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Empire Fire and Marine Insurance Co. v. Estrella

United States District Court, E.D. New York

September 13, 2019



          Peggy Kuo, United States Magistrate Judge.

         Plaintiff Empire Fire and Marine Insurance Company (“Plaintiff”) brought this action against Kelvin Estrella, Jose Guevara, Cesar Rojas, and Yocasta Polanco a/k/a Yorasta Polanco (collectively, “Defendants”), alleging breach of contract against Estrella and seeking a declaratory judgment that it does not have a duty to defend or indemnify Estrella in two underlying state court actions arising from an alleged motor vehicle accident in which Estrella is a defendant.

         Before the Court on referral from the Honorable Kiyo A. Matsumoto is Plaintiff's Motion for Default Judgment against Defendants (the “Motion”) (Dkt. 14; Referral Order dated 4/1/2019). For the reasons stated herein, the undersigned respectfully recommends that the Motion be granted.


         The following facts are taken from the Complaint, unless otherwise stated, and are accepted as true for the purposes of the Motion. See Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009).

         Plaintiff issued the Empire Commercial Lines Policy, bearing policy number RSI552807-03 (the “Policy”) to Enterprise Holdings, Inc. (“Enterprise”) to cover the period from September 1, 2014 to September 1, 2015. (Compl., ¶ 4, Dkt. 1; Affidavit of Sue Rudy, dated November 14, 2018 (“Rudy Aff.”), ¶ 4, Dkt. 16; Ex. 1, Dkt. 16-1.) The Policy includes Supplemental Rental Liability Insurance for New York, providing coverage once the minimum financial responsibility limits under New York's no-fault insurance law are met, up to $1 million per accident. (Compl., ¶ 3, 5; Rudy Aff., ¶ 22.) The Policy kicks in after $50, 000 for bodily injuries and $10, 000 for property damage per accident. (Compl., ¶ 36; Rudy Aff., ¶ 24; Ex. 1, at p. 65.)

         Estrella rented a car from Enterprise[1] around June 22, 2015 and paid for Supplemental Liability Protection (“SLP”), thereby qualifying him as an insured under the Policy. (Compl., ¶ 7; Rudy Aff., ¶ 26; Exs. 4, 14.)

         The Policy contains a provision under which the insured must cooperate with Plaintiff in its investigation and defense of any litigation arising from a motor vehicle accident. (Compl., ¶ 37; Rudy Aff., ¶ 25; Ex. 1, at pp. 92-93.) The Policy also contains an amendment providing that the insured must submit to examinations under oath at Plaintiff's request in connection with any litigation. (Compl., ¶ 38, Rudy Aff., Ex. 1, at pp. 92-93.)

         In November 2015, Guevara, Rojas, and Polanco brought two lawsuits against Estrella in the Supreme Court of New York, County of Bronx. They alleged that on June 25, 2015, the Enterprise rental car which Estrella was driving collided with a car driven by Polanco, in which Guevara and Rojas were passengers. (Compl., ¶¶ 2, 21-22, 29-30; Rudy Aff., ¶ 3.) The lawsuits are captioned Jose Guevara v. Yorasta Polanco and Kelvin Estrella, Index No. 26408/15E (the “Guevara Action”), and Cesar Rojas and Yocasta Polanco v. Kelvin Estella and Enterprise Holdings, Inc., d/b/a Enterprise Rent-a-Car, Index No. 304688/2015 (the “Rojas/Polanco Action”) (together, the “Underlying Actions.”). (Compl., ¶¶ 1, 18, 26; Rudy Aff., ¶¶ 1, 6, 8, 14, 16; Exs. 2-3.)

         Pursuant to New York's minimum financial requirements, Enterprise retained defense counsel for Estrella in the Underlying Actions. (Compl., ¶¶ 7, 39; Rudy Aff., ¶¶ 13, 21, 27.)

         Plaintiff has made numerous efforts to reach Estrella regarding his defense in the Underlying Actions, but Estrella has not responded. (Compl., ¶¶ 8, 25, 33; Rudy Aff., ¶¶ 27-28.) Initial attempts to contact Estrella using the address and telephone numbers he provided on his rental agreement failed. (Compl., ¶ 40; Rudy Aff., ¶ 28.) As a result, Plaintiff's claims handler retained the law firm White Fleischner and Fino, LLP (“White Fleischner”) to assist in contacting him. (Id.)

         On July 15, 2016, August 12, 2016, October 4, 2016, November 8, 2016, and February 3, 2017, White Fleischner sent letters to both Estrella's address listed on his rental agreement, and a P.O. Box address in Ohio identified as Estrella's. (Compl., ¶¶ 41, 49, 53, 59, 68; Rudy Aff., ¶¶ 29-58; Exs. 5, 7-8, 10, 13.) The letters were sent via certified and regular mail, and contained notices scheduling Estrella's examination under oath. (Compl., ¶¶ 42, 50, 53, 60, 69; Rudy Aff., Exs. 5, 7-8, 10, 13.) The letters warned Estrella that if he failed to appear for his examination under oath and produce requested documents, Plaintiff would construe that as a breach of the Policy, which might forfeit Estrella's rights thereunder. (Compl., ¶¶ 43, 51, 54, 61, 70.) Receipts indicate that someone received and signed for four of the five letters sent to the Ohio address and three of the five letters sent to the New York address. (Compl., ¶¶ 44, 52, 55, 71; Rudy Aff., ¶¶ 39, 42, 58; Exs. 5, 7-8, 10.) Four examinations under oath were scheduled, and Estrella failed to appear at any of them. (Compl., ¶¶ 48, 58, 66, 77; Rudy Aff., ¶¶ 35, 45, 53, 64; Exs. 6, 9, 12, 15.) Estrella also failed to answer White Fleischner's telephone calls made to the primary and secondary numbers he provided in his rental agreement. (Compl., ¶¶ 45, 56, 64, 75; Rudy Aff., ¶¶ 32-33, 43, 51, 62; Exs. 12, 15.) On several occasions, the person who answered the phone indicated that there was no one named Kelvin Estrella at that number, that it was the “wrong number, ” or that he was “not Kelvin Estrella, and he only speaks Chinese.” (Compl., ¶¶ 45, 46, 56, 64; Rudy Aff., ¶¶ 32, 43, 51, 62; Exs. 6, 12.)

         Plaintiff also hired three private investigators, who performed a “skip-trace” search on Estrella, which confirmed the address he had given on the rental agreement (including an apartment number, which Estrella had failed to provide) and revealed an active driver's license for Estrella at that address, as well as New York voter registration records at that address. (Compl., ¶ 79; Rudy Aff., ¶ 66; Ex. 16.) An investigator telephoned Estrella in Spanish and in English, and visited his residence on at least four occasions. (Compl., ¶¶ 62-63, 67, 78-88; Rudy Aff., ¶¶ 50, 54, 68, 71-75; Exs. 11-12, 17-18.) One investigator met Estrella's brother at the residence, who confirmed that he lived there. (Compl., ¶ 67; Rudy Aff., ¶ 54; Ex. 11.) Another investigator met the building superintendent, who stated that Estrella no longer resided there. (Compl., ¶ 81; Rudy Aff., ¶ 68.) That investigator nevertheless affixed a letter to the door of the apartment, asking Estrella to contact him. (Id.) No. one did. On another occasion, a Spanish-speaking investigator spoke with someone at one of Estrella's phone numbers, who identified himself as Estrella and confirmed his address. (Compl., ¶ 83; Rudy Aff., ¶ 70; Ex. 18.) However, when this investigator visited that address, an unidentified male answered the door and claimed that Estrella did not live there, and that he would not accept any documents on Estrella's behalf. (Compl., ¶¶ 84-88; Rudy Aff., ¶¶ 71-75; Ex. 18.)

         Plaintiff also sent its own letter to Estrella on March 2, 2017, via certified mail, return receipt requested, and regular mail, stating that it was reserving its rights under the Policy, and “[b]ased on the information we have received, we question the applicability of coverage to you for any benefits under our policy.” (Compl., ¶ 73; Rudy Aff., Ex. 14.) The letter noted that Estrella had “failed to cooperate in the investigation and defense of this matter” and as a result, “there may be no Supplemental Liability Coverage for this accident.” (Compl., ¶ 74; Rudy Aff., Ex. 14.) After receiving a finalized report from its third investigator in February 2018, Plaintiff retained counsel in order to conduct a factual and legal analysis before ultimately filing this action in June 2018. (Rudy Aff., Ex. 18; Pl. Ltr., Dkt. 32.)


         Plaintiff filed the Complaint on June 12, 2018, seeking declaratory judgment. (Dkt. 1.) Estrella was served on June 18, 2018. (Dkt. 6.) Guevara was served on June 28, 2018. (Dkt. 5.) Polanco was served on July 27, 2018. (Dkt. 8.) Rojas was served on August 13, 2018. (Dkt. 9.) After no defendant responded to the Complaint, Plaintiff requested and the Clerk of the Court entered default as to all Defendants on September 25, 2018. (Dkts. 10-13.) Plaintiff sent letters to counsel for Estrella, Guevara, Rojas, and Polanco in the Underlying Actions on September 18 and 20, 2018, enclosing the Summons and Complaint and informing them that Plaintiff had requested certificates of default and would move for default judgment. (Dkt. 15-2.)

         Plaintiff filed the Motion on November 15, 2018. (Dkt. 14-19). On April 18, 2019, Rojas and Polanco filed a letter asking the Court to deny the Motion on the basis that they had never been personally served and were unaware of this action. (Dkt. 20.) The Court directed Rojas and Polanco to file a motion to vacate, which they did on May 3, 2019. (Motion to Vacate Clerk's Entry of Default, “Motion to Vacate, ” Dkt. 23.) Plaintiff filed its opposition on May 10, 2019. (Dkt. 26.)

         A Hearing and Inquest on the Motion and the Motion to Vacate were held on August 6, 2019. The undersigned denied the Motion to Vacate on the record because Rojas and Polanco failed to articulate a meritorious defense to this action for declaratory judgment based on Estrella's breach of contract. However, Rojas and Polanco were given leave to file a motion for reconsideration by September 9, 2019 if they learned new facts at Estrella's deposition in the Underlying Actions, then scheduled for August 22, 2019, that would support a meritorious defense. (See Minute Entry dated August 7, 2019; Tr. at 31, Dkt. 29.)

         On August 30, 2019, Rojas and Polanco reported that the deposition of Estrella did not occur on August 22, 2019 because he did not appear, and that it was therefore ...

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