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Government Employees Insurance Co. v. Saco

United States District Court, E.D. New York

March 30, 2017

GOVERNMENT EMPLOYEES INSURANCE COMPANY, Plaintiff,
v.
DIANE SACO and SUZANNE KUSULAS, Defendants. SUZANNE KUSULAS, as assignee of the rights of DIANE SACO, Plaintiff,
v.
GOVERNMENT EMPLOYEES INSURANCE COMPANY, Defendant.

          MEMORANDUM & ORDER

          NICHOLAS G. GARAUFIS, United States District Judge.

         The parties in these two related cases seek the court's determination as to the Government Employees Insurance Company's ("GEICO") obligation to pay certain costs under its insurance policy issued to Diane Saco ("Saco"). Underlying the actions is a prior state court trial, in which a jury adjudged Saco to be liable to Suzanne Kusulas ("Kusulas") for injuries sustained in an automobile accident.

         Before the court are GEICO's Motion for Summary Judgment as to all claims in both actions (see GEICO's Mot. for Summ. J. ("GEICO Summ. J. Mot.") (Dkt. 115), No. 12-CV-5633), [1] and Kusulas's Motion for Partial Summary Judgment as to her counterclaim for breach of contract (see Kusulas Summ. J. Mot. (Dkt. 117), No. 12-CV-5633).

         For the following reasons, the court DENIES Kusulas's Motion for Partial Summary Judgment and GRANTS IN PART and DENIES IN PART GEICO's Motion for Summary Judgment.

         I. BACKGROUND

         A. The Parties' Statements of Undisputed Facts

         The facts in this opinion are drawn, where possible, from the parties' statements of undisputed facts, submitted pursuant to Local Rule 56.1. (See Kusulas Rule 56.1 Statement (Dkt. 117-1); GEICO Rule 56.1 Statement (Dkt. 115-1).) See also Holtz v. Rockefeller & Co., 258 F.3d 62, 73 (2d Cir. 2001) (The court "is not required to consider what the parties fail to point out in their Local Rule 56.1 statements." (internal quotation marks and citations omitted)).

         In addition to submitting their initial statements of "undisputed" facts, the parties both submitted counterstatements to each other's statements, and GEICO additionally submitted a reply to Kusulas's counterstatement. (See GEICO 56.1 Counterstatement (Dkt. 123-1); Kusulas Rule 56.1 Counterstatement (Dkt. 121); GEICO Rule 56.1 Reply (Dkt. 128)).) This opinion relies only on facts in the parties' Rule 56.1 statements that are truly undisputed and notes any apparent disagreement over any material allegation.

         B. Factual Background

         At issue in both of these cases is a car accident and subsequent state court case, the facts of which are undisputed. On February 23, 2006, Saco collided with a car in which Kusulas was a passenger. (Kusulas Rule 56.1 Statement ¶ 2.) At the time of the accident, Saco held two insurance policies issued by GEICO: an automobile policy with a policy limit of $300, 000 (the "Automobile Policy") and a personal umbrella policy, with a policy limit of $1, 000, 000 (the "Umbrella Policy;" collectively, the "Policies"). (See GEICO Rule 56.1 Statement ¶¶ 1, 5.) The Umbrella Policy provided cumulative "excess coverage" to the Automobile policy, and so Saco's coverage as to the accident in question had a combined limit of $1, 300, 000 (the "Policy Limits"). (Id.)

         In January 2007, Kusulas instituted an action against Saco in the Supreme Court of the State of New York, Kings County (the "Underlying Action"). (Id. ¶ 3.) On June 16, 2010, the state court granted Kusulas's motion for summary judgment as to liability, holding that Saco was fully liable for Kusulas's injuries resulting from the accident. (See Id. ¶ 16; see also Kusulas Rule 56.1 Statement ¶ 5.) On March 5, 2012, a jury considering only the issue of damages returned a verdict of $3, 369, 066.75. (GEICO Rule 56.1 Statement ¶ 100; Kusulas Rule 56.1 Statement ¶ 8.) Following further proceedings, the state court entered judgment entered judgment for Kusulas in the amount of $2, 857, 900.55 on October 10, 2014. (GEICO Rule 56.1 Statement ¶ 106; Kusulas Rule 56.1 Statement ¶ 10.) Significantly for the motions considered here, this judgment included $779, 273.26 in interest, calculated at the statutory rate of nine percent per annum from the date of the June 16, 2010, judgment as to Saco's liability for Kusulas's injury. (Kusulas Rule 56.1 Statement ¶ 10.)[2]

         From October 2007 through return of the jury verdict, the parties engaged in off-and-on settlement discussions and GEICO developed internal case valuations, reviewed in greater detail below. (See Section II.C.l, infra.)

         C. Procedural History

         GEICO filed the first of the two captioned cases in this court on November 15, 2012, and named both Saco and Kusulas as defendants. (Compl. (Dkt. 1).) That complaint seeks declaratory judgment that (1) GEICO is not required to make any payments in excess of the Policy Limits; (2) the Policies do not require payment for Saco's personal attorney's fees; and (3) GEICO is not subject to any claim for bad faith in relation to its obligations to Saco. (Id. ¶ 41.) In her answer, Kusulas included two counterclaims: (1) GEICO breached its contract in failing to tender to Saco the full Policy Limits plus prejudgment interest[3] on that amount; and (2) GEICO acted in bad faith towards Saco in its failure to settle the Underlying Action.[4] (See Kusulas Answer & Countercl. (Dkt. 51) ¶¶ 21-28; id. ¶¶ 29-63.) While, as noted, Saco originally appeared as a defendant in the case, she assigned her rights against GEICO to Kusulas on December 23, 2014. (GEICO Rule 56.1 Statement ¶ 107.)

         II. DISCUSSION

         Pending before the court are the parties' cross-motions for summary judgment. GEICO seeks summary judgment as to all claims in both actions. (See Mem. in Supp. of GEICO's Mot. for Summ. J. ("GEICO Summ. J. Mem.") (Dkt. 116) at 1.) Kusulas moves for summary judgment only as to her claim for breach of contract based on GEICO's failure to pay prejudgment interest on the Policy Limits. (See Mem. in Supp. of Kusulas's Mot. for Partial Summ. J. ("Kusulas Summ. J. Mem.") (Dkt. 120) at 1.) The court concludes that GEICO is entitled to summary judgment as to its liability for prejudgment interest in excess of the Policy Limits, as extrinsic evidence demonstrates that the parties to the Policies lacked intent for GEICO to be liable for those payments. Kusulas's Motion for Partial Summary Judgment must therefore be denied. The court also denies GEICO's request for summary judgment as to whether it discharged its duty of good faith to Saco in the Underlying Action, as conflicting evidence presented by the parties gives rise to a genuine dispute of material fact.

         A. Legal Standard

         A court must grant summary judgment where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "A 'material' fact is one capable of influencing the case's outcome under governing substantive law, and a 'genuine' dispute is one as to which the evidence would permit a reasonable juror to find for the party opposing the motion." Figueroa v. Mazza, 825 F.3d 89, 98 (2d Cir. 2016) (citing Anderson v. Liberty Lobby. Inc.. 477 U.S. 242, 248 (1986)). "The movant may discharge this burden by showing that the non-moving party has 'fail[ed] to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.'" Lantheus Med. Imaging. Inc. v. Zurich Am. Ins. Co., ___ F.Supp.3d ___, No. 10-CV-9371 (KPF), 2015 WL 1914319, at *6 (S.D.N.Y. Apr. 28, 2015) (citing Celotex Corp. v. Catrett. 477 U.S. 317, 322 (1986)).

         "In determining whether an issue is genuine, '[t]he inferences to be drawn from the underlying affidavits, exhibits, interrogatory answers, and depositions must be viewed in the light most favorable to the party opposing the motion.'" SCW West LLC v. Westport Ins. Corp.. 856 F.Supp.2d 514, 521 (S.D.N.Y. 2012) (quoting Cronin v. Aetna Life Ins. Co., 46 F.3d 196, 202 (2d Cir. 1995)). "[T]he judge's function is not Q to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Redd v. N.Y. Div. of Parole. 678 F.3d 166, 173-74 (2d Cir. 2012) (quoting Liberty Lobby. 477 U.S. at 249). However, "[a] party may not rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment, " and "[m]ere conclusory allegations or denials ... cannot by themselves create a genuine issue of material fact where none would otherwise exist." Hicks v. Baines. 593 F.3d 159, 166 (2d Cir. 2010) (internal quotation marks and citation omitted).

         B. Breach of Contract Claim

         Both Kusulas and GEICO move for summary judgment as to GEICO's obligation to pay the prejudgment interest that accrued between the June 16, 2010, decision regarding liability and the March 5, 2012, jury verdict on damages. (See Kusulas Summ. J. Mem. at 10; GEICO Summ. J. Mem. at 7-10). Kusulas does not claim payment for all prejudgment interest on the total judgment; rather, she seeks the interest accrued "on the portion of the Judgment up to GEICO's policies' limits (i.e. up to $1, 283, 500)." (See Kusulas Summ. J. Mem. at 10.)

         The parties raise two issues for the court's consideration: (1) Is GEICO required to pay prejudgment interest in excess of the Policy Limits as a matter of New York law? (2) If not, do the Policies' terms require such payment? The court finds that neither state law nor the Policies' terms obligate GEICO to pay prejudgment interest in excess of the Policy Limits and so concludes that GEICO is entitled to summary judgment on the issue.

         1. Obligation to Pay Prejudgment Interest Under New York Law

         In the court's previous decision on the parties' cross-motions for judgment on the pleadings, the undersigned determined that "New York regulations do not require that an automobile insurance policy cover prejudgment interest in excess of the policy limit." (Apr. 2, 2015, Mem. & Order (Dkt. 90) at 7.) Kusulas urges the court to reconsider its position and argues that the previous decision misconstrued the applicable cases. (Kusulas Summ. J. Mem. at 20.) The court finds no support for her argument that New York requires insurers to pay prejudgment interest.

         Kusulas's argument hinges on the New York Court of Appeals' decision in Dingle v. Prudential Property & Casualty Ins. Co.. 85 N.Y.2d 657 (N.Y. 1995). In a bifurcated trial, the defendant was found to be 100% liable for a car accident. Id. at 659. The defendant's insurance policy did not address payment of interest accrued between the dates on which liability was adjudged and damages were set in a bifurcated trial, but the insurer agreed to pay interest during that period on an amount up to the policy limit. Id. Following the damages determination, the insurer-defendant paid out the policy limit amount, the interest on the policy amount "accruing from the date of the liability verdict to the date of the damages award" (i.e. prejudgment interest on the policy limits), and interest on the entire verdict from the date of the damages award to the date of tender. Id. at 659-60. The issue before the court was thus not the payment of interest on the policy limit, but rather the plaintiffs request for the "difference between the interest on the entire judgment... and the amount actually tendered." Id. at 660.

         Dingle therefore takes as a given the precise issue that is in dispute here: the defendant-insurer had already agreed to pay prejudgment interest on the policy limits in addition to the entire policy limit, exactly what GEICO is refusing to do here. In support of her contrary reading of the case, Kusulas points to the first "Question Presented" in the Dingle plaintiffs brief: "Must an insurance carrier... pay interest on the judgment against its insured from the date of liability determination to the date of the tender of the policy?" (Ex. E to Kusulas Summ. J. Mot. at 1.) However, she presents this argument entirely without context, as the remainder of the cited brief reaffirms that the defendant insurer had already agreed to pay prejudgment interest and was not contesting that point. (Id. at 3-4.) For the same reason, Kusulas's citations to broad policy statements in Dingle do not bind the court here: ...


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