JANET BOND ARTERTON, District Judge.
Plaintiff Tilcon New York, Inc. ("Tilcon" or "Plaintiff") brings this action against Defendant Indemnity Insurance Co. of North America ("IINA" or "Defendant") alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of the Connecticut Unfair Insurance Practices Act ("CUIPA"), Conn. Gen. Stat. § 38a-815, in connection with Defendant's refusal to cover a claim under a bumbershoot insurance policy (a type of umbrella marine insurance policy providing excess coverage) that Plaintiff purchased to supplement a Protection & Indemnity policy it held with American Home. By Ruling on the Motion to Transfer/Dismiss State Court Claims, the Court determined that the IINA Bumbershoot policy is a maritime contract and that it had subject matter jurisdiction pursuant to 28 U.S.C. 1331(1) (maritime jurisdiction), that federal choice-of-law rules apply and that to the extent federal admiralty law does not apply, Connecticut law would apply, and dismissed Plaintiff's claims under CUIPA and portions of its claims concerning the breach of the implied covenant of good faith and fair dealing dependent on an alleged, but unsupported, duty to defend. (Ruling on Mot. to Transfer/Dismiss [Doc. # 40] at 8-9, 14.) The case proceeded on the question of breach of contract and breach of the implied covenant in other respects. (Id. at 14.) The parties now cross-move for summary judgment [Docs. ## 69, 72]. For the reasons set forth below, the Court DENIES the parties' cross-motions for summary judgment.
Tilcon is a New York-based company that provides road construction services, operates quarries and asphalt plants, and produces construction materials that are transported throughout New York and New Jersey by truck, barge, and rail. (Ruling on Mot. to Transfer/Dismiss at 2.) Tilcon owns and operates a quarry and a maritime terminal in Clinton Point, New York on the Hudson River where it loads gravel and stone aggregate onto barges for delivery to construction sites. (Pl.'s D. Conn. L. Civ. R. 56(a)1 Stmt. ("Pl.'s 56(a)1") [Doc. # 72-11] ¶¶ 1-2; Def.'s D. Conn. L. Civ. R. 56(a)2 Stmt. ("Def.'s 56(a)2") [Doc. # 76] ¶¶ 1-2.) The barges themselves have no engines or ability to steer, and Tilcon uses tugboats (called "push boats") to maneuver the barges to the dock. (Pl.'s 56(a)1 ¶ 10; Def.'s 56(a)2 ¶ 10; Ex. 4 to Stern Decl. ("Kechejian Tr.") [Doc. 70-1] at 13:4-23.) Once a barge is maneuvered up to the dock for loading, it is affixed to the dock by a set of cables. These cables, which are tightened and loosened by a winch, propel the barge along the dock so that, as it moves, the gravel being loaded into the barge is evenly distributed. (Pl.'s 56(a)1 ¶¶ 15-17; Def.'s 56(a)2 ¶¶ 15-17.) Another set of cables runs between the barge and the dock. The lines are shackled to the dock in such a way that they permit the barge to move along the dock but prevent it from drifting away from the dock. As aggregate is loaded into the barge, two Tilcon employees rake it to a flat surface so that purchasers can better estimate volume; the employees who perform this job are called "trimmers." (Pl.'s 56(a)1 ¶¶ 19-20; Def.'s 56(a)2 ¶¶ 19-20.)
In the underlying lawsuit, Ronkese v. Tilcon New York et al., Tilcon employee Richard Ronkese alleged that on October 15, 2004, while working as a trimmer aboard a barge called the Nicola Lizza, he was struck by a cable that snapped, causing injury. (Pl.'s 56(a)1 ¶ 42; Def.'s 56(a)2 ¶ 42; Ex. I ("Ronkese Complaint") to Pl.'s 56(a)1 [Doc. # 72-26] ¶¶ 16-18; Def.'s D. Conn. L. Civ. R. 56(a)1 Stmt. [Doc. # ("Def.'s 56(a)1") [Doc. # 70] ¶ 15; Pl.'s D. Conn. L. Civ. R. 56(a)2 Stmt. ("Pl.'s 56(a)2") [Doc. # 72-12] ¶ 15).
In Mr. Ronkese's complaint, he alleged that he was injured "when a cable snapped/parted, striking plaintiff's body . . . [and] propelling his body with great force and velocity to the deck of" the barge. (Ronkese Complaint ¶ 18.)
Mr. Ronkese filed suit on September 7, 2007 — just shy of three years after his injury — in New York Supreme Court, Ulster County, alleging that the snapped cable caused him to suffer shoulder and neurocognitive injuries. (Ronkese Complaint ¶ 18.) In the years between the injury and the suit, Mr. Ronkese collected $260,000 in New York State Workers Compensation benefits. (Def.'s 56(a)1 ¶ 16-17; Pl.'s 56(a)2 ¶¶ 16-17.)
At the time of the suit, there was dispute at Tilcon about the severity of Mr. Ronkese's injuries. David Toolan, Deputy General Counsel for Tilcon's parent and Assistant Secretary of Tilcon, testified as 30(b)(6) witness for Tilcon that it had received Mr. Ronkese's workers compensation file, complete with summaries of independent medical examination reports indicating that Mr. Ronkese had suffered neurocognitive injuries, but he also testified that Mr. Ronkese's coworkers had seen him at the gym lifting weights without apparent difficulty. (Toolan 30(b)(6) Tr. 57:13-58:22.) Cross motions for summary judgment were filed in the underlying action on April 30, 2012, and after the court denied the motions on Sept. 28, 2012, Tilcon settled with Mr. Ronkese for $3.25 million.
At the time of Mr. Ronkese's injury, Tilcon did not own the barge Nicola Lizza. Rather, the barge was held in trust for the benefit of Buchanan Marine, L.P. (Ex. 6 ("Declaration of the Buchanan Trust # 54") to Stern Decl. [Doc. #70-1] (setting forth terms of trust); Ex. 7 ("Bareboat Charter") to Stern Decl. [Doc. # 70-1] (setting forth in Schedule A the list of vessels, including the Nicola Lizza, held in trust and subject to the bareboat charter).)
This trust, the Buchanan Trust # 54, was established by Buchanan Marine, Inc. as grantor and names A.P. Franz Jr. as trustee and Buchanan Marine, L.P. as beneficiary. (Declaration of the Buchanan Trust # 54.) Under a separate bare-boat charter agreement, the trust then licenses the vessels it holds to Buchanan Marine, L.P. and gives Buchanan Marine, L.P. the rights to "man, victual, navigate, operate, supply, fuel, maintain and repair" the vessels, including the Nicola Lizza, while ensuring that the trustee retains full legal title. (See Bareboat Charter, § 8(a)-(b)).
At the time of the underlying accident, through common corporate parentage, Plaintiff Tilcon New York was an affiliate of both the grantor of the trust, Buchanan Marine, Inc., and the beneficiary and bare-boat charterer, Buchanan Marine, L.P., in virtue of the following corporate relations: Plaintiff's parent corporation Tilcon, Inc. wholly owned two subsidiaries, Plaintiff Tilcon New York, Inc., and a sister corporation that is not a party to this action, Tilcon Connecticut, Inc. (Ex. 2 to Stern Decl. ("Toolan 30(b)(6) Tr.") [Doc. # 70-1] at 10:11-13, 11:1-17.) Tilcon Connecticut, Inc. wholly owned Buchanan Marine, Inc., the grantor of the trust and former owner of the vessels in the fleet. (Id. at 11:20-22.) Buchanan Marine, Inc., was a 25% limited partner in Buchanan Marine, L.P., the beneficiary of the trust and the bare-boat charterer. (Id. at 12:20-21.)
The underlying "Protection & Indemnity" ("P&I") policy, Number B215204, was issued by American Home Insurance Company for the period July 20, 2004 to July 20, 2005 to the Named Assureds "Buchanan Marine, LP and/or Northeast Bulk Material Movers, Inc., Richard Jurczak as General Partner, Buchanan Marine, Inc., and Tilcon of NY." (Ex. D., Tab 2 to Toolan Decl., ("American Home Policy") [Doc. # 72-19] at 2-3.)
The underlying P&I policy insured 14 specifically enumerated kinds of risk (including mutiny, plague, and damage to docks or piers) and with regard to personal injury, the policy declared:
Ten endorsements accompanied the policy.
(Id. at 17.)
In addition to this primary policy, Buchanan Marine L.P. contracted with Defendant IINA to provide a commercial marine bumbershoot
(Ex. D, Tab 1 ("Bumbershoot Policy") to Pl.'s 56(a)1 [Doc. # 72-18].)
The policy set forth certain conditions on coverage, including a notice provision that required:
(Id. at 4.) Under an "Assistance and Specification" condition, the policy further specified that IINA "shall have the right and shall be given the opportunity to associate with the Assured or the Assured's Underlying Insurers, or both, in the defense and control of any claim, suit or proceeding" in connection with a claim that could trigger bumbershoot coverage, and required that the "Assured, the Underlying Insurers and Underwriters shall cooperate in all things in the defense of such claim, suit or proceeding." (Id. at 5.)
After Mr. Ronkese filed suit in September 2007, Tilcon gave notice of the lawsuit to American Home "for recordkeeping purposes." (Ex. H to Pl.'s 56(a)1 ("Colella Tr.") at 52-53.) Peter Colella, the insurance broker who arranged for the policy, was the one who instructed Tilcon's lawyer to give notice. He testified that he qualified his instruction — "for recordkeeping purposes" — because "the Jones Act case is a bit of a stretch because [Mr. Ronkese] has been a workers comp claimant, but we should put [the primary insurer] on notice." (Colella Tr. at 53:5-9.) He later testified that he did not "recall putting [the] excess [insurer] on notice so quickly after finding out myself, but I know that at some point in the not too distant future from this point [we] would have had discussions about putting an excess insurer on notice because of the size of this claim." (Id. at 57:1-6.)
Nine months after filing suit, in June 2008, Mr. Ronkese voluntarily dismissed his claims against all defendants except his employer, Tilcon New York. (Def.'s 56(a)1 at ¶ 33; Pl.'s 56(a)2 at ¶ 33.) Inexplicably, in September 2008, Tilcon instructed American Home to close its file even though Tilcon was still a party to this live suit. (Def.'s 56(a)1 ¶¶ 34-35; Pl.'s 56(a)2 ¶¶ 34-35.) Mr. Collella closed his file as well, believing that the lawsuit was over.
On June 20, 2012, American Home sent Tilcon a letter denying some coverage and reserving rights on all coverage, explaining that four of Mr. Ronkese's claims — the non-seaman's claims — were not covered because they arose out of Tilcon's ownership and management of the loading dock and the quarry, not out of ownership of the Nicola Lizza. (Ex. 19 ("Denial of Coverage Letter") to Stern Decl. [Doc. # 70-2] at 4.) Further, American Home reserved its rights to deny coverage on the other counts because Tilcon's direction to `close the file' and its failure to keep American Home notified of the status of the Ronkese action amounted to waiver and forfeiture of its claim for coverage, and its failure to provide prompt notice, as well as its failure to permit American Home to associate with and assist in the defense of the claim likewise undermined its claim. (Id. at 4-8.) Notably, American Home did not issue its reservation of rights with respect to the seaman's claims on the basis that Mr. Ronkese's injury did not fall within the scope of risks insured by a Protection & Indemnity policy, and it did not reserve rights on the basis of Tilcon's non-ownership of the barge.
The New York court denied the cross motions for summary judgment on Sept. 28, 2012, after which a settlement conference was held. The parties' conduct leading up to and at the conference is in dispute: IINA claims that it offered to attempt to settle with Mr. Ronkese if Tilcon agreed to a loan-receipt agreement under which it would reimburse IINA for any settlement if IINA subsequently determined there was no coverage. (Def.'s 56(a)1 Stmt. ¶ 48.) IINA claims that Tilcon rejected this offer and then independently settled with Mr. Ronkese for $3.25 million. (Def.'s 56(a)1 Stmt. ¶¶ 49-50.) Tilcon claims that it settled with Mr. Ronkese after consultation with counsel for the underlying insurance agency and that IINA simply refused to indemnify it after the settlement. (Pl.'s 56(a)1 Stmt. ¶¶ 46, 48-49; Def.'s 56(a)2 Stmt. ¶ 46)
Despite its initial reservation of rights, American Home tendered its liability limit of $1 million under the policy toward the settlement. (See Ex. 25 ("Toolan Letter") to Stern Decl. [Doc. # 70-2]) ("the American Home Assurance Company (`Chartis') tendered the policy limit of the underlying policy on October 11, 2012. . . .") IINA refused coverage under the Bumbershoot policy and notified Tilcon of its denial in early 2014.
The parties cross-move for summary judgment. Summary judgment is appropriate where, "resolv[ing] all ambiguities and draw[ing] all permissible factual inferences in favor of the party against whom summary judgment is sought," Holcomb v. Iona Coll., 521 F.3d 130, 137 (2d Cir. 2008), "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 dispute regarding a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Williams v. Utica Coll. of Syracuse Univ., 453 F.3d 112, 116 (2d Cir. 2006) (quotation marks omitted). "The substantive law governing the case will identify those facts that are material, and `[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.'" Bouboulis v. Transp. Workers Union of Am., 442 F.3d 55, 59 (2d Cir. 2006) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). When considering a motion for summary judgment, the Court may consider depositions, documents, affidavits, interrogatory answers, and other exhibits in the record. Fed. R. Civ. P. 56(c). The same standard applies to cross-motions for summary judgment. See Morales v. Quintel Entm't, Inc., 249 F.3d 115, 121 (2d Cir. 2001). The court must examine the merits of each motion independently and in each case must consider the facts in the light most favorable to the non-moving party. Id. at 121.
The Bumbershoot Policy provides the following coverage:
(Bumbershoot Policy at 2.)
Defendant argues that summary judgment in its favor is appropriate because Mr. Ronkese's injury is not covered by the underlying P&I policy and coverage under subsection (a) of the Bumbershoot policy only extends to those risks covered by the underlying P&I policy. (Def.'s Mem. Supp. Mot. Summ. J. [Doc. # 71] at 8.)
Construction of a contract of insurance presents a question of law for the court. Lexington Ins. Co. v. Lexington Healthcare Grp., Inc., 311 Conn. 29, 37 (2014). "The terms of an insurance policy are to be construed according to the general rules of contract construction. . . . The determinative question is the intent of the parties, that is, what coverage the . . . provisions of the policy. . . ." Liberty Mut. Ins. Co. v. Lone Star Indust., Inc., 290 Conn. 767, 795-96 (2009). That expressed intent, however, is to be found by "examining the contract or policy as a whole" rather than looking to extrinsic evidence. Lexington Ins. Co., 311 Conn. at 58. Where the intent is unclear because a true ambiguity exists, the rule in Connecticut is that the interpretation that "will sustain the claim and cover the loss must, in preference, be adopted." Rydingsword v. Liberty Mut. Ins. Co., 224 Conn. 8, 15 (1992).
When properly incorporated into a policy, endorsements are part of the contract of insurance and "are to be read together to determine the contract actually intended by the parties." Lexington Ins. Co., 311 Conn. at 57. An endorsement is "a writing added or attached to a policy or certificate of insurance which expands or restricts its benefits or excludes certain conditions from coverage." Id. at 55 (citing 2 L. Russ & T. Segalla, Couch on Insurance (3d Ed. 2005) § 18:17, p. 18-24).
Schultz v. Hartford Fire Ins. Co., 213 Conn. 696, 705 (1990) (citing 13A J. Appleman, Insurance Law and Practice § 7537).
The underlying P&I policy insured all "loss and/or damage and/or expense as the Assured shall as owners of the vessel named herein have become liable to pay" "for [among 14 specifically enumerated risks] personal injury to . . . any person." (P&I policy.) The policy further specified that
Defendant asserts that Mr. Ronkese's injury was not the type of risk that is covered by P&I insurance and relies on jurisprudence developed in the Fifth Circuit regarding the interpretation of P&I policies to support its claim. In that line of Fifth Circuit cases, "under terms or language similar to SP-23 the assured must be liable as owner of the insured vessel; liability in any other capacity is irrelevant." St. Paul Fire & Marine Ins. Co. v. Vest Transp. Co., Inc., 666 F.2d 932, 942 (5
In the Fifth Circuit, "as owner" is taken to limit coverage in two ways. First, it restricts the scope of who is insured: operators, charterers and employers are not covered. Second, it restricts the scope of the type of risk insured. In the seminal case of Lanasse v. Travelers Ins. Co., the Fifth Circuit affirmed denial of coverage under a P&I policy where a worker was injured aboard a vessel because a crane operator, working on an adjacent oil rig, negligently lifted a piece of equipment from the deck of the vessel to transfer it onto the rig and accidentally knocked the equipment against the worker. Affirming denial of coverage, the Fifth Circuit noted that
Lanasse v. Travelers Ins. Co., 450 F.2d 580, 584 (5th Cir. 1971).
In St. Paul Fire & Marine, which Defendant urges on the Court, the Fifth Circuit affirmed this principle, reasoning that
St. Paul Ins. Co., 105 F.3d at 654.
Despite this apparent limitation on the types of risk insured, even the Fifth Circuit's conception of "causal operational relation" is capacious: In St. Paul, the cause of the injury for which the claimant sought coverage was a car accident that occurred while four sailors were traveling to the insured ship in order to outfit it for voyage. The trial court concluded, and the Fifth Circuit affirmed, that "although the harm arose out of nonvessel operations-a car accident at least sixty miles away from the vessel-the employees were utilizing transportation provided by [the owner] to effect a crew change and to deliver supplies as ordered by [the owner] in preparation for the vessel's departure." Id.
The Second Circuit has not staked out a definitive interpretive position with respect to the range of risks insured by a P&I policy, but its decisions suggest a historical, more eclectic view of the scope of coverage under P&I policies:
Seaboard Shipping Corp. v. Jocharanne Tugboat Corp., 461 F.2d 500, 503 (2d Cir. 1972). Indeed, the Second Circuit has explicitly distinguished its reading of the standard terms of a P&I policy from the Fifth Circuit's and required more expansive, individualized treatment in instances where the insurer was aware that the insured ran a hybrid business as both ferry transport and rail carrier. N.Y. Cross Harbor R.R. Terminal Corp. v. Atlantic Mut. Ins. Co., 852 F.2d 38, 44 (2d Cir. 1988) (P&I policy covered car hire fees assessed as liquidated damages for breach of rail transport contract despite defendant's argument that this risk did not arise out of plaintiff's status as shipowner).
Under either the "causal operational relation" test of Lanasse or the more eclectic historical approach of the Second Circuit, the injury at issue here is covered by the policy. First, the expansive language of the personal injury clause in the policy, which affords coverage for "personal injury to. . . any person," captures Mr. Ronkese's injuries sustained aboard the Nicola Lizza. Second, the policy explicitly envisions Mr. Ronkese's injury when it provides: "Protection hereunder for . . . personal injury arising in connection with the handling of cargo of the vessel named herein shall commence from the time of receipt by the Assured of the cargo . . . on craft. . . ." Mr. Ronkese was injured while raking the cargo — stone aggregate — into a level surface so that its volume could be properly estimated. Third, the injury was caused by a cable used to maneuver the barge safely during loading. These facts contrast with Lanasse, in which the negligence of a crane operator on a different vessel, with obscured view of the object he was moving, caused the injury. Finally, as noted above, American Home did not reserve rights regarding coverage on the seaman's claims, implicitly conceding that they were of a type covered by its policy. The Court concludes that Mr. Ronkese's injury was of the type of risk covered by the P&I policy.
The emphasis of Defendant's argument against coverage focuses on the second inquiry: whether the P&I policy's limitation of coverage to shipowners means that Tilcon is not covered. Defendant asserts that because "there is no genuine dispute that Tilcon did not own the barge Ronkese was injured upon," "the claim was not a `protection and indemnity risk' involving a vessel owner and no coverage is afforded under the IINA policy." (Def's Mem. Supp. Mot. Summ. J. at 11.) It is undisputed that Tilcon did not own the Nicola Lizza.
Defendant's argument, however, disregards the effects of the fifth endorsement, the Affiliated Companies Clause, on the scope of coverage under the underlying policy. This Endorsement reads:
(American Home Policy at 18.) Plaintiff argues that this clause expands the coverage for each vessel insured under the contract (a total of 255, all held in trust by A.P. Franz. Jr.) to each of the four Assureds. When faced with Plaintiff's reliance on this clause, Defendant replies that the Endorsement only expands the scope of coverage to those affiliates that "have an ownership interest in the vessel to be insured" and no further. (Def.'s Opp'n [Doc. # 75] at 5.)
The Court views Defendant's reading as a misconstruction of the meaning of the word "Assured," the placement of the adverb "also," and the scope of the phrase modified by the clause "be they owners, or bareboat charterers, sub-charterers, or operators. . . ."
The defined term "Assured" includes four entities: Buchanan Marine, L.P., Northeast Bulk Material Movers, Inc., Buchanan Marine, Inc., and Tilcon of NY. As discussed above, the unamended P&I policy does not cover all Assureds equally; an Assured must be a shipowner in order to receive coverage. Defendant argues with some force that Tilcon would be covered for injuries occurring on each of the two vessels it owns, the Ike and the Paige E, but not for any other vessel in the fleet. This argument loses its force, however, in the face of the plain language of the fifth endorsement, which declares that "In respect of the vessel insured hereunder, this policy also covers the Assured and affiliated, subsidiary, interrelated and associated companies and persons. . . ."
In order for the placement of the adverb "also" to make sense, the endorsement must extend coverage in some way. Since each Assured was already covered with respect to the vessels it owned, the most natural reading of the placement of "also" extends coverage for each Assured to the vessels it does not own.
Defendant argues that even if "the Assured" is "also" covered, it is only covered insofar as it is an "owner, bareboat charterer, sub-charterer or operator" and that, if an Assured plays none of these roles, it is not covered.
The phrase "be they owners, or bareboat charterers, sub-charterers, or operators" modifies "affiliated, subsidiary, interrelated and associated companies and persons," but does not modify "Assured." Although the string of adjectival modifications does create potential ambiguity, the most natural reading of the sentence treats the adjectival phrase beginning with "be they" as modifying the string of nouns immediately preceding it, the "affiliated companies." Moreover, as noted above, ambiguities are construed in favor of coverage. Other courts have agreed, construing the "be they" clause to modify only the "affiliated companies" immediately preceding, and not placing any restrictions on the role in which an Assured is covered. C.f. SW Traders, LLC v. United Specialty Ins. Co., No. C-09-778 (MJP), 2009 WL 5215762 (W.D. Wash. Dec. 29, 2009), aff'd 409 Fed. App'x 96.
More importantly, Defendant overlooks the function of the second sentence of the endorsement, the proviso, which limits the ways in which any covered entity can recover: "it (they) shall not be entitled to recover in respect of any liability to which it (they) would not be subject if it (they) were the owner of the vessel and not to a greater extent than an owner would be entitled in such event to recover." This limitation prevents any covered entity from recovering for risks that do not fall within the scope of the insured risks, and it prevents any covered entity from recovering more than the actual shipowner would recover for the same injury. This proviso would not be necessary if the endorsement only expanded coverage to entities with an ownership interest, or if it limited the roles that affiliated companies could play in order to be covered.
Significantly, American Home never reserved rights or denied coverage to Mr. Ronkese on the underlying P&I policy for the reasons now asserted by Defendant, and American Home ultimately tendered its policy limit. Thus, the parties to the P&I contract seem to agree that, whatever shortcomings in Tilcon's notice to American Home, the risk was of the type covered by the policy and Tilcon was a covered entity under the policy. Even if Defendant has raised some metaphysical doubts about whether nor not the language of the contract is unambiguous, those doubts are overcome by the agreement between the parties to the contract that, under the contract, Tilcon was covered and American Home would pay its claim.
The Court concludes that the Affiliated Companies Clause in the fifth endorsement extended coverage to Tilcon with respect to injuries occurring on the Nicole Lizza. Because this risk was covered under the underlying P&I policy, it is a risk that is covered under (a) of the Bumbershoot policy.
Defendant argues that even if Tilcon was covered with respect to risks occurring aboard the Nicola Lizza, IINA is not liable because Tilcon failed to provide notice in accord with the requirements of the Bumbershoot policy. The policy requires that
(Bumbershoot Policy.)
The parties do not dispute that "[t]he test for determining whether notice of occurrence must be given to a particular insurer is whether the circumstances known to the insured at that time would have suggested to a reasonable person the possibility of a claim against that insurer." Ogden Corp. v. Travelers Indem. Co., 924 F.2d 39, 43 (2d Cir. 1991).
Arrowood Indem. Co. v. King, 304 Conn. 179, 199 (2012).
Defendant concedes that "Connecticut law requires that the insurer seeking to avoid coverage due to late notice must first establish it has been materially prejudiced." (Mem. Supp. Mot. Summ. J. at 16); see also Arrowood Indem. Co. at 725-26 (overruling the prior rule of Aetna Casualty & Surety Co. that imposed the burden on the insured and holding that "the insurer bears the burden of proving, by a preponderance of the evidence, that it has been prejudiced by the insured's failure to comply with a notice provision").
The timeline established above shows that Tilcon failed to provide notice "as soon as practicable." Mr. Ronkese was injured in the Fall of 2004. By September 9, 2006, an IME report by Dr. Richard P. DeBenedetto prepared in connection with Mr. Ronkese's workers' compensation claim found that he suffered a neurocognitive disability causally related to his injury and that "Mr. Ronkese is not expected to be able to effectively manage the usual demands of daily living as well as the demands and responsibilities of his former work as a barge trimmer." (Junge Report [Doc. # 72-28] at 4.)
Between September 2006 and December 2007, Mr. Ronkese underwent five IMEs, which counsel for Plaintiff characterized in a 2009 e-mail to Tilcon's claims adjuster, copies of which were sent to two people at Tilcon and one at an affiliate, as each doing more damage to Tilcon's case than the prior one. (Ex. 17 to Stern Decl. ("Ficks email") [Doc. # 70-2].)
Mr. Ronkese filed suit in 2007, definitively placing Tilcon on notice of a claim against it. Although Tilcon may have had some reason to believe Mr. Ronkese was malingering, the 2009 Ficks email, in concert with the pendency of an actual lawsuit, leaves no open question that Tilcon was aware of facts that would suggest to a reasonable person that liability had been incurred and that the bumbershoot policy would be reached. Waiting until 2012 to notify IINA breached its timely notice obligation.
Defendant argues that Plaintiff's delay prejudiced IINA in the following manner: (1) IINA was not given opportunity to "associate in the defense of the Ronkese litigation" or "to file a federal limitation of liability action in favor of vessel owner Buchanan which would have moved the matter to a federal venue" (Def.'s Mem. Supp. Mot. Summ. J. at 16-17); (2) IINA was not given an opportunity to conduct discovery (Id.); and (3) IINA was not given an opportunity to draft or review Tilcon's motion for summary judgment in the underlying action. (Id.) In addition, IINA voices skepticism that it would have pursued the same strategic litigation choices as Tilcon, suggesting that it would have urged Tilcon to appeal the New York court's denial of summary judgment in the underlying action or pushed it to trial and that separate counsel should have been appointed for Tilcon and Buchanan. (Id.)
Tilcon responds that IINA's actual conduct shows that it was not prejudiced. First, even though IINA was notified in May 2012, it failed to review Mr. Ronkese's case file until three months later. (Pl.'s Mem. Supp. at 29-30.) Second, it appointed coverage counsel, and never intended to associate in the defense of the Ronkese action. (Id.) Kristen Swingle, the IINA employee who handled Tilcon's claim,
Tilcon further argues that IINA was not prejudiced because IINA denied coverage for the contract reasons listed above: it believed that the Ronkese action was not a covered P&I risk and it believed that Tilcon had not become legally obligated to pay the claim at issue in the action. (Pl.'s Mem. Supp. Mot. Summ. J. at 32-33.) Tilcon reasons that earlier notification would simply have resulted in an earlier denial of coverage.
There thus remain open factual disputes as to whether and how IINA was prejudiced by Tilcon's late notice. Where there are genuine issues of material fact as to whether delay in notification prejudices an insurer, summary judgment is inappropriate. State Farm Fire & Cas. Co. v. Yoel, No. 13-cv-101 (AWT), 2014 WL 4182614 (D. Conn. Aug. 21, 2014) (denying motion for summary judgment when unclear whether earlier notice would have allowed insurer to develop facts of case). Indeed, although Arrowood overruled Aetna Cas. & Sur. Co. with respect to who bears the burden, it continues to recognize the principle that "a proper balance between the interests of the insurer and the insured requires a factual inquiry into whether, in the circumstances of a particular case, an insurer has been prejudiced by its insured's delay in giving notice of an event triggering insurance coverage." Aetna Cas. & Sur. Co. v. Murphy, 206 Conn. 409, 417-18 (1988), overruled on other grounds by Arrowood, 304 Conn. at 202-03.
IINA asserts as a final defense that Tilcon's late notification precluded IINA's right to participate in the defense. Under the "Assistance and Specification" condition, the policy specified that IINA "shall have the right and shall be given the opportunity to associate with the Assured or the Assured's Underlying Insurers, or both, in the defense and control of any claim, suit or proceeding." IINA claims that Tilcon's voluntary settlement of the claim at a settlement conference over IINA's objection robbed it of that right.
Tilcon relies on the Swingle testimony cited above about IINA's intentions to show that IINA was not robbed of any such chance to associate because it had no intention of participating in the defense of the claim.
As with the question of prejudice arising out of Tilcon's delay in providing notice, the parties here have raised genuine questions of material fact as to whether IINA was prejudiced by its inability to participate in the defense.
For the reasons set forth above, the Court DENIES the parties' cross-motions for summary judgment.
IT IS SO ORDERED.
First, the term "Named Assured" does not repeat in the contract, but is used only once on the declarations page and then abandoned. The contract as a whole refers only to the "Assured" and does not appear to treat the terms "Named Assured" and "Assured" as different. By contrast, the CGL policy that American Home issued to Tilcon explicitly distinguishes between "Assured" and "Named Assured" in its definition section, and it assigns different rights and responsibilities to Assureds and Named Assureds. (See Ex. D to Tab 3 ("CGL Policy") to Toolan Decl. [Doc. # 17-20].) Second, when American Home reviewed the Ronkese claim, it treated Tilcon as an "Assured" and denied coverage on other grounds. (Denial of Coverage Letter, passim.) Third, at oral argument, counsel for Defendant insisted that Tilcon would have been covered as an Assured for the two vessels it owns, the Paige E and the Ike. If, hypothetically, the policy distinguished between "Assured" and "Named Assured," and only covered Assureds, then Tilcon would not be covered because it was merely listed as a Named Assured.
