Andy Warhol Found. for the Visual Arts, Inc. v Philadelphia Indem. Ins. Co.
Annotate this CaseDecided on December 6, 2012
Supreme Court, New York County
The Andy Warhol Foundation for the Visual Arts, Inc., THE ANDY WARHOL ART AUTHENTICATION BOARD, INC., VINCENT FREMONT and VINCENT FREMONT ENTERPRISES, Plaintiffs,
against
Philadelphia Indemnity Insurance Company, Defendant.
650917/2011
O. Peter Sherwood, J.
Defendant, Philadelphia Indemnity Insurance Company ("PIIC") moves pursuant to CPLR 3212 for summary judgment to dismiss the complaint. For the reasons discussed in this Decision and Order, the motion must be DENIED.
BACKGROUND
Plaintiff, The Andy Warhol Foundation for the Visual Arts, Inc. (the "Foundation"), is a non-profit New York corporation whose primary purpose is to advance the visual arts by making grants to arts organizations. The Foundation is also responsible for advancing and protecting the legacy of the late artist, Andy Warhol. Plaintiff The Andy Warhol Art Authentication Board, Inc. (the "Board") is a non-profit New York corporation, whose primary purpose is to review pieces of artwork submitted to it, and determine whether they were created by Andy Warhol (the Foundation and Board are collectively referred to as "Plaintiffs").
From 2002 to 2003, Plaintiffs purchased the following four insurance policies from PII" target="_blank">Bentoria Holdings, Inc. v Travelers Indem. Co., 84 AD3d 1135, 1136 [2d Dept 2011], rev'd on other grounds, ____ NY3d ____ [2012] [internal quotation marks and citations omitted]). Thus, in order for the exclusion to apply, PIIC must meet the heavy burden of proving that the Board's art authentication services constitute "professional services," and that there is no other reasonable interpretation of "professional services" that would exclude art authentication services from its definition (see id.) PIIC cannot carry its burden, at least as to the Professional Service Exclusion in the 2002 D & O Policy. The Exclusion lists specific occupations that involve specialized knowledge, training or skill. Authentication services is not listed. It also lists "the actual rendering of professional services to others, including counseling services, in your capacity as [sic]social service organization." PIIC asserts that the Foundation is a "social service organization". Because the examples of "professional services" listed do not relate in any way to art authentication services, PIIC cannot show that the policies state the exclusion "in clear and unmistakable language" (see id.). As a result, the term "professional services" is at best ambiguous and must "be construed in favor of [Plaintiffs] and against [PIIC]" (see id.) The Professional Services Exclusion does not apply, and summary judgment based on PIIC's interpretation of this endorsement must be denied.
III.The Standstill and Preservation of Rights Agreement
PIIC argues that it is entitled to summary judgment for the independent reason that Plaintiffs failed to comply with conditions precedent to bringing suit pursuant to the Standstill Agreement. The Standstill Agreement provides the following relevant conditions precedent:
"[T]he Warhol Defendants shall not pursue any further payments from PIIC for the Claim under the 2002 D & O Policy and 2003 D & O Policy until after both of the Underlying Litigations have been completely adjudicated, including any Appeals, and the Warhol Defendants have made good faith efforts to obtain reimbursement from the plaintiffs in the Underlying Litigations for all costs and expenses incurred with respect to the Underlying Litigations should the Warhol Defendants prevail in the Underlying Litigations. The parties agree that "good faith efforts" in the context of this agreement means that the Warhol Defendants will undertake those measures that are reasonable given the individual circumstances related to seeking reimbursement from each plaintiff."
PIIC contends that Plaintiffs failed to comply with two conditions precedent: (1) that the Simon and Shaer actions were never "completely adjudicated," and (2) that plaintiffs failed to make "good faith efforts to obtain reimbursement from" Simon and Shaer.
PIIC contends that the term "completely adjudicated" does not include a settlement and that Plaintiffs were "required to obtain a judicial ruling with respect to the [counterclaims] against Simon and Shaer. . . . Here, there was no judicial ruling as to the claims brought by Simon and Shaer; rather, only a stipulated settlement of the two litigations. Thus, there was no adjudication of the underlying actions." PIIC notes that Black's Law Dictionary defines "adjudicated" to mean "to rule upon judicially." A settlement is as much a complete adjudication of a disputed claim as a judgment entered after a trial. [*6]
PIIC also contends that plaintiffs failed to make "good faith efforts to obtain reimbursement from" Simon and Shaer. The Standstill Agreement defines "good faith efforts" as "undertak[ing] those measures that are reasonable given the individual circumstances related to seeking reimbursement from each plaintiff." The steps Plaintiffs took were entirely reasonable under the circumstances. Plaintiffs hired K2 Global to determine whether Simon and Shaer could pay a potential judgment on the counterclaims. Based on a K2 Global determination that Simon and Shaer lacked assets sufficient to satisfy a judgment, plaintiffs settled the case for $0. Pursuing the counterclaims would have led to increased litigation costs with no possibility of recovery from Simon and Shaer. Pursuit of such a course would have been pointless.
IV.The Lanham Act Claims
PIIC argues in the alternative that it should be awarded partial summary judgment on the basis that the Lanham Act claims in the Simon class action are not covered by the D & O policies. The 2002 D & O Policy excludes from coverage any "oral or written publication or material, done by or at the direction of the Insured' with knowledge of its falsity." PIIC argues that since "Simon clearly alleges in his Complaint that the Board and Foundation publicized that Simon's work was not an authentic Warhol despite knowing that such publication was false," Simon's Lanham Act claims fall within this exclusion. The argument must be rejected.
Although PIIC contends that the Lanham Act claims could only be proven "with knowledge of . . . falsity," in deciding the motion to dismiss in the Simon class action, Judge Swain stated that "[i]n order to be actionable under the Lanham Act, a challenged advertisement must be literally false or, though literally true, likely to mislead or confuse customers" (Simon-Whelan v Andy Warhol Found. for the Visual Arts, Inc., 2009 WL 1457177, at *8 [SDNY May 26, 2009], quoting Groden v Random House, Inc., 61 F3d 1045 [2d Cir 1995]). As a result, the class could have recovered without proving that Plaintiffs had knowledge of its falsity. PIIC thus had a duty to defend Plaintiffs, because the allegations in Simon's class action complaint "state[d] a cause of action that [gave] rise to a reasonable possibility of recovery under the policy" (Atlantic Mut. Ins. Co. v Terk Tech. Corp., 309 AD2d 22, 29 [1st Dept 2003]).
Accordingly, it is hereby
ORDERED that defendant's motion for summary judgment is DENIED.
This constitutes the decision and order of the court.
DATED: December 6, 2012E N T E R,
______________________________
O. PETER SHERWOOD
J.S.C.
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