("Travelers") and the insurance company paid out approximately $800, 000 on the claim. (Rabinowitz Decl., Ex. B at 88:13, Doc. No. 48-2.) Subsequent to this incident and payout of this first claim, Travelers issued a notice of nonrenewal of insurance to Lewiarz based on his loss history. (Verveniotis Decl., Ex. U at 1, Doc. No. 45-22.)

In 2001 or 2002, Lewiarz began rebuilding a home at the site of the fire. (Rabinowitz Decl., Ex. B at 81:8-17.) During the initial building phase, Lewiarz sought homeowners' insurance for the property, but due to his loss history was unsuccessful. ( Id. at 86:7-12.) Lewiarz then called Karen Kenney ("Kenney") seeking coverage. ( Id. )

Through 2003, Kenney maintained a work space at the offices of the Dolores Buonocore Agency ("Buonocore Agency") in exchange for clerical/office work that she performed for the owner, Dolores Buonocore. (Verveniotis Decl., Ex. K at 8:2-6, Doc. No. 45-12.) One of her clerical duties included taking information from certain clients to procure insurance through an insurance agent. ( Id. at 14:2-6.) Dolores Buonocore, in addition to being a real estate agent, was a licensed insurance agent in the State of New York. (Verveniotis Decl., Ex. J at 7:6-8, Doc. No. 45-11.) Kenney was not a licensed insurance broker. (Verveniotis Decl., Ex. K at 8:19-21.) Dolores Buonocore had instructed Kenney to take the information from the clients and contact an agency that would try to get a quote for the client. (Verveniotis Decl., Ex. J at 20:13-21:13.) Lewiarz had previously obtained commercial insurance through the Buonocore Agency. ( Id. at 29:8-10.)

When Lewiarz sought insurance from Kenney, she took some basic information from him and then faxed that information to Sils. (Verveniotis Decl., Ex. K at 31:2-13.) A Sils employee then entered that information into its computer system and, based on the information provided, offered a quoted price for an insurance premium to Lewiarz through Kenney. No one at Sils or Travelers spoke with Lewiarz regarding the new insurance policy. Lewiarz accepted the quote, a binder was issued, and the premium was paid. ( Id. at 34:19-35:5.)

Then, in 2006, Lewiarz's new property sustained damage from a fire. Lewiarz submitted a claim to Travelers. (Rabinowitz Decl., Ex. A at 2.) Travelers denied the claim alleging that there were material misrepresentations in the application for insurance that made the policy void ab initio. (Rabinowitz Decl., Ex. U at 1, Doc. No. 48-21.) Lewiarz then initiated the Underlying Action to recover damages against Travelers, ...


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