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James River Ins. Co. v. Power Mgmt., Inc.

United States District Court, E.D. New York

October 28, 2014

JAMES RIVER INSURANCE COMPANY, Plaintiff,
v.
POWER MANAGEMENT, INC., Defendant

Page 447

For the Plaintiff: James F. Scaffidi, Esq., Of Counsel, Silverson, Pareres & Lombardi, LLP, New York, NY.

For the Defendant: Joanna M. Roberto, Esq., Of Counsel, Goldberg Segalla, LLP, Garden City, NY.

Page 448

MEMORANDUM OF DECISION AND ORDER

ARTHUR D. SPATT, United States District Judge.

By Order dated April 22, 2014, United States District Judge Leonard D. Wexler

Page 449

directed that the Clerk of the Court reassign this declaratory judgment action to the undersigned as related to Pacific Indemnity Company v. Power Management Inc., Case No. 09-CV-5163 (the " Pacific Indemnity Company Action" or the " Related Action" ), jury selection for which is currently scheduled for November 10, 2014.

The Pacific Indemnity Company Action involves negligence and breach of contract claims brought by Pacific Indemnity Company (" Pacific Indemnity" ) against Power Management Inc. (" PMI" ) arising out of alleged damage caused by the failure of an engine that PMI contracted to rebuild.

The above-captioned action is brought by PMI's insurance provider, the Plaintiff James River Insurance Company (the " JRI" ), against PMI seeking a declaration that it has no duty provide a defense or indemnity to PMI under the subject insurance policy for the claims asserted in the Pacific Indemnity Company Action.

Presently before the Court is a motion for summary judgment pursuant to Federal Rule of Civil Procedure (" Fed. R. Civ. P." ) 56 by JRI and a cross-motion for partial summary judgment pursuant to Fed.R.Civ.P. 56 by PMI for an order declaring that (1) the " Damage to Your Product" exclusion in the subject insurance policy is inapplicable; (2) JRI cannot disclaim coverage on the basis of late notice; and (3) JRI is estopped from denying coverage.

For the following reasons, JRI's motion for summary judgment is granted in part and denied in part, and PMI's cross-motion for partial summary judgment is denied.

I. BACKGROUND

Unless stated otherwise, the following facts are drawn from the parties' Rule 56.1 statements. Triable issues of fact are noted.

A. The Parties

JRI is a corporation duly organized and existing under the laws of the State of Ohio, with its principal place of business located in Virginia. JRI is engaged in the insurance business and is licensed to do such business in the State of New York.

PMI is a corporation duly organized and existing under the laws of the State of California with its principal place of business located in California. PMI is engaged in the business of, among other things, the operation and management of power generation facilities and landfill gas control systems.

JRI issued to PMI a Commercial General Liability Policy, bearing Policy Number 00009740-2, effective May 9, 2007 through May 9, 2008 (the " Policy" ).

B. Procedural History

In late May or early June 2012, JRI commenced this declaratory judgment action seeking a declaration that it does not have a duty under the Policy to provide a defense to or indemnify PMI in the Pacific Indemnity Company Action. This action was originally assigned to District Court Judge Leonard D. Wexler.

On July 5, 2012, PMI answered and asserted a number of affirmative defenses. PMI also sought a declaration that JRI owes a duty under the Policy to defend and indemnify it in connection with the Pacific Indemnity Action.

Following the completion of discovery, on November 8, 2013, JRI filed a motion pursuant to Fed.R.Civ.P. 56 for summary judgment requesting a declaration that it has no duty under the Policy to provide a defense or indemnify PMI for the claims

Page 450

asserted in the Pacific Indemnity Company Action.

On April 22, 2014, Judge Wexler denied that motion without prejudice to renew it before this Court, newly-assigned to the case.

Thereafter, the parties filed letters concerning whether this action should be stayed pending the resolution of the Pacific Indemnity Company Action. In particular, PMI sought a stay on the ground that the resolution of the Pacific Indemnity Company Action would be dispositive of this case. JRI opposed a stay and asserted, among other arguments, that this action only affected coverage issues rather than liability issues; that the outcome of the Pacific Indemnity Company Action would have no impact on the outcome of this action; and that the Pacific Indemnity Company Action awaited resolution of this action before proceeding forward to trial.

On May 2, 2014, this Court issued an order declining to stay this action, concluding that " before [JRI] expends considerable resources in connection with the Pacific Indemnity Company Action, the Court finds that a determination is needed as to whether [JRI] is responsible under the subject insurance policy to provide [PMI] with coverage in the event the [PMI] is found liable in the Pacific Indemnity Company Action." (Doc No. 39, at 2.) The Court directed that this action be tried before the Pacific Indemnity Company Action.

JRI subsequently re-filed its motion for summary judgment in accordance with the Individual Rules of this Court, and PMI cross-moved for partial summary judgment.

C. The Events Giving Rise to this Dispute

On or about February 18, 2008, Wehran Energy Corp. (" Wehran" ) purchased a power generation facility and landfill gas control system located in Brookhaven, New York from U.S. Energy Biogas (" USEB" ). The product consisted of U.S. Energy's entire operations at Brookhaven and the two inoperable Deutz 620 engines located there. As there was no operational Duetz 620 engine, Brookhaven was not producing any energy. Wehran desired to produce energy, but instead of purchasing a new engine, Wehran chose to hire PMI to rebuild the Duetz 620 engine.

Later that month, Wehran orally contracted with PMI to rebuild and install one of the Deutz 620 engines at the Brookhaven facility. PMI alleges that this task was to be performed alongside USEB. (See Thomas Reynolds (" Reynolds" ) Dep. at 14, 33; JRI Exh. D.) According to JRI, neither PMI nor Wehran subcontracted any portion of the work associated with the contract or the rebuild. ...


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