United States District Court, N.D. New York
& WILLIAMS LLP Attorneys for Plaintiff, SYED S. AHMAD,
ESQ., WALTER J. ANDREWS, ESQ., PATRICK M. MCDERMOTT, ESQ.
AUSTIN LLP Attorneys for Plaintiff, DANIEL R. THIES, ESQ.,
THOMAS D. CUNNINGHAM, ESQ., WILLIAM M. SNEED, ESQ.
WILLIAMS LOPATTO PLLC Attorneys for Defendant, MARY A.
LOPATTO, ESQ., JOHN B. WILLIAMS, ESQ.
N. HURD United States District Judge.
LEGAL STANDARDS. .
Motion for Judgment on the Pleadings
Motion for Summary Judgment..
Defendant FFIC's Motions..
Motion for Judgment on the Pleadings (to dismiss Counts II
and III) . . 9
Count II. . ......................................... 10
Count III.. ......................................... 11
Motion for Partial Summary Judgment on Count I (Utica's
"Aggregate Limits" Contention) . .
Motion for Partial Summary Judgment on Count II (Utica's
"Bad Faith" Contention) . .
Motion for Summary Judgment on Count I (Utica's
"Follow the Settlement" Contention) . .
Motion in Limine to Preclude Testimony of Dennis R.
Connolly.. . . . . 39
Plaintiff Utica's Motions. .
Motion for Partial Summary Judgment on the Follow the
Fortunes Doctrine ..
Motion for Partial Summary Judgment That FFIC Is Not Entitled
To Rescission .. ............................................
Motion for Partial Summary Judgment That Notice Was Not Due
Before February 1999 . .
Utica Mutual Insurance Company ("Utica" or
"plaintiff") commenced this diversity action
against defendant Fireman's Fund Insurance Company
("FFIC" or "defendant") on July 29, 2009
seeking to enforce the terms of its reinsurance contracts.
seeks damages in the amount of nearly $29 million for amounts
billed through August 31, 2009, interest, attorneys'
fees, costs, and declaratory relief based on defendant's
alleged breach of the reinsurance contracts and breach of the
duty of good faith and fair dealing. FFIC counterclaims for
rescission based on plaintiff's alleged intentional
and/or negligent rescission. The case was referred to
mandatory mediation, but did not settle.
completing limited discovery, plaintiff moved on June 6, 2014
and June 13, 2014 for partial summary judgment pursuant to
Federal Rule of Civil Procedure ("Rule") 56
dismissing two of defendant's affirmative defenses. Oral
argument was heard on July 25, 2014 and a Memorandum-Decision
and Order was issued on February 9, 2015, denying both
motions. Utica Mut. Ins. Co. v. Fireman's Fund Ins.
Co., No. 6:09-CV-853, 2015 WL 521024 (N.D.N.Y. Feb. 9,
2015). With respect to FFIC's late notice defense, it was
held that the parties may litigate lost commutations at
trial, and if FFIC can establish resulting prejudice, it
would be entitled to complete relief from its duty to
indemnify. As to FFIC's bad faith defense, disputed
issues of material fact remain as to whether Utica was
grossly negligent or reckless in failing to provide prompt
notice to FFIC and thus whether its claim for indemnification
plaintiff moved for partial summary judgment pursuant to Rule
56 on the follow the fortunes doctrine, defendant's
counterclaims for rescission, and when notice to defendant
was required. Defendant simultaneously moved for judgment on
the pleadings pursuant to Rule 12(c) to dismiss Counts
II and III, and for partial summary judgment
pursuant to Rule 56 on plaintiff's aggregate limits, bad
faith, and follow the settlement contentions. Plaintiff
opposed defendant's motions, and defendant opposed
plaintiff's motions. Both parties submitted replies in
seven pending motions were fully briefed and oral argument
was heard on February 13, 2015, in Utica, New York. Decision
was reserved. While pending, defendant filed a motion in
limine pursuant to Federal Rule of Evidence 702 to preclude
expert testimony at trial by Dennis R. Connolly. Plaintiff
opposed. That motion will be considered on the basis of the
submissions without oral argument.
parties' familiarity with the facts and history of this
case is presumed, and only those facts necessary for the
disposition of the pending matters will be recited. This case
involves a dispute over $35 million which Utica claims FFIC
owes it under its reinsurance contracts. FFIC argues it
does not owe Utica any money because Utica breached
provisions in the reinsurance contracts.
issued primary liability insurance policies to Goulds from
1966 through 1972.These seven primary policies have not been
located and one of the main issues in this case is whether
those policies contained aggregate limits for bodily injury.
Utica also issued umbrella policies to Goulds for these same
years providing for $10 million in coverage each year. Utica
reinsured the umbrella policies, reinsuring $5 million of
each $10 million with FFIC pursuant to facultative reinsurance
contracts. Each of the facultative reinsurance contracts
contain the following provision: "All claims involving
this reinsurance, when settled by the Company [Utica], shall
be binding on the Reinsurer [FFIC] . . . ." See LoPatto
Decl., Ex. 2, ECF. No. 285 (the "Certificates").
This provision is known as a follow the settlements
clause. See Travelers Cas. & Sur. Co. v.
Gerling Global Reins. Corp., 419 F.3d 181, 184 (2d Cir.
became the subject of thousands of asbestos bodily injury
claims, with the first suits naming Goulds in 1997. Pursuant
to the primary policies between Goulds and Utica, Utica
defended and indemnified Goulds for these claims. In
mid-2001, Utica provided notice of the Goulds losses to
reinsurers of its umbrella policies, including reinsurers at
the $5 million excess of the $5 million umbrella layer. Utica
contends this was an initial and precautionary notice. FFIC
disputes this and suggests the reinsurers actually received
earlier notice, but Utica has no record of such. According to
Utica, FFIC did not receive the precautionary notice at this
time because Utica was unaware of the FFIC reinsurance and
did not learn about it until 2008, when another reinsurer
notified Utica about it. According to Utica, it had not
retained all of its policy records from decades earlier,
consistent with its document retention policies.
disputes this and contends that when Utica notified these
reinsurers-those reinsuring umbrella policies post-1972-is
irrelevant to when Utica determined or should have determined
there was a reasonable possibility that the 1966-72 umbrella
policies would be involved. FFIC maintains that Utica's
sharing information on the Goulds claims in 1996 with Gen Re
indicated that Utica recognized then that the claims
could penetrate the 1996-72 umbrella policies.
However, Utica contends that Gen Re only learned of the
Goulds claims in the 1990s through its routine review of
Utica's asbestos and environmental files. Utica asserts
that it provided precautionary notice of the claims to the
other reinsurers of its umbrella policies in June 2001, and
that it would have included a notice to FFIC if Utica had
known about FFIC's reinsurance at the time.
judgment actions between Goulds and its insurers, including
Utica, followed in 2003 to determine the rights of the
insurers. Goulds and Utica engaged in mediation relating to
the coverage. According to FFIC, Utica made it non-negotiable
that Goulds agree that all Utica primary policies had
aggregate limits of coverage, even those policies which were
not at issue in the coverage litigation. According to FFIC,
in exchange for Goulds' receipt of a $325 million
settlement from Utica, Goulds agreed to stipulate that all of
the Utica primary policies had aggregate limits for bodily
injury of $300, 000 and that all such limits had been
exhausted. The agreement, signed in February 2007 by Utica
and Goulds, also provided that the $325 million settlement
would come from the umbrella policies (therefore triggering
Utica's reinsurance policies). See LoPatto Decl., Ex. 6,
ECF. No. 285 (the "Settlement Agreement").
to Utica, by 2007, payments on Goulds claims had reached
FFIC's layer on the umbrella policies at issue and after
learning about FFIC's reinsurance in 2008, Utica notified
FFIC in July 2008. FFIC asserts that Utica provided no
rationale for reporting its reinsurance claim more than a
year after its February 2007 settlement with Goulds.
According to the Certificates, "[p]rompt notice shall by
given to the Reinsurer . . . of any occurrence or accident
which appears likely to involve this reinsurance."
See generally Certificates. Utica submitted
reinsurance claims in August, September, October, and
November 2009, totaling $35 million. Under the Certificates,
Utica was required to "make available for inspection and
place at the disposal of [FFIC] at reasonable times any of
its records relating to this reinsurance or claims in
connection therewith." Id.
Utica's requests for payment, FFIC initiated a claims
investigation. FFIC sought numerous pieces of information
from Utica, inspected its files, and sent a team to
Utica's offices for inspection. While its claims
investigation was ongoing, Utica filed this suit contending
that FFIC was taking too long to pay and was, inter alia, in
breach of the Certificates.
Motion for Judgment on the Pleadings
standard for granting a Rule 12(c) judgment on the pleadings
is identical to that of a Rule 12(b)(6) motion to dismiss.
Patel v. Contemporary Classics of Beverly Hills, 259
F.3d 123, 126 (2d Cir. 2001). To survive a Rule 12(b)(6)
motion to dismiss, the "[f]actual allegations must be
enough to raise a right to relief above the speculative
level." Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007). Although a complaint need only contain
"a short and plain statement of the claim showing that
the pleader is entitled to relief, " Fed.R.Civ.P.
8(a)(2), more than mere conclusions are required. Indeed,
"[w]hile legal conclusions can provide the framework of
a complaint, they must be supported by factual
allegations." Ashcroft v. Iqbal, 556 U.S. 662,
679 (2009). Dismissal is appropriate only where plaintiff has
failed to provide some basis for the allegations that support
the elements of its claims. See Twombly, 550 U.S. at
570 (requiring "only enough facts to state a claim to
relief that is plausible on its face"). When considering
a motion to dismiss, the complaint is to be construed
liberally, and all reasonable inferences must be drawn in the
plaintiff's favor. Chambers v. Time Warner,
Inc., 282 F.3d 147, 152 (2d Cir. 2002).
Motion for Summary Judgment
entry of summary judgment is warranted when "the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a
matter of law." Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986) (citing Fed.R.Civ.P. 56(c)); see
also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247
(1986). A fact is "material" for purposes of this
inquiry if it "might affect the outcome of the suit
under the governing law." Anderson, 477 U.S. at
248; see also Jeffreys v. City of N.Y., 426 F.3d
549, 553 (2d Cir. 2005). A material fact is genuinely in
dispute "if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party."
Anderson, 477 U.S. at 248.
summary judgment is sought, the moving party bears the
initial burden of demonstrating that there is no genuine
issue of material fact to be decided with respect to any
essential element of the claim. Id. at 250 n.4. The
failure to meet this burden warrants denial of the motion.
See id. In the event this initial burden is met, the
opposing party must show, through affidavits or otherwise,
that there is a material issue of fact for trial.
deciding a summary judgment motion, a court must resolve any
ambiguities and draw all inferences from the facts in a light
most favorable to the non-moving party. Jeffreys,
426 F.3d at 553. Summary judgment is inappropriate where
"a review of the record reveals sufficient evidence for
a rational trier of fact to find in the [non-movant's]
favor." Treglia v. Town of Manlius, 313 F.3d
713, 719 (2d Cir. 2002); see also Anderson, 477 U.S.
at 250 (summary judgment is appropriate only when "there
can be but one reasonable conclusion as to the
Defendant FFIC's Motions
Motion for Judgment on the Pleadings (to dismiss Counts
II and III) (ECF No. 276)
moves for judgment on the pleadings to dismiss Counts
II and III as duplicative of Count I.
In Count I, Utica complains that FFIC breached the
Certificates by not paying its claims and seeks damages in
the form of the sums due under the Certificates through
August 31, 2009. In Count II, Utica alleges that
FFIC asked for irrelevant information and ignored its
billings, inquiries, and repeated requests for payment,
thereby violating FFIC's duty to deal with Utica in
utmost good faith. For damages under Count II, Utica
seeks attorneys' fees and other costs in connection with
this lawsuit. In Count III, Utica seeks a
declaration that FFIC is obligated to pay for bills after
August 31, 2009, pursuant to the Certificates.
contends Counts II and III are duplicative
of Count I and are not independent causes of action.
It argues Counts II and III are premised on
the same alleged breach of its duties under the
Certificates-its failure to pay-and seek relief for that
responds that Count II is not duplicative as nowhere
in Count I is it alleged that FFIC ignored
information in its claim investigation, requested additional
improper information, and ignored Utica's inquiries.
Further, Count II seeks attorneys' fees and
other costs in connection with this lawsuit, a different
remedy than Count I. Similarly, Utica argues
Count III is different than Count I as the
declaratory judgment cause of action recognizes that future
obligations may arise under the Certificates, in addition to
the amounts already billed and unpaid. Specifically, that the
Certificates continue to apply to Utica's umbrella
coverage to Goulds, and the parties continue to dispute how
those Certificates apply.
test for duplication respecting a breach of contract claim
and a bad faith claim is whether "the [alleged] wrongful
conduct was 'also the predicate for a claim for breach of
covenant of an express provision of the underlying
contract.'" Haym Salomon Home for the Aged, LLC
v. HSB Group, Inc., No. 06-CV-3266, 2010 WL 301991, at
*6 (E.D.N.Y. Jan. 20, 2010).
I seeks relief for FFIC's failure to pay amounts
billed under the Certificates. Count II seeks relief
for FFIC's alleged improper claims handling; that cause
of action includes allegations that FFIC ignored information
provided by Utica, asked for additional irrelevant
information not needed to process Utica's billings, and
improperly ignored Utica's numerous inquiries regarding
its review of Utica's billings and payment status. Utica
alleges FFIC's bad faith in its claims processing caused
it damages beyond the recovery of amounts owed under the
Certificates, the relief sought in Count I. Thus
Count II seeks attorneys' fees and other costs
in connection with this lawsuit and all resulting damages
from the breach of the duty of utmost good faith and fair
these causes of actions are predicated on different wrongful
conduct and seek different relief, they may stand as separate
causes of action. See e.g., Ret. Bd. of
Policemen's Annuity & Benefit Fund v. Bank of N.Y.
Mellon, No. 11 Civ. 5459, 2014 WL 3858469, at *3
(S.D.N.Y. July 30, 2014) (finding breach of good faith claim
was not duplicative of breach of contract claim because they
rested upon different facts); Friedman v. Maspeth Fed.
Loan & Sav. Ass'n, No. 13-CV-6295, 2014 WL
3473407, at *9 (E.D.N.Y. July 14, 2014) (finding breach of
good faith claim was not duplicative of breach of contract
claim where the facts supporting each claim were not
identical); O.K. Petroleum Distrib. Corp. v. Travelers
Indem. Co., No. 09 Civ. 10273, 2010 WL 2813804, at *4
(S.D.N.Y. July 15, 2010) (finding bad faith allegations that
insurer inadequately investigated and inordinately delayed
were not duplicative because they extended beyond a breach of
insurance contract claim); JJM Sunrise Auto., LLC v.
Volkswagen Grp. of Am., Inc., No. 601658-14, 2014 WL
5800301, at *13 (N.Y. Sup. Ct. Nov. 6, 2014) (finding breach
of good faith claim was not duplicative of breach of contract
claim because breach of good faith claim contained
allegations of wrongful conduct that were not alleged in
breach of contact claim).
Declaratory Judgment Act, 28 U.S.C. § 2201(a), vests
district courts with "broad discretion" to decline
jurisdiction over requests for declaratory relief, Dow
Jones & Co., Inc. v. Harrods Ltd., 346 F.3d 357, 359
(2d Cir. 2003) (identifying factors relevant to exercise of
such discretion, including, inter alia, "whether the
judgment will serve a useful purpose in clarifying or
settling the legal issues involved"; "whether a
judgment would finalize the controversy and offer relief from
uncertainty"; and "whether the proposed remedy is
being used merely for procedural fencing, or a race to res
judicata'" (internal quotation marks omitted)). Fort
v. Am. Fed. of State, Cnty. and Mun. Emps., 375 F.App'x
109, 112 (2d Cir. Apr. 29, 2010) (summary order).
Count III, Utica seeks a declaration of the same
rights that will be determined under Count I for
breach of contract. Count I alleges that as a result
of the breach of the Certificates, FFIC owes Utica for
billings through August 31, 2009, totaling nearly $29 million
and that such damages are continuing. The parties do not
dispute that future obligations may arise under the
Certificates at issue, in addition to the amounts billed and
unpaid as of the filing of the Amended Complaint. Count
III seeks payment for billings subsequent to August 31,
2009. The declaratory judgment sought in Count III
will not clarify or settle the legal issues involved in this
case. The declaration sought, that FFIC breached the
Certificates and that FFIC is obligated to make payment to
Utica for subsequent billings, will be addressed in Count
I, the breach of contract claim. Nor will a declaratory
judgment offer relief from uncertainty because resolution of
the breach of contract claim will offer that relief.
Therefore, Count III is duplicative of Count
I and it is proper to decline jurisdiction over
plaintiff's request for declaratory relief in Count
motion for judgment on the pleadings dismissing Counts
II and III as duplicative of Count I
will be granted in part and denied in part and Count
III will be dismissed.
Motion for Partial Summary Judgment on Count I
(Utica's "Aggregate Limits"
Contention) (ECF No. 279)
moves for partial summary judgment on Count I,
arguing it was not obligated to provide reinsurance coverage
to Utica with respect to the five years 1966, 1968, 1969,
1970, and 1971. It contends that because it was not
obligated to provide reinsurance coverage for those years, it
could not breach the Certificates for those years as a matter
explained in the previous Memorandum-Decision and Order, one
of the main issues in this case involves the existence of
aggregate limits for bodily injury in the primary policies
between Goulds and Utica. Aggregate limits for bodily injury
in the primary policies would allow Utica to combine asbestos
injuries arising from multiple accidents, occurrences, or
individuals into a loss that would exceed the primary policy
limits, penetrate the umbrella policy, and access FFIC's
reinsurance. Utica claims that these policies did in fact
have aggregate limits, while FFIC contends they did not. If
these missing primary policies had said aggregate limits, the
umbrella policies between Goulds and Utica could and would
have been accessed, thereby triggering the reinsurance
policies between Utica and FFIC. Alternatively, if the
primary policies did not contain aggregate limits, the
umbrella policies would never have been triggered, and
FFIC's reinsurance coverage would not have been reached.
It follows that FFIC would have no liability to Utica for the
five years in question. As the primary policies in question
are missing, much of the discovery in this case has focused
on whether those policies had aggregate limits for bodily
instant motion for partial summary judgment is about
different aggregate limits-those listed in the umbrella
policies. According to FFIC, the contractual reinsurance
relationship between Utica and FFIC is governed by (1) the
annual (reinsurance) Certificate, and (2) the corresponding
umbrella policy. It is undisputed that the Certificates
contain a follow form provision, providing that FFIC's
liability is subject to the terms and conditions of
Utica's contract with Goulds (the umbrella policy). FFIC
agreed to provide reinsurance only in accordance with the
terms and conditions of the umbrella policies and therefore
what those policies said about the limits of the underlying
primary policies. While the primary policies between Goulds
and Utica for the years at issue are missing, the parties are
in possession of the umbrella policies between Goulds and
Utica for those years.
argues the umbrella policies are clear and unambiguous, and
none contain aggregate limits for bodily injury for the
underlying primary policies. FFIC has submitted the
declarations page of each umbrella policy. LoPatto Decl., Ex.
2, ECF. No. 279-5 (the "Umbrella Declarations
pages"). Each Umbrella Declarations page includes a
"Schedule of Underlying Insurance Policies."
According to FFIC, these pages provide the bodily injury and
property damage claim limits for the corresponding underlying
primary policies. Each Umbrella Declarations page submitted
by FFIC includes an aggregate limit for property damage, but
no aggregate limit is listed for bodily injury. FFIC asserts
this shows Utica knew how to provide for an aggregate limit
when it wanted to-if the primary policies had aggregate
limits for bodily injury, they would have appeared on the
Umbrella Declarations page of the corresponding umbrella
to FFIC, because the Umbrella Declarations pages (which the
Certificates follow form to) list no aggregate limits for
bodily injury and because the contracts are clear and
unambiguous, they may not be altered by extrinsic evidence.
Therefore, FFIC contends that without aggregate limits for
bodily injury in the primary policies, the Goulds claims
never moved out of the primary policies, the umbrella
policies never triggered, and Utica never should have paid
under the umbrella policies. It follows that FFIC's
reinsurance should never have been triggered and it cannot be
obligated to provide reinsurance coverage for these five
years and thus could not breach the Certificates as a matter
argues partial summary judgment should be denied because FFIC
cannot prove by way of the umbrella policies that the missing
primary policies lack aggregate limits for bodily injury.
Further, even if it could, the umbrella policies as presented
do not actually establish that the underlying primary
policies lack aggregate limits for bodily injury. Utica takes
issue with FFIC's theory about how the umbrella coverage
applies over the primary policies because FFIC does not
discuss nor attach any triggering language from the umbrella
policies. Instead, FFIC's entire argument is based on how
the umbrella policies might apply in light of the
Umbrella Declarations pages, but fails to provide any
supporting umbrella policy contract language such as the
insuring agreements, exclusions, definitions, endorsements,
or terms and conditions. According to Utica, there is not a
complete contract to be interpreted: application of the
Certificates requires an understanding of both the primary
and umbrella policies and the umbrella policies include terms
and conditions explaining how the Umbrella Declarations pages
apply but FFIC has not provided these. Each umbrella
policy generally includes a ...