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Zyburo v. Continental Casualty Co.

United States District Court, S.D. New York

November 21, 2014

EDWARD ZYBURO, Plaintiff,
v.
CONTINENTAL CASUALTY CO., Defendant

For Edward Zyburo, Plaintiff: William Peerce Howard, LEAD ATTORNEY, PRO HAC VICE, Morgan & Morgan, Tampa, FL; Daniel Parsons Mitchell, Barr, Murman & Tonelli, Pa / Partner, Tampa, FL; David Patrick Mitchell, Morgan & Morgan, P.A., Tampa, FL; Peter George Safirstein, Morgan & Morgan, P.C., New York, NY.

For Continental Casualty Company, Defendant: Karen Ventrell, LEAD ATTORNEY, PRO HAC VICE, Colliau Carluccio Keener Morrow Peterson & Parsons, Washington, DC.

Page 532

MEMORANDUM ORDER

JED S. RAKOFF, UNITED STATES DISTRICT JUDGE.

Plaintiff, Edward Zyburo, brings this action pursuant to 28 U.S.C. section 2201 against defendant, Continental Casualty Co., seeking a declaratory judgment that defendant wrongfully denied coverage to one of its insureds, NCSPlus, Inc., and wrongfully refused to defend NCSPlus in a separate action between plaintiff and NCSPlus, Zyburo v. NCSPlus, Inc., 12 Civ. 6677 (JSR). The issue presented to the court on a motion to dismiss is whether an injured plaintiff may bring a declaratory judgment action against an insurer when he has not yet obtained a judgment against the insured.

At the outset, it should be noted that the Declaratory Judgment Act does not provide an independent basis for jurisdiction; jurisdiction must be founded separately on either federal question or diversity.

Page 533

See Great Am. Ins. Co. v. Hous. Gen. Ins. Co., 735 F.Supp. 581, 584 (S.D.N.Y. 1990) (citing Warner-Jenkins on Co. v. Allied Chem. Corp., 567 F.2d 184, 186 (2d Cir. 1977)); see also In re Joint E. & S. Dist. Asbestos Litig., 14 F.3d 726, 731 (2d Cir. 1993). While the Complaint alleges " federal question" jurisdiction, it does not specify any such question. See Complaint (" Compl." ) ¶ 1. Nonetheless, as the factual averments of the Complaint plead, directly or by clear implication, the requisite elements of diversity jurisdiction, this case may proceed on that basis. Compl. ¶ ¶ 3, 4-6.

On the merits, the relevant factual allegations are as follows. On or about October 5, 2011, defendant issued a policy of insurance to NCSPlus (the " Policy" ), affording coverage for miscellaneous professional liability in the amount of $2 million with effective dates November 15, 2011 to November 15, 2013. Id. ¶ 7. On August 31, 2012, plaintiff filed a putative class action, Zyburo v. NCSPlus, in the Southern District of New York, alleging that NCSPlus violated the Telephone Consumer Protection Act (" TCPA" ), 47 U.S.C. § 227, by calling the cell phone of lead plaintiff and others similarly situated numerous times without consent, using an automated telephone dialing system. Id. ¶ 16. Plaintiff later filed an amended complaint, withdrawing the class action allegations under the impression from initial discovery and an evidentiary hearing that NCSPlus did not have insurance or sufficient assets to satisfy a class judgment. Id. ¶ ¶ 17-18. Thereafter, however, plaintiff first learned of the Policy on July 22, 2013, id. ¶ 21, and this Court reinstated the class action complaint and motion to certify the class on October 23, 2013. Id. ¶ 26.

Plaintiff notified Continental of the lawsuit Zyburo v. NCSPlus shortly after learning of the Policy and later demanded the full amount of the Policy from Continental. Id. ¶ ¶ 22-24, 27. Continental declined to appear in that case, stating that there had been no claim submitted by the insured. Id. ¶ 25. It also rejected plaintiff's demand. Id. ¶ 27. On June 11, 2014, in response to an inquiry by NCSPlus, Continental sent a letter to NCSPlus stating that indemnity coverage would not be available, because none of the amounts sought by plaintiff under the TCPA constituted a " loss" covered by the Policy. Id. ¶ 29.

In the instant action, plaintiff seeks an adjudication of whether, under the Policy, defendant has an obligation to cover a judgment against NCSPlus in Zyburo v. NCSPlus. It is undisputed that plaintiff is not an " Insured Person" as defined in the Policy. See Defendant Continental Casualty Company's Memorandum of Law in Support of its Motion to Dismiss Complaint (" Def. Br." ) ¶ 12; Plaintiff's Memorandum of Law in Opposition to Defendant's Motion to Dismiss Plaintiff's Complaint (" Pl. Br." ) at 4. No provision of the Policy affords any rights to plaintiff under the Policy or any right to plaintiff to sue on or under the Policy prior to obtaining a final and nonappealable judgment. Def. Br. ¶ 13; Pl. Br. at 4. Plaintiff has not obtained a judgment against NCSPlus in its suit for alleged violations of the TCPA. Zyburo v. NCSPlus, 12 Civ. 6677 (JSR) (bench trial scheduled to begin on January 26, 2015).

Defendant brings this motion to dismiss pursuant to Federal Rules of Civil Procedure Rules 12(b)(1) and 12(b)(6), asserting that plaintiff has no standing under New York State Insurance Law section 3420 to bring this declaratory judgment action.[1]

Page 534

Def. Br. at 6. Plaintiff insists that the Declaratory Judgment Act, 28 U.S.C. ยง 2201, provides the basis for his standing. Pl. Br. at 5-6. He further argues that the relevant underlying state statute is procedural and therefore does not bar a federal court from applying its own remedy. Transcript of Hearing dated Nov. 13, 2014 (" ...


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