United States District Court, S.D. New York
case involves a dispute over whether an umbrella-policy
insurance carrier, Great American Insurance Co.
("GAIC"), must cover losses arising from an
individual named Kim Hodges tripping and falling in front of
a vacant lot (the "Hodges incident") owned by
Joseph Zelik, a real estate investor. Zelik had an umbrella
insurance policy (the "Umbrella Insurance Policy")
issued by GAIC covering the lot at the time of the incident.
Zelik obtained this policy through Secure Insure
("Secure"), an insurance broker.
sues for rescission or reformation of the Umbrella Insurance
policy based on alleged material misrepresentations on
Zelik's insurance application. In the alternative, GAIC
seeks a decision from the Court finding that the policy as
written does not cover the Hodges incident. Zelik
counter-claims for breach of contract and a declaratory
judgment that GAIC must cover the Hodges incident. Zelik has
also filed a third-party complaint against Secure for
before the Court are GAIC's and Zelik's cross-motions
for summary judgment, and Secure's motion for summary
judgment against Zelik. For the reasons below, the Court
denies summary judgment on all but one claim.
Undisputed Material Facts
Plaintiff, Joseph Zelik is a real estate investor, broker,
and manager. In 2011, Zelik first began insuring some of his
properties under a commercial real estate umbrella liability
insurance program for which Plaintiff/Counter-Defendant Great
American Insurance Company was the lead insurer. Zelik
obtained this umbrella insurance coverage through Third-Party
Defendant Secure Insure Brokerage, Inc., an insurance
of the application process for the umbrella insurance policy
that Secure obtained for Zelik, Zelik sent Secure a
spreadsheet of twenty-seven properties Zelik wanted insured
under the policy. Zelik's Resp. to Secure's Local
Rule 56.1 Statement of Material Facts ("Zelik Resp.
Secure SMF") ¶ 18. The spreadsheet included
descriptions of the properties as well as the underlying
carrier and policy No. per location. JA Exh. 59-60. Secure
provided GAIC with the same spreadsheet. Zelik Resp. Secure
SMF ¶ 29. The spreadsheet indicated that the underlying
carrier for a No. of these properties was
"Allstate." JA Exh. 60. All properties for which
the underlying insurance policy was listed as
"Allstate" had an underlying homeowner's
insurance policy. JA Exh. 53.
initial umbrella insurance application, which was signed by
Secure on Zelik's behalf, checked a box in the
affirmative next to the following statement: "I
acknowledge that I have read the above and agree that all
primary insurance either currently comply or will be placed
and/or amended to be in compliance with the underlying
requirements prior to binding the Umbrella Insurance."
Joint App'x in Support of the Parties' Respective
Summary Judgment Motions ("JA") Exh. 16 at GAIC
114, ECF No. 41-43. The application earlier states that it
"require[s] all underlying insurance" to have
underlying "Commercial General Liability"
("CGL") insurance with a limit of no less than $1,
000, 000 per occurrence, $2, 000, 000 general aggregate per
location, and $1, 000, 000 personal and advertising injury.
Id. Exh. 7 at GAIC 114. Neither Zelik nor Secure
altered the Allstate homeowner's insurance underlying
some of the properties before binding the Umbrella Insurance
Policy in September 2011.
after the insurance policy was bound, GAIC issued a
Certificate of Coverage and provided Zelik with $5 million of
commercial umbrella coverage under the Umbrella Insurance
Policy. Zelik Resp. Secure SMF ¶ 67-68. The policy
listed all properties listed in the spreadsheet, including
those covered under the Allstate homeowner's policy. The
2011 Certificate of, Coverage was repeatedly and continuously
renewed through September 22, 2019. Zelik's Resp. to
GAIC's Local Rule 56.1 Statement of Undisputed Material
Facts ("Zelik Resp. GAIC SMF") ¶ 71, ECF No.
48. As part of these renewals, Secure submitted renewal
applications on behalf of Zelik that contained the same
affirmation of underlying insurance as the first application.
Id. ¶¶ 74-75.
the properties listed as covered in the Umbrella Insurance
Policy was a vacant lot at 467 Bushwick Avenue. This vacant
lot had the Allstate homeowner's insurance policy as its
underlying insurance coverage. In 2019, an individual named
Kim Hodges tripped and fell in front of this vacant lot,
incurring significant injuries. Allstate provided Zelik with
defense in a personal injury lawsuit Hodges subsequently
filed against him in New York State court. Zelik Resp. GAIC
SMF ¶ 88. Allstate notified GAIC of the lawsuit in April
2018. Id. ¶ 92. On January 17, 2019, Allstate
requested that GAIC participate in the lawsuit. Id.
¶ 92. On January 18, 2019, Allstate advised GAIC that it
had tendered the one million dollar limit of its primary
policy to settle the Hodges lawsuit, for which the settlement
demand was in excess of the one million dollar primary limit.
Id. ¶ 93.
January 25, 2019 GAIC began investigating this insurance
claim, during which time it alleges that it first learned
that the underlying primary policy for 467 Bushwick Avenue
was a homeowner's policy. Id. ¶ 95. In
February, GAIC advised Zelik that based on material
misrepresentations made in application for the Umbrella
Insurance Policy, GAIC would be seeking to rescind the
policy. Id. ¶ 97. GAIC then filed this lawsuit
against Zelik. Zelik filed a counter-claim and filed a
third-party complaint against Secure.
Summary Judgment Standard
judgment is proper when, after drawing all reasonable
inferences in favor of a non-movant, no reasonable trier of
fact could find in favor of that party." Heublein,
Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir.
1993); see also Fed.R.Civ.P. 56(a) ("The court shall
grant summary judgment if 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."). "A fact
is 'material' for these purposes if it 'might
affect the outcome of the suit under the governing
law.'" Holtz v. Rockefeller & Co.,
Inc., 258 F.3d 62, 69 (2d Cir. 2001) (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986)). "An issue of fact is 'genuine'
if 'the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.'"
Id. "Genuine issues of fact are not created by
conclusory allegations." Heublein, 996 F.2d at
Summary Judgment Motions on Claims Between Zelik and GAIC
moves for summary judgment seeking rescission of the Umbrella
Insurance Policy, reformation of the policy, or a ruling that
there can be no coverage for Zelik under the 2014-2015
Umbrella Insurance Policy as written for the lawsuit filed by
Kim Hodges against him. Zelik cross-moves for summary
judgment against GAIC on its rescission and reformation
claims. Further, Zelik seeks a ruling that the Umbrella
Insurance Policy covers the Hodges incident and that GAIC
must pay the reasonable attorneys' fees Zelik incurred
while litigating this action. Secure, as a third-party
defendant, briefed a No. of arguments in support of
Zelik's summary judgment motion.
first argues that the Court should partially rescind each
GAIC Umbrella Insurance Policy as to the locations where
Zelik had an underlying homeowner's insurance policy.
Zelik and Secure assert numerous arguments about why this
claim fails as a matter of law, and why the Court should
instead grant summary judgment against GAIC. Under New York
law, "an insurer may rescind an insurance policy if it
was issued in reliance on material misrepresentations."
Fid. & Guar. Ins. Underwriters, Inc. v. Jasam Realty
Corp., 540 F.3d 133, 139 (2d Cir. 2008). Because a
material dispute remains as to whether Zelik's
misrepresentation was material, the Court denies all motions
for summary judgment on this question.
parties first dispute whether the fact that Secure, on behalf
of Zelik, checked a box on the insurance application stating
that "I acknowledge that I have read the above and agree
that all primary insurance either currently comply or will be
placed and/or amended to be in compliance with the underlying
requirements prior to binding the Umbrella Insurance"
constitutes a material misrepresentation. "Whether there
has been a misrepresentation and the materiality of that
misrepresentation are usually questions of fact for the jury;
however, where the evidence concerning a material
misrepresentation 'is clear and substantially
uncontradicted, the matter is one of law for the court to
determine." Mutual Benefit Life Ins. Co. v.
Morley, 722 F.Supp. 1048, 1051 (S.D.N.Y.1989). Here, the
evidence is not clear and substantially uncontradicted on the
question of materiality, so it remains a question for the
initial matter, there is clear and substantially
uncontradicted evidence that Zelik made a misrepresentation.
New York courts have long recognized that an uncontradicted
false answer on an application for insurance is a
misrepresentation. Travelers' Ins. Co. v.
Pomerantz, 246 N.Y. 63, 66-67, 158 N.E. 21 (1927). By
checking a box through Secure stating that he had insurance
in compliance with underlying requirements of the Umbrella
Insurance Policy, Zelik made such an uncontradicted false
answer. The affirmation specifically indicated that Zelik
needed underlying "Commercial General Liability"
insurance, JA Ex. 16, GAIC 114, and Zelik had only
fails to effectively dispute this evidence that he made a
misrepresentation. First, he argues that he did not make a
misrepresentation because the text of the Umbrella Insurance
Policy only required "general liability" coverage,
and that Zelik in fact had such coverage through Allstate.
Zelik's Mem. of Law in Opp. To Pl. GAICs Mot. for Summary
Judgment ("Zelik Opp. GAIC Mem.") 11, ECF No. 47.
Zelik, however, only points to a part of the Allstate policy
that indicates he has "Family Liability"
protection, which does not mention "general
liability." Zelik fails to explain how "family
liability" insurance is equivalent to CGL insurance.
Second, Zelik argues that because GAIC knew that Zelik's
primary coverage was through Allstate, which primarily
provides homeowner's insurance, it could have raised the
misrepresentation with Zelik at the time. Id. at 10.
This claim, however, does not make the representation any
even though there is clear and substantially uncontroverted
evidence of a misrepresentation, it is not clear whether this
misrepresentation was material. "A fact is material so
as to void ab initio an insurance contract if, had it been
revealed, the insurer or reinsurer would either not have
issued the policy or would have only at a higher
premium." Christiania Gen'l Ins. Corp. v. Great
Am. Ins. Co., 979 F.2d 268, 278 (2d Cir. 1992). In other
words, the "insurer need not prove that it would not
have issued any policy at all, but that the policy in
question would not have been issued." Aetna Cas.
& Sur. Co. v. Retail Local 906, 921 F.Supp. 122, 131
(E.D.N.Y. 1996), aff'd, 106 F.3d 34 (2d Cir. 1997).
both parties have adduced evidence sufficient to raise a
dispute as to whether the misrepresentation was material. The
very fact that GAIC required an affirmation that the
underlying insurance policy was in compliance constitutes
evidence that the nature of the underlying insurance policy
was material. Further a representative of GAIC testified that
such affirmations are important to its decision whether to
issue a policy, JA, Ex. 7, 131. Zelik, however, has adduced
evidence suggesting that the misrepresentation was not
material. For example, Zelik points to a clause in the
Umbrella Insurance Policy stating that if an insured fails to
maintain compliant underlying coverage, GAIC "will only
be liable to the same extent that [it] would have been had
[the insured] fully complied with" the policy
requirements. 2014 Umbrella Policy, J. Ex. 29, at GAIC 1344,