P. KEVIN CASTEL, District Judge:
This is a declaratory judgment action arising out of a dispute over the scope and notice requirements of an insurance contract between plaintiff the City of New York (the "City") and defendant Lexington Insurance Company ("Lexington"). The City seeks a declaration that Lexington is obligated to provide coverage for a wrongful death action against a City employee arising out of an incident at the West Indian Day Parade in 1996. Lexington argues that no coverage is owed for claims against a City employee because it did not independently receive notice of the claims against the employee. Discovery in this case is closed and the parties have filed cross motions for summary judgment pursuant to Rule 56(c), Fed. R. Civ. P. (See Docket Nos. 14, 17.) The parties submit that there is no dispute as to any issue of material fact and jointly filed a Joint Stipulation of Facts in lieu of Rule 56.1 statements. (See Docket No. 21.) The parties filed an Amended Joint Stipulation of Facts ("Stip.") on November 2, 2009. (See Docket No. 29.)
For the reasons stated below, plaintiff's motion for summary judgment pursuant to Rule 56(c) is granted and defendant's cross-motion is denied. (Docket Nos. 14, 17.)
Plaintiff the City of New York is a municipal corporation organized pursuant to the laws of the State of New York. (Compl. ¶ 2.) Defendant Lexington Insurance Company is a corporation organized under the laws of Delaware with its principal place of business in Massachusetts. (Ans. ¶ 3.)
This Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332 because there is complete diversity of citizenship between the parties and the amount in controversy exceeds $75,000, exclusive of interest and costs.
In or around June 28, 1996, the West Indian American Carnival Association, Inc. ("WIACA") obtained a permit from the City for its annual West Indian Day Parade (the "Parade"), which was to be held on September 2, 1996. (Stip. ¶ 2.) WIACA purchased an insurance policy from Lexington: Commercial General Liability Policy number ERGL 2840405 (the "Policy"). (Id. ¶ 3.) The Policy had an effective date of August 29, 1996 and an expiration date of September 2, 1996. (Id.) The Policy named WIACA as the "Named Insured" and covered liability arising out of the Parade. (Id. ¶¶ 3-4.) An endorsement to the Policy provided coverage to the City as an "Additional Named Insured." (Id. ¶ 5.)
On or about September 2, 1996, Kenneth Thomas died after allegedly being struck by a truck towing a float in the Parade. (Id. ¶ 6.) Thomas's estate later filed a claim against the City and one of its employees, Police Officer John Wannamaker, for wrongful death.
On April 8, 1997, the New York City Law Department forwarded two Notices of Claim related to Thomas's death to WICA. (Id. ¶ 7.) The City's letter to WIACA provided that:
(Id. ¶ 8.)
One notice of claim was filed by the law firm of Jacoby & Meyers on behalf of Thomas's estate (the "Jacoby Notice"). (Id. ¶ 9.) The Jacoby Notice alleged that "The City of New York, its agents, servants, and/or employees was negligent in the management, control, safety and security of the individuals attending this parade...." (Id. ¶ 9; Ex. 3.) The other notice of claim was filed on behalf of Thomas's estate by the law firm of Bernstein & Bernstein (the "Bernstein Notice"). (Stip. ¶ 10.) The Bernstein Notice alleged that
(Id. ¶ 10; Ex. 4.)
On April 10, 1997, WIACA forwarded the City's letter, along with the Jacoby
(Id. ¶ 12; Ex. 6.)
On April 18, 1997, the City sent a letter directly to Lexington, attaching the Jacoby Notice and the Bernstein Notice. (Id. ¶ 14.) The claims adjuster made a "General Note" on April 22, 1997 in reference to the claim:
(Id. ¶ 15; Ex. 9.)
On April 28, 1997, the claims adjuster entered another "General Note" which provided:
(Id. ¶ 16; Ex. 10.)
On May 1, 1997, the claims adjuster sent a letter to the City denying coverage under the Policy because "the City of New York is not named as an additional named Insured under Policy #2840405. Therefore... Lexington Insurance Company can not undertake to defend the City of New York as they are not named as an additional named Insured on our policy." (Id. ¶ 17; Ex. 11.)
On October 21, 1997, the City was served with a complaint in a case captioned: Alphonso Lewis, as Administrator of the Estate of Kenneth Thomas deceased, and as Guardian of his infant children, Kyle Kalvin Thomas and Kenneth Kallil Thomas, Jr., and Vermaneta Lewis, wife of the decedent v. the City of New York and Police Officer "John" (first name not known) Wannamaker (Shield No. believed 4584), Index No. 23759/97, Sup.Ct. Bronx County (the "Lewis Action"). (Id. ¶ 18; Ex. 12.) The complaint named Officer Wannamaker and contained various allegations related to his conduct, including:
(Id. ¶ 19, Ex. 12.) An undated file memo from the claims adjuster states that:
(Id. ¶ 20; Ex. 13.)
In March 1998, after receiving a copy of the Lewis Complaint, the claims adjuster made a General Note in the file:
(Id. ¶ 21, Ex. 14.) On April 2, 1998, the City followed up with a letter to AI which provided in part:
(Id. ¶ 22, Ex. 15.) The answer attached to the April 2, 1998 letter was served on November 5, 1997 and named only the City as a responding defendant. (Id. ¶ 23.) A separate answer was filed by Corporation Counsel on behalf of the City and Officer Wannamaker on February 9, 1998, but was not attached to the April 2, 1998 letter. (Id. ¶ 24, Ex. 16.) Corporation Counsel for the City defended Officer Wannamaker in the Lewis Action. (Id. ¶ 25.)
On April 10, 2008, the claims adjuster made a General Note in the file:
(Id. ¶ 26, Ex. 17.)
On June 15, 1998, Cheryl Beckles of AIGCS wrote a memo to file which stated:
(Id. ¶ 27, Ex. 18 (emphasis added).)
On June 26, 1998, AIGCS sent a letter to the City which provided:
(Id. ¶ 28, Ex. 19.) The parties exchanged correspondence regarding which firm to
Cheryl Beckles of AIGCS wrote a memo to file dated August 25, 1998 which provided in part:
(Id. ¶ 33, Ex. 22.) Following this entry, on September 9, 1998, AIGCS sent a letter to WFF. (Id. ¶ 34, Ex. 23.) The letter stated:
(Id.)
In response, WFF sent a letter to AIGCS dated October 14, 1998 which provided:
(Id. ¶ 35, Ex. 24.) The next day, Cheryl Beckles created an internal memorandum which recognized that the claims against the City might "revolve around hiring the police officer; inadequate training" and that such claims "should not be covered under the policy. Will review policy and address the issue further." (Id. ¶ 36, Ex. 25.)
The Lewis Action progressed and jury selection was set for January 21, 2009, but was adjourned on that date to February 9, 2009. (Id. ¶ 37.)
On January 15, 2009, six days before jury selection was set to begin, the City sent an email to AIGCS which questioned whether Lexington intended to assume the defense of Officer Wannamaker at trial. (Id. ¶ 38, Ex. 26.) The letter states that the City's understanding was that Lexington had "not assumed the defense of [Officer Wannamaker] based on allegations that the officer's conduct was intentional." (Id. Ex. 26.) AIGCS responded by letter dated January 21, 2009. (Id. ¶ 39.) In the January 21, 2009 letter, AIGCS stated that Officer Wannamaker was not an insured on the Policy and was not entitled to any coverage under the terms of the Policy. (Id.) The letter further rejected the request for coverage, noting that:
(Id., Ex. 27.) AIGCS reiterated this position in a letter to the City dated February 10, 2009. (Id. ¶ 40, Ex. 28.)
Subsequently, the parties settled the Lewis Action. (Id. ¶ 41.) As part of the settlement, Lexington paid $150,000 to settle the claims made against the City, and the City paid $150,000 to settle the claims asserted against Officer Wannamaker. (Id.) The City seeks reimbursement for the amount paid to settle the action as well as the costs it incurred in defending Officer Wannamaker. (Id.)
The City claims that Lexington breached the insurance agreement by failing to reimburse the City for sums the City paid on behalf of its employee, Officer Wannamaker, in order to settle the wrongful death claims asserted in the Lewis Action. The City claims that Lexington is responsible for the settlement amount because it falls within the scope of the City's coverage under the Policy as "sums [the City] bec[ame] legally obligated to pay as damages because of `bodily injury.'" (See id. Ex. 1 at 28.) The City further claims that, alternatively, Officer Wannamaker was an insured under the policy by virtue of his employment by the City and that Lexington was responsible to pay for any "sums [Officer Wannamaker] bec[ame] legally obligated to pay as damages because of `bodily injury.'"
Lexington asserts that payments made as a result of the City's obligation to indemnify Officer Wannamaker fall outside of the scope of coverage. Lexington further asserts that Officer Wannamaker's failure to give timely notice of the occurrence and the claims in the underlying action vitiated the insurance contract with respect to his claims.
Summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Rule 56(c). It is the initial burden of a movant on a summary judgment motion to come forward with evidence on each material element of his claim or defense, demonstrating that he is entitled to relief. A fact is material if it "might affect the outcome of the suit under the governing law...." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The evidence on each material element must be sufficient to entitle the movant to relief in its favor as a matter of law. Vt. Teddy Bear Co., Inc. v. 1-800 Beargram Co., 373 F.3d 241, 244 (2d Cir. 2004).
When the moving party has met this initial burden and has asserted facts to demonstrate that the non-moving party's claim cannot be sustained, the opposing party must "set out specific facts showing a genuine issue for trial," and cannot rest "merely on allegations or denials" of the facts asserted by the movant. Rule 56(e)(2), Fed. R. Civ. P. In raising a triable issue of fact, the nonmovant carries only a "limited burden of production," but nevertheless "must `demonstrate more than some metaphysical doubt as to the material facts,' and come forward with `specific facts showing that there is a genuine issue for trial.'" Powell v. Nat'l Bd. of
An issue of fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. The Court must "view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in its favor, and may grant summary judgment only when no reasonable trier of fact could find in favor of the nonmoving party." Allen v. Coughlin, 64 F.3d 77, 79 (2d Cir.1995) (internal quotations and citations omitted); accord Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). In reviewing a motion for summary judgment, the court must scrutinize the record, and grant or deny summary judgment as the record warrants. Rule 56(c). In the absence of any disputed material fact, summary judgment is appropriate. Id.
Mere "conclusory statements, conjecture, or speculation by the party resisting the motion will not defeat summary judgment." Kulak v. City of New York. 88 F.3d 63, 71 (2d Cir.1996) (citing Matsushita, 475 U.S. at 587, 106 S.Ct. 1348); see also Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505 (noting that summary judgment may be granted if evidence is "merely colorable" or "not significantly probative") (citations omitted). "An opposing party's facts must be material and of a substantial nature, not fanciful, frivolous, gauzy, spurious, irrelevant, gossamer inferences, conjectural, speculative, nor merely suspicions." Contemporary Mission, Inc. v. U.S. Postal Serv., 648 F.2d 97, 107 n. 14 (2d Cir.1981).
When cross-motions for summary judgment are filed, "each party's motion must be examined on its own merits, and in each case all reasonable inferences must be drawn against that party whose motion is under consideration." Morales v. Quintel Ent'mt, Inc., 249 F.3d 115, 121 (2d Cir. 2001). Here, the parties submitted a stipulation of facts and agree that there is no disputed issue of material fact; rather, the dispute concerns the scope and interpretation of contractual language, which the parties agree is not ambiguous and may be determined as a matter of law.
As a federal court sitting in diversity, I am bound to apply New York choice of lawrules. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). The parties agree that New York law governs the terms of the insurance contract at issue. (See, e.g., Def. Br. at 3, Pl. Br. at 21.)
The interpretation of unambiguous contractual language is a question of law for the Court. U.S. Fire Ins. Co. v. Gen. Reinsurance Corp., 949 F.2d 569, 571 (2d Cir.1991). "Under the law of New York, `if a policy of insurance is written in such language as to be doubtful or uncertain in its meaning, all ambiguity must be resolved in favor of the policy holder and against the company.'" Lumbermens Mut. Cas. Co. v. Town of Pound Ridge, Westchester Cnty., 362 F.2d 430, 432 (2d Cir.1966).
It is not disputed that Lexington issued a $1 million policy of insurance to WIACA, that the City was an Additional Named Insured under the Policy, and that Officer Wannamaker was covered in his capacity as an employee while acting within the scope of his duties as such. (Stip. ¶ 3, 4, 5, Ex. 1, Def. Br. in Supp. at 3. ("Lexington now concedes for purposes of this motion
The City claims that Lexington is obligated under the terms of the Policy to reimburse the City for all sums paid on behalf of Officer Wannamaker because the City was "legally obligated to pay [the sums] as damages because of `bodily injury'" based on the City's statutory obligation to indemnify its employees for any damages incurred as a result of actions taken within the scope of the employee's employment. See N.Y. Gen. Mun. § 50-K(3). Lexington counters that the amount paid by the City to indemnify its employee was not an amount paid "because of `bodily injury'" but rather was paid in fulfillment of a contractual obligation to indemnify Officer Wannamaker, and it was therefore excluded under the terms of the policy.
The Policy excludes "`bodily injury' for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement." (Id. Ex. 1 at 28.) "This exclusion does not apply to liability for damages (1)[t]hat the insured would have in the absence of the contract or agreement." (Id.)
Under New York law, policy coverage "exclusions are not to be extended by interpretation or implication but are to be accorded a strict narrow construction." Nat'l Union Fire Ins. Co. of Pittsburgh, Penn. v. Ins. Co. of N. Am., 188 A.D.2d 259, 261, 590 N.Y.S.2d 463 (1st Dep't 1992). Also, as explained above, any ambiguity in insurance contracts should be resolved in favor of the policy holder. See Lumbermens, 362 F.2d at 432.
The Policy excludes coverage for liability assumed "in a contract or agreement." In order for plaintiff to recover under the Policy, it must establish that it is legally obligated, apart from the exempted contractually assumed liability, to pay damages as a result of bodily injury. See Weissblum v. Glens Falls Ins. Co., 40 Misc.2d 964, 964, 244 N.Y.S.2d 689 (N.Y.Sup.1963). Where plaintiff can demonstrate that liability to pay the damages does not depend on a written contract, i.e., that the liability arises from another obligation, the liability does not fall within the exclusion. See Lumbermens, 362 F.2d at 434.
The City's obligation to indemnify its employees arises under New York General Municipal Law section 50-k(3), not a contract of indemnification. The statute provides that "[t]he city shall indemnify and save harmless its employees in the amount of any ... settlement of a claim ... provided that the act or omission from which such ... settlement arose occurred while the employee was acting within the scope of his public employment. ..." N.Y. Gen. Mun. Law § 50-k(3) (McKinney 2007). Therefore, the City is required, by statute, to indemnify its employees for all actions
The cases cited by Lexington are inapposite because the City's obligation to pay the settlement amount for damages arising out of bodily injury was not based on a written contract of indemnification. It arose from a statutory obligation, as well as the doctrine of respondeat superior. Therefore, the settlement amount paid on behalf of Officer Wannamaker does not fall within the policy's exclusion for amounts paid pursuant to contractual indemnification.
Other language in the Policy supports the conclusion that it was intended to cover such damages. For example, the Policy also excludes certain categories of "Employer's Liability," but does not exclude liability incurred as a result of actions by an employee. (See Stip. Ex. 1 at 29 (excluding "`Bodily injury' to (1) an employee of the insured ..." but including employees as insureds "for acts within the scope of their employment").)
Lexington does not dispute the fact that the City was "legally obligated" by statute and by virtue of its status as employer under the doctrine of respondeat superior to pay the damages arising from "bodily injury" as a result of Officer Wannamaker's actions. Lexington does not raise any issue of material fact to defeat the City's motion for summary judgment and the City's motion (docket no. 17) is granted.
Lexington filed a motion for summary judgment which seeks a declaration that Officer Wannamaker failed to comply with the notice provisions of the Policy and therefore any claim on his behalf is barred. For the reasons explained above, Lexington was obligated to reimburse the City for settlement fees paid under the Policy and therefore, the issue of Officer Wannamaker's compliance with the notice provisions is moot. However, even if the City's payment on behalf of Officer Wannamaker was not independently covered under the terms of the Policy, the notice the City provided sufficiently complied with the Policy's requirements and Lexington is not entitled to summary judgment. For the reasons more fully explained below, defendant's motion for summary judgment (docket no. 14) is denied.
Compliance with a policy's notification provisions is a condition precedent to the insurer's liability under the policy. See Webster ex rel. Webster v. Mount Vernon Fire Ins. Co., 368 F.3d 209, 214 (2d Cir.2004) (citing Power Auth. v. Westinghouse Elec. Corp., 117 A.D.2d 336, 502 N.Y.S.2d 420 (1st Dep't 1986)). It is undisputed that Officer Wannamaker did not provide independent notice to Lexington of the claims at issue. Instead, the City claims that its notice satisfied the notification provisions on Wannamaker's behalf.
The Policy defines the words "you" and "your" as the "Named Insured shown in the Declarations." (Stip. Ex. 1 at 28.) The parties agree that the City qualified as an additional Named Insured under the policy and that Officer Wannamaker was an insured. (See id. ¶¶ 3, 4, 5, Ex. 1, Def. Br. in Supp. at 3.) Therefore, references to "you" or "your" in the Policy are references to the City.
The Policy conditions coverage on the fulfillment of duties outlined in section IV(2): Duties in the Event of Occurrence, Offense, Claim or Suit. (Id. Ex. 1 at 35.) That section provides:
(Id. Ex. 1 at 35-36.) The parties agree that the City complied with the notice provisions with respect to the claims asserted against the City. (See id. ¶¶ 7, 41.) The question before the Court is whether the City's notice of the occurrence and claims complied with the notice requirements with respect to the claims asserted against Officer Wannamaker.
The Notices forwarded by the City included language referencing the existence of a claim against Officer Wannamaker. (See id. ¶¶ 9-10 (referencing claim against "the City of New York, its agents, servants, and/or employees ..." and negligent acts and omissions of "various city employees, including police officer Wannamaker").) When the Lewis Action was filed, the City forwarded a copy of the complaint to Lexington. (Id. ¶ 22.) The complaint asserted claims against the City and Officer Wannamaker in his capacity as an employee of the City of New York. (Id. ¶ 19, Ex. 12 ¶¶ 11, 15, 20, 22.)
The Policy's notice provisions in sections IV(2)(a) and (b) only required notice from "You," meaning from the City or WIACA. As explained above, it is undisputed that WIACA and the City sent the notice of claim and the complaint to Lexington. (See id. ¶¶ 9-14, 22.) Therefore, the question becomes whether the City's notice and subsequent communications with Lexington were sufficient to satisfy the policy's requirements in section IV(2)(c). Section IV(2)(c) required the City "and any other involved insured" to send Lexington "copies of any demands, notices, summonses, or legal papers received in connection with the claim or suit." Lexington asserts that Wannamaker's failure to independently send copies of all documents violated this provision.
Where a policy provides "that each insured has a duty to comply with the policy's notice requirements," the "notice provided by one insured in accordance with the policy terms will not be imputed
There are, however, situations in which timely notice by one insured may be deemed notice by another insured. "Where two or more insureds are defendants in the same action, notice of the occurrence or of the lawsuit provided by one insured will be deemed notice on behalf of both insureds only where the two parties are united in interest or where there is no adversity between them." Id. It is the burden of the plaintiff to demonstrate that it is united in interest with the insured. Id. (citing Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 508 N.Y.S.2d 923, 501 N.E.2d 572 (1986)).
"Unity of interest is a question of law to be determined from an examination of the nature of plaintiff's claim and the jural relationship existing between the parties." Connell v. Hayden, 83 A.D.2d 30, 44, 443 N.Y.S.2d 383 (2d Dep't 1981). Unity of interest arises where "the interest of the parties in the subject-matter is such that they stand or fall together and that judgment against one will similarly affect the other." Id. at 40, 443 N.Y.S.2d 383 (quoting Prudential Ins. Co. of Am. v. Stone, 270 N.Y. 154, 159, 200 N.E. 679(1936)). "[W]hen because of some legal relationship between the defendants they necessarily have the same defenses to the plaintiff's claim, they will stand or fall together and are therefore united in interest." Id. at 43-45, 443 N.Y.S.2d 383. This includes relationships in which a defendant is "by statute fully, personally, and vicariously liable for the torts of [another]." See id. at 46, 443 N.Y.S.2d 383.
Furthermore, the potential defense that the employee was acting outside the scope of the employment at the time of the action at issue does not defeat the unity of interest between an employer and employee, especially when the defense is not raised. See id. at 48, 443 N.Y.S.2d 383. "Insofar as [Officer Wannamaker] was sued as an employee of [the City], he and [the City] are united in interest." Nat'l Union Fire Ins., 188 A.D.2d at 261, 590 N.Y.S.2d 463.
As explained above, the City was vicariously liable, pursuant to a statutory obligation of indemnification and the doctrine of respondeat superior, for the torts committed by Officer Wannamaker within the scope of his employment. Therefore, because the City's "interests were not adverse to those of [Officer Wannamaker] at the time the summons and complaint were forwarded to [Lexington], the notice provided by [the City]'s forwarding of the summons and complaint sufficed to defeat the carrier's affirmative defense of late notice." N.Y. Tel. Co. v. Travelers Casualty & Sur. Co. of Am., 280 A.D.2d 268, 268, 719 N.Y.S.2d 648 (1st Dep't 2001); see also Rose v. State, 265 A.D.2d 473, 474, 696 N.Y.S.2d 527 (2d Dep't 1999). The defendant's motion for summary judgment is denied.
The plaintiff's motion for summary judgment is granted. (Docket No. 17.) The defendant's cross-motion is denied. (Docket No. 14.) Plaintiff shall submit a proposed judgment within 14 days.
SO ORDERED.
