United States District Court, E.D. New York
U.S. UNDERWRITERS INSURANCE COMPANY, Plaintiff,
ORION PLUMBING & HEATING CORP., ARKADIY BANGIYEV, JOSEPH POMILLA, J BAYOT HOME DESIGN and ARNULFO BAYOT, Defendants.
MEMORANDUM AND ORDER
LASHANN DEARCY HALL, UNITED STATES DISTRICT JUDGE:
April 17, 2018, United States Magistrate Judge Ramon E.
Reyes, Jr., issued a Report and Recommendation (the
“R&R”), wherein he recommended that Plaintiff
U.S. Underwriters Insurance Company's (“U.S.
Underwriters”) motion for default judgment against
Defendant Orion Plumbing & Heating Corporation
(“Orion”) be denied and that Plaintiff's
claims be dismissed for lack of subject matter jurisdiction.
Plaintiff commenced this action against Defendant Orion on
August 19, 2016, seeking the rescission of an insurance
policy and a declaration that Plaintiff has no duty to defend
or indemnify Orion for claims asserted in a New York State
court action captioned Joseph Pomilla v. Arkadiy
Bangiyev, et al., (the “Underlying
Action”). (Compl., ECF No. 1, ¶¶ 10, 29,
34, 38.) Orion has failed to appear in or defend itself in
this matter. On December 22, 2016, the Clerk of Court entered
default against Orion, and Plaintiff moved for default
judgment pursuant to Fed.R.Civ.P. 55. (ECF No. 28.)
Plaintiff's Motion for Default Judgment was referred to
Magistrate Judge Reyes for a report and recommendation, which
he issued on April 17, 2018. (ECF No. 43.) In the R&R,
Magistrate Judge Reyes recommended denying Plaintiff's
requests for two declarations: one rescinding the insurance
policy issued to Orion and another finding that Plaintiff is
under no obligation to defend or indemnify Orion. On April
25, 2018, Plaintiff filed an objection challenging Magistrate
Judge Reyes' recommendation that the Court deny
Plaintiff's request for a declaration of rescission.
(See Objection, ECF No. 44). In reaching that
conclusion, Magistrate Judge Reyes found that, because Orion
had not made a claim under Plaintiff's policy and was
unlikely do so, there was no case or controversy before this
Court. (See R&R, *4). Plaintiff did not object
to Magistrate Judge Reyes' denial of Plaintiff's
request for a declaration that Plaintiff has no duty to
defend or indemnify Orion in the Underlying Action.
Court reviews any portion of Magistrate Judge Reyes'
R&R that has been objected to de novo.
See Fed. R. Civ. P. 72(b)(1), (3); 28 U.S.C. §
636(b)(1)(C). As to the balance, “the district court
need only satisfy itself that there is no clear error on the
face of the record.” Estate of Ellington ex rel.
Ellington v. Harbrew Imps. Ltd., 812 F.Supp.2d 186, 189
(E.D.N.Y. 2011) (quoting Urena v. New York, 160
F.Supp.2d 606, 609-10 (S.D.N.Y. 2001) (internal quotation
marks and citations omitted)).
reasons set forth below, the Court adopts Magistrate Judge
Reyes' opinion in full.
2012, Plaintiff, an insurance provider, extended a commercial
liability policy (the “Policy”) to Orion, a
heating and plumbing contractor. (Compl. ¶ 16.) Orion
subsequently performed work on a property located at 112-44
68th Avenue in Rego Park, Queens (the
“Property”). On June 3, 2012, a fire occurred on
the Property, allegedly injuring Pomilla. (ECF. No. 1-1
(“Underlying Compl.”) ¶¶ 59-61.) In
2015, Pomilla commenced the Underlying Action against the
Property's owner, Bangiyev, and several other defendants
for injuries Pomilla allegedly suffered as a result of the
fire. (Underlying Compl. ¶ 1.) Bangiyev, in turn, filed
a third-party complaint against Orion, seeking
indemnification and contribution based on the work performed
by Orion on the Property. (Compl. ¶ 14.) Orion never
sought indemnification from Plaintiff or sought to implead
Plaintiff in the Underlying Action. Bangiyev and Orion were
subsequently dismissed as defendants in the Underlying
Action, a decision which Pomilla is currently appealing.
(ECF. No. 39); Pomilla v. Bangiyev, Sup. Ct., Queens
County, June 8, 2017, Raffaele, J., Index No. 1590/15.
objects to Magistrate Judge Reyes' recommendation that
the Court deny Plaintiff's request for a declaration of
rescission. Plaintiff contends that its rescission claim
presents a justiciable controversy because Plaintiff issued
the Policy based on Orion's material misrepresentations
in its insurance application. (See Objection, 3-7.)
grant Plaintiff's motion, the Court must first be
satisfied that the complaint presents a case or controversy
as required by Article III of the Constitution. That is,
“[t]he controversy must be ‘real and substantial
. . . admitting of specific relief through a decree of a
conclusive character, as distinguished from an opinion
advising what the law would be upon a hypothetical state of
facts.'” Olin Corp. v. Consol. Aluminum
Corp., 5 F.3d 10, 17 (2d Cir. 1993) (quoting Aetna
Life Ins. Co. v. Haworth, 300 U.S. 227, 241 (1937)). In
other words, “[t]he [controversy] . . . must [take] a
fixed and final shape so that a court can see what legal
issues it is deciding, what effect its decision will have on
its adversaries, and some useful purpose to be achieved in
deciding them.” U.S. Underwriters Ins. Co. v. Kum
Gang Inc., 443 F.Supp.2d 348, 352 (E.D.N.Y. 2006)
(quoting Pub. Serv. Comm'n of Utah v. Wycoff Co.,
Inc., 344 U.S. 237, 244 (1952)). Magistrate Judge Reyes
found that Plaintiff's claims did not present a case or
controversy. The Court agrees.
conduct has not been shown to cause actual or threatened
injury to Plaintiff. Orion has not claimed a loss based on
the Underlying Action. And, because the Underlying Action has
been dismissed against Orion, Orion appears unlikely to do
so. (See R&R, *3.) Plaintiff argues that under
New York law, “an insurer is entitled to rescind an
insurance policy thereby rendering the policy void ab initio
if it issued the policy in reliance on a material
misrepresentation made by the insured.” (Objection,
*4.) While this may be true, Plaintiff conflates the grounds
upon which an insurance policy can be rescinded with the
grounds upon which this Court may exercise jurisdiction.
Further undermining Plaintiff's arguments, in each and
every case cited by Plaintiff, an insured had already made a
claim for insurance coverage pursuant to an insurance policy.
See, e.g., U.S. Underwriters Insur. Co. v. Novel
Home Health Care Servs. of New York, Corp., No. 14 Civ.
3715, 2016 WL 5339358, *4 (E.D.N.Y. Jan. 13, 2016)
(addressing rescission claim where the insured defendant had
already made a claim for insurance coverage pursuant to an
insurance policy); Fidelity and Guaranty Insur.
Underwriters, Inc. v. Jasam Realty Corp., 540 F.3d 133,
143 (2d Cir. 2008) (same); Vella v. Equitable Life
Assurance Soc'y of the U.S., 887 F.2d 388, 390-391
(2d Cir. 1989) (same); John Hancock Life Insur. Co., v.
Perchikov, 553 F.Supp.2d 229, 232-233 (E.D.N.Y. 2008)
(same). That is not the case here. Indeed, it is undisputed
that Orion has not been found liable in the Underlying
Action, has not challenged the coverage, and has made no
claims whatsoever under the Policy.
determining the justiciability of declaratory actions, courts
“focus on the practical likelihood that the
contingencies will occur.” Century Sur. Co. v.
Odyssey Mech. Corp., No. 9 Civ. 1040, 2011 WL 4529637,
*3 (E.D.N.Y. Sept. 27, 2011) (quoting Associated Indem.
Corp. v. Fairchild Indus., Inc., 961 F.2d 32, 35 (2d
Cir. 1992)). As Magistrate Judge Reyes correctly found, an
attenuated chain of contingencies would have to occur for
Orion to present a justiciable claim to the Court.
First, the Underlying Action would have to be
reinstated against Orion. Second, an unfavorable
opinion would have to be entered against Orion, causing a
loss to Orion. Third, Orion would have to make a
claim under the Policy. Because the Policy was cancelled six
years ago, and because Orion has made no claims under the
Policy, there is no practical likelihood that these
contingencies will occur. Therefore, Plaintiff's claim is
Court has reviewed the remaining portions of the R&R for
clear error and, finding none, hereby adopts Magistrate Judge
Reyes' R&R as the opinion of this Court. For the
foregoing reasons, the Court orders, consistent with
Magistrate Judge Reyes' ...