Matter of Sportsfield Specialities Inc. v Twin City Fire Ins. Co.
Annotate this CaseDecided on November 2, 2012
Supreme Court, Delaware County
In the Matter of Sportsfield Specialities, Inc., Plaintiff
against
Twin City Fire Insurance Company and CASTLEPOINT INSURANCE COMPANY, Defendants.
2011-1216
Kevin M Young, Esq., for plaintiff, Sportsfield Specialities, Inc.,
Young, Sommer, Ward, Ritzenberg, Baker & Moore, LLC
Stephen M Lazare, Esq., for defendant Twin City Fire Insurance Company
Lazare, Potter & Giacovas, LLP
Dan D Kohane, Esq., for defendant CastlePoint Insurance Company
Hurwitz & Fine, PC
Carl F. Becker, J.
This matter comes before the Court on plaintiff Sportsfield Specialities, Inc., ("Sportsfield") motion for partial Summary Judgment filed on January 18, 2012 against Defendants Twin City Fire Insurance Company ("Twin City") and CastlePoint Fire Insurance Company ("CastlePoint") and defendant's cross-motions for Summary Judgment against Sportsfield filed on March 7 and March 5, 2012, respectively and Sportsfield's responses filed on March 23, 2012 and the further responses of defendants Twin City and CastlePoint both filed on April 9, 2012.
Background
A. The underlying action
On September 30, 2009, ABT, Inc., a North Carolina corporation, filed a complaint for Declaratory Judgment and Complaint for Damages against Sportsfield and Peter Juszczyk in the General Court of Justice, Superior Court Division, Iredell County, North Carolina.[FN1] Sportsfield removed the case to the United States District Court for the Western District of North Carolina. [FN2] Thereafter, ABT amended the original complaint to allege breach of contract against its former employee, Juszczyk; tortious interference with contract and business relations against Sportsfield; unfair and deceptive trade practices against Sportsfield and Juszczyk; computer trespass against Juszczyk; misappropriation of trade secrets against Sportsfield and Juszczyk; and sought injunctive relief against Sportsfield and Juszczyk. [FN3] This document was filed on November 5, 2009.[FN4] On August 10, 2010, the District Court entered a Memorandum and Order Granting Preliminary Injunction in Favor of Plaintiff ABT.[FN5]
A jury trial was held and on July 28, 2011, a Verdict Form was filed in the District Court which set forth the jury's findings. The jury found for ABT on the following causes of action: a) breach of contract against Juszczyk; b) computer trespass in violation of N.C. Gen. Stat. §14-458 against Juszczyk; c) tortious interference with contract by Sportsfield; d) unfair and deceptive trade practices in violation of N.C. Gen. Stat. §75-1.1 against both Sportsfield and Juszczyk; and misappropriation of trade secrets in violation of N.C. Gen. Stat. §66-152, et seq. against Sportsfield and Juszczyk. The jury found that the total damages sustained by ABT, Inc. from Sportsfield's actions was $1,677,183.[FN6] It also found that the damages sustained by ABT, Inc. as a result of the actions of both Sportsfield and Juszczyk was $1,863,537. The verdict sheet has a notation by the judge that this latter amount was reduced to $46,588.50 with consent of all parties.[FN7] After the jury verdict was announced, counsel for ABT made an oral motion for the Unfair and Deceptive Trade Practices Act (UDPTA") award to be trebled pursuant to NC Gen. Stat. §75-16. In an order filed August 4, 2011, the District Court granted this motion and trebled the damages awards assessed to Sportsfield ($559,061) and Juszczyk ($46,588.50) for violating the [*2]UDPTA.[FN8] On December 21, 2011, the District Court entered judgments in favor of ABT and against Sportsfield ($2,795,305) Juszczyk ($279,531) and jointly and severally against Sportsfield and Juszczyk ($139,765.50).[FN9]
On January 18, 2012, Sportsfield filed a Notice of Appeal to the United States Court of Appeals for the Fourth Circuit from the order entered on December 21, 2011.[FN10] On January 25, 2012, ABT and Sportsfield submitted a Joint Notice of Satisfaction of Judgment to the District Court.[FN11]
B. Insurance
Twin City issued Commercial General Liability Policy no. 01 CES OF0469 to Sportsfield effective July 1, 2009 to July 1, 2010 ("Twin City policy" or "primary policy") through its agent/broker Harding Brooks Associates, LLC ("Harding") of Vestal, NY.[FN12] On November 6, 2009, an employee of Harding faxed a "General Liability Notice of Occurrence/Form" to Claims Dept. - Hartford [FN13] . The cover letter states that it is accompanied by a letter from the lawyer for the above insured. Actually, the letter is from counsel for ABT, Inc., and the fax also included a copy of the state court complaint initially filed by ABT in September of 2009 and a copy of a Noncompetition Agreement between ABT, Inc and Peter Juszczyk.[FN14] On February 8, 2010, Speciality Risk Services wrote to Sportsfield, on behalf of Twin City, denying an obligation to defend or indemnify Sportsfield for the claims made or damages alleged in the complaint. [FN15] It should be noted that the Speciality Services letter refers to the wrong dates of coverage, i.e., July 1, 2008 to July 1, 2009 rather than July 1, 2009 to July 1, 2010, which dates are not in dispute by the parties to this action. On August 17, 2011, counsel for Sportsfield wrote to Twin City seeking reimbursement of Sportsfield's defense costs and indemnification up to the limits of the policy.[FN16] On October 14, 2011, counsel for Twin City sent a letter to counsel for Sportsfield which set forth in detail its reasons for declining coverage.[FN17]
CastlePoint Insurance Company issued a commercial umbrella policy to Burton F. Clark, Inc., effective July 1, 2009 to July 1, 2010, through Harding. An endorsement, form no. TG CU 00 08 added Sportsfield as an additional insured.[FN18]
On August 18, 2011, counsel for Sportsfield wrote to CastlePoint and demanded that CastlePoint reimburse its past defense costs and pay all continuing costs going forward as well as indemnification for any judgment awarded for the conduct alleged in the complaint.[FN19] In a letter dated September 11, 2011, CastlePoint denied coverage for the incident, claim and lawsuit.[FN20]
C. The instant litigation
On November 3, 2011, Sportsfield filed an action in Delaware County Supreme Court against Twin City and CastlePoint which alleges the following causes of action:
1) against Twin City for breach of its duty to defend under the primary policy;
2) against Twin City for breach of its duty to indemnify under the primary policy;
3) against Twin City for a declaratory judgment; declaring the respective rights of Sportsfield and Twin City;
4) against Twin City for a declaratory judgment that its disclaimer prejudiced Sportsfield with regard to the CastlePoint umbrella policy;
5) against CastlePoint for breach of its duty to defend and indemnify under the umbrella policy and
6) against CastlePoint for a declaratory judgment that CastlePoint has breached its defense and/or indemnity obligations under the umbrella policy.
Twin City Insurance filed an answer dated January 13, 2012 responding to the six causes of action and offered eighteen defenses.
CastlePoint Insurance Company filed an answer with eight affirmative defenses dated January 4, 2012.
On January 18, 2012, Sportsfield filed a motion seeking partial summary judgment on its first, third, fifth and sixth causes of action.
CastlePoint filed an affidavit and memorandum of law in opposition to plaintiff's motion for summary judgment and in support of it's own cross-motion on March 5, 2012.
On March 7, 2012, Twin City filed a notice of cross-motion, affidavit and memorandum of law in support of its cross motion for summary judgment and in opposition to plaintiff's motion for partial summary judgment.
Sportsfield filed an affidavit and memorandum of law in support of its opposition to Twin City's cross-motion for summary judgment and reply to Twin City's opposition to Sportsfield's own motion for partial summary judgment on March 23, 2012. On the same date, Sportsfield filed a memorandum of law in opposition to CastlePoint's cross-motion for summary judgment and in reply to CastlePoint's opposition to Sportsfield's [*3]own motion for partial summary judgment.
Twin City and CastlePoint each filed memoranda of law in further support of their own cross-motions and in opposition to plaintiff's motion for partial summary judgment on April 9, 2012.
Legal Standard
A. The Legal Standard for Summary Judgment
Under NY CPLR Rule 3212, a court shall grant a motion for summary judgment if, upon all the papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party. The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851, 853, 487 NYS2d 316, 317 (1985). Summary judgment is a drastic remedy and should not be granted where there is any doubt as to the existence of a triable issue. Moskowitz v. Garlock, 23 AD2d 943, 944, 259 N.Y.S.2d 1003, 1004 (1965). To grant summary judgment it must clearly appear that no material and triable issue of fact is presented, and summary judgment should not be granted where there is any doubt as to the existence of fact issues. Sillman v. Twentieth Century-Fox Film Corp., 3 NY2d 395, 404, 165 NYS2d 498, 505 (1957) B.Duty to Defend
Insurer's duty to defend is not contingent on insurer's duty to indemnify should insured be found liable, nor is it material that complaint against insured asserts additional claims which fall outside policy's general coverage or within its exclusory provisions, but duty to defend rests solely on whether complaint alleges any facts or grounds which bring action within protection purchased. Seaboard Sur. Co. v. Gillette Co., 64 NY2d 304, 310, 486 NYS2d 873, 876 (1984). When the "four corners of the complaint" contain facts that suggest a reasonable probability of coverage, the duty to defend is triggered.Fitzpatrick v American Honda Motor Co, 78 NY2d 61, 65, 571 NYS2d 672, 673 (1991). Sportsfield's motion seeks, among other things, partial summary judgment against Twin City for breach of its duty to defend and against CastlePoint for breach of the duty to defend and the duty to indemnify.
C.Insurance Policy Interpretation
The principles to be used in construing insurance contracts are the same as those used in construing other types of contracts. Johnson v Travelers, 269 NY 401, 407, 199 NE 637 (1936).A contract of insurance is no different from any other contract and must be construed in a fair and reasonable manner, having regard to the risk and subject matter of the policy, and special rules such as liberal construction in favor of the insured and against the insurer who drew the contract apply. New York Cent. Mut. Fire Ins. Co. v. Ward, 38 AD3d 898, 833 N.Y.S.2d 182 (2d Dept 2007).
Insurance contract language is unambiguous if it has a definite and precise meaning, unattended by danger of misconception in the purport of the contract itself, and concerning which there is no reasonable basis for a difference of opinion, whereas contract language is ambiguous where it is capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of [*4]the entire integrated agreement. Shutts v. First Unum Life Ins. Co., 310 F. Supp. 2d 489 (N.D. NY 2004).
Analysis
A.The Twin City Policy (coverage & exclusions)
The Twin City policy (no. 01 CES OF0469), in effect during the period July 1, 2009 to July 1, 2010 [FN21] , states in its insuring clause it shall cover "sums that the insured shall become legally obligated to pay as damages because of bodily injury,' property damage,' or personal or advertising injury' to which this policy applies..." caused by an "offense..." [Twin City policy form no. GN 00 40 12 (ed. 12/98) page 1][FN22] . The policy states that Twin City has "no duty to defend...any suit' seeking damages for any injury or damage to which this insurance does not apply." [Id. page 2]. The policy defines "personal and advertising injury" to include "[o]ral, written or electronic publication of material that violates a person's right of privacy" [Twin City policy form no. GN 25 29 14 (ED.8/01), page 2].
The Twin City policy excludes coverage for "personal and advertising injury" "(1) arising out of an offense' committed by, at the direction or with the consent or acquiescence of the insured with the expectation of inflicting personal and advertising injury,'...(7) [a]rising out of any breach of contract;...[and] (12) [a]rising out of any violation of any intellectual property rights, such as ...trade secret..." [Id. page.1].
Sportsfield's motion for partial summary judgment seeks a determination that the Twin City policy provides coverage for plaintiff's claim.An insurer's duty to defend rests solely on whether the complaint in the underlying action contains any allegations that arguably or potentially bring the action within the protection purchased. Avondale Indus., Inc. v. Travelers Indem. Co., 887 F.2d 1200, 1204 (2d Cir. 1989) quoting Technicon Electronics Corp. V American Home Assurance Company, et al., 74 NY2d at 73, 544 N.Y.S.2d 531, (1989). So long as the claims alleged against the insured rationally may be said to fall within the policy coverage, the insurer must come forward and defend. A liability insurer has a duty to defend its insured if the pleadings allege a covered occurrence. Fitzpatrick v American Honda Motor Co., 78 NY2d 61, 62, 571 NYS2d 672 (1991).
Here, allegations of the complaint in the underlying action are that Sportsfield and a former employee of ABT (Juszczyk) had engaged in tortious interference with the contract between the employee and ABT; that Sportsfield had engaged in unfair and deceptive trade practices and misappropriated trade secrets of ABT. Sportsfield's primary argument in support of coverage is that these allegations constitute a violation of a "person's right to privacy" and as such are a covered "personal injury" offense under the Twin City policy. Sportsfield asserts that the term "person" as used in the Twin City policy cannot be narrowly construed to mean "individual" so that ABT, a corporation, has a right of privacy concerning its business information. Plaintiff further [*5]argues that the policy uses "person" as a catchall term which includes individuals, corporations, partnerships and joint ventures, whereas "organization" is used to encompass other groups or associations of individuals. Plaintiff also argues that the term is ambiguous and thus should be broadly interpreted to afford coverage.
Defendant Twin City argues that the violation of a right of privacy does not apply to a corporate entity like ABT because the right of privacy in the contract refers to an individual's (not a corporation's) right to be left alone, and several exclusions (breach of contract, trade secret and intentional acts) apply. The Court has reviewed the memoranda of law provided by plaintiff and defendant and finds that while Twin City's arguments are supported by law, Sportsfield's are not
1. Is there coverage?In 47 Mamaroneck Ave. Corp. v. Hartford Fire Ins. Co., 50 AD3d 952, 954, 857 NYS2d 610, 611 (2nd Dept 2008)[FN23], the plaintiff sought to recover from its insurance carrier the costs of defending an underlying tort action. The plaintiff argued the underlying allegations of wrongful eviction and/or wrongful entry were covered under the "personal and advertising injury" provision of the policy for claims that the insured committed various offenses including the "wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor." do not constitute an invasion of privacy and there is no coverage under the Twin City policy.
2. Is a person a corporation?
Sportsfield's additional arguments which assert that the definition of "person" in the Twin City policy cannot be defined narrowly to mean individual and that corporations have privacy [*6]interests; that the definition of "person" is ambiguous and should be construed broadly in favor of plaintiff are insufficiently supported by law.
The Twin City policy distinguishes between "person" and "organization" in five instances [FN25] . If an agreement on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity. White v. Continental Cas. Co., 9 NY3d 264, 267, 848 NYS2d 603 (2007). The Court finds the Twin City policy use of the term "person" is reasonably understood to refer to an individual and not a corporate entity. While these terms are not specifically defined, usage in each instance indicates a known distinction of these entities and unlike Plaintiff's strained and complicated arguments, is easily understood.
3. The underlying claim does not involve a "right of privacy"
Twin City argues, and research determined that it is still correct law, that "[n]ot one case has ever held that trade secret misappropriation falls within the covered offense of oral or written publication of material that violates a person's right of privacy." Winklevoss Consultants v. Federal Ins. Co., 991 F. Supp. 1024 (E.D.Ill. 1998). Plaintiff responds that, at a minimum, the phrase "right of privacy" is ambiguous and should be construed in favor of Plaintiff to favor any claims arising from the disclosure or publication of confidential or private information. In Lenscrafters, Inc., v Liberty Mutual Fire Insurance Company, 2005 WL 146896, (N.D.CA. 2005), the court, applying California law, focused its analysis primarily on what constitutes "publication" and is thus distinguishable. The plaintiff's argument that the policy should be interpreted in accordance with the reasonable expectations of its executives, as ordinary businessmen, fails because plaintiff's executives, in addition to being ordinary businessmen, are interested parties.
In conclusion, the Court cannot find sufficient legal support for plaintiff's claim that allegations contained in the underlying action are analogous to a claim of a violation of a right of privacy which would support a finding that Twin City is obligated to defend plaintiff. None of the allegations fall within the risk covered by the policy. Ruder & Finn Inc., v. Seaboard Sur. Co., 52 NY2d 663, 439 NYS2d 858 (1981).
4.Exclusions
Since an insurer must conclusively establish the absence of any potential for coverage in order to prevail on the duty to defend issue, the court must address the exclusions in the Twin City policy. To negate coverage under an exclusion, an insurer must establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation and applies in the particular case. Hotel des Artistes, Inc., v General Acc Ins Co of America, 9 AD3d 181, 189, 775 NYS2d 262, 268 (1st Dept 2004). If one exclusion applies in an insurance policy, there can be no coverage, since no one exclusion can be regarded as inconsistent with another. Monteleone v Crow Const. Co., 242 AD2d 135, 673 NYS2d 408 (1st Dept 1998).
Twin City argues that coverage for the underlying action is excluded because of the policy's breach of contract exclusion; the trade secrets exclusion and the intentional acts exclusion. Plaintiff argues, for various reasons, that the exclusions do not apply to [*7]the underlying claims.The Twin City policy excludes coverage for "personal and advertising injury" "(1) arising out of an offense' committed by, at the direction or with the consent or acquiescence of the insured with the expectation of inflicting personal and advertising injury,'...(7) [a]rising out of any breach of contract;...[and] (12) [a]rising out of any violation of any intellectual property rights, such as ...trade secret..."[FN26]
The ABT complaint, read as a whole, alleges that plaintiff hired its former employee, who was bound by certain non-compete and confidentiality contracts, and obtained ABT's proprietary information from this employee to compete against ABT. Specifically, it alleges tortious interference with contract and unfair and deceptive trade practices against Sportsfield.
In Int'l Chem Corp. v. Nautilus Ins Co., 2011 US Dist Lexis 15037 (W.D.NY 2011), the court, applying NY law, found that in determining whether a policy exclusion applies, the facts alleged in the complaint, rather than the conclusory assertions found therein, are controlling. The defendant insurer, Twin City, argues that no claim would exist but for the alleged intentional conduct of the plaintiff insured and this court is constrained to agree.
Before an insurance company is permitted to avoid policy coverage, it must satisfy the burden which it bears of establishing that the exclusions or exemptions apply in the particular case, and that they are subject to no other reasonable interpretation' " Seaboard Sur. Co. v. Gillette Co., 64 NY2d 304, 311, 486 NYS2d 873, (1984).
The Court also finds that given that the duty to defend is broader than the duty to indemnify; Twin City has no duty to defend; it also has no duty to indemnify Sportsfield in the underlying action. Technicon Elec Corp., v Am Home Assur. Co., 74 NY2d 66, 73, 544 NYS2d 531 (1989).
BThe CastlePoint policy
CastlePoint is Sportsfield's commercial umbrella carrier under policy no. CXG28—0411, during the coverage period July 1, 2009 through July 1, 2010. CastlePoint's coverage is divided into Coverage A and Coverage B. Coverage A provides that:
"We will pay, on behalf of the insured, sums in excess of the amount payable under the terms of any Underlying Insurance as stated in the Schedule of Underlying Insurance, that the Insured becomes legally obligated to pay as damages because of injury or damage to which this insurance applies." [Form TG CU 31 11 (7/05), page 1].
The Underlying Insurance is identified in the Schedule of Underlying Insurance as the Twin City policy. Coverage A does not apply unless the Twin City policy applies or would apply but for the exhaustion of its Limits of Liability. Coverage A incorporates all of the conditions and exclusions set forth in the Twin City policy:
"This insurance is subject to the same terms, conditions, agreements, exclusions and definitions as the Underlying Insurance except as otherwise provided in this policy; provided, however, that in no event will this insurance apply unless the Underlying Insurance applies or would apply but for the exhaustion of its applicable Limits of Liability." [Id.]
Coverage B provides umbrella coverage over a retained limit. It applies to losses in excess of the $10,000 retained limit that are not insured under Coverage A. There are terms and conditions specific to Coverage B which are separate from the Twin City Policy as follows:
"B. Coverage B - Umbrella Occurrence Based Liability over Retained Limit.
We will pay, on behalf of the insured, damages with respect to liability for loss in excess of the Retained Limit as specified in Item 4(d) of the Declarations or the amount payable by any other Insurance, whichever is greater, up to the applicable Limits of Insurance shown in the Declarations when liability is imposed on the insured by law or when liability is assumed by the insured under an insured contract because of: 1. bodily injury or property damage which occurs during this Policy Period and is cause by an occurrence; and2. personal or advertising injury to which this coverage applies, caused by an occurrence committed during the Policy Period.
Coverage B will NOT apply to any loss for which insurance is afforded under Coverage A or which arises out of subjects of insurance or exposures to loss for which Underlying Policies are required to be maintained under Schedule V - CONDITIONS, I. MAINTENANCE OF SCHEDULED UNDERLYING INSURANCE." [Id. Page 2].
On page 25, the CastlePoint policy defines "personal injury" as:
One or more of the following offenses:
a. false arrest, false imprisonment, wrongful detention or malicious prosecution;
b. libel, slander, defamation of character, or oral or written publication of
material that violates a person's right of privacy, unless arising out of advertising activities;
c. wrongful eviction, wrongful entry into or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of the owner, landlord or lessor, or by a person claiming to be acting on behalf of the owner landlord or lessor."
Page 16 provides, "Duties In The Event Of Occurrence, Claim Or Suit
1. You MUST see to it that we and your Scheduled Underlying Insurers:
a. are notified as soon as reasonably possible of any occurrence which may reasonably be believed to result in a claim involving this policy;
b. receive notice of the claim or suit as soon as reasonably possible;...
Notice of an occurrence is not notice of a claim.
Coverage A does not apply because the Twin City policy does not provide coverage.
Coverage B does not provide coverage because the matter does not involve a claim for bodily injury, property damage, personal injury or advertising injury, caused by an occurrence; additionally, notice was not given to the insurer as soon as reasonably possible and Sportsfield also breached the policy provisions by retaining their own counsel, making voluntary payments and assuming obligations and incurring expenses without the insurer's prior consent.
1. Coverage under the terms of the policy.
Sportsfield makes the same argument with regard to the CastlePoint policy as with the Twin City policy; that the use and disclosure of ABT proprietary sales information, lists, price quotes, is a violation of ABT's right of privacy. The Sportsfield argument is strained and not supported by relevant law. The CastlePoint policy language differentiates between "person" and "organization" and purposefully distinguishes between the two words. The nearest controlling authority with regard to the definition of "person" in this context is 47 Mamaroneck Ave. Corp. v. Hartford Fire Ins. Co., 50 AD23d 952, 954, 857 NYS2d 610, 611 (2nd Dept 2008). CastlePoint argues, correctly, that New York does not recognize a right of privacy on behalf of a corporation. Civil Rights Law §51, Jaggard v Macy & Co., 176 Misc 88, 26 NYS2d 829 (Sup Ct NY Co.1941), University of Notre Dame Du Lac v. Twentieth Century-Fox Film Corp., 22 AD2d 452, 456, 256 NYS2d 301, 305 (1st Dept 1965). Since ABT is not a natural person, but a corporate entity, injuries plaintiff inflicted upon it are not violative of a person's right to privacy.
Likewise, the term "publication" means "the act of declaring or announcing to the public" (Blacks Law Dictionary, 7th edition). There is no allegation in the underlying complaint that either Sportsfield or its employees disseminated the ABT information to the public.
Finally, trade secret misappropriation, the basis of the claims against Sportsfield, does not constitute a violation of a right of privacy. As set forth above with regard to Twin City, a federal court sitting in Illinois held that, "Not one case has ever held that trade secret misappropriation falls within the covered offense oral or written publication of material that violates a person's right of privacy.'" Winklevoss Consultants, Inc., v. Federal Ins. Co., 991 F.Supp 1024, 1040 (ND Il 1998). This is still the case.
In Heritage Mutual Ins. Co., v Advanced Polymer Technology, 97 FSupp2d 913, 934, (SD IN 2000) in the court found that trade secret misrepresentation did not constitute "oral or written publication of material that violates a person's right of privacy." The court noted that the underlying allegations "never expressly or implicitly refer to a violation of a right of privacy;" "not one case has ever held that trade secret misappropriation falls within [this] covered offense; and "The policy distinguishes between person and organization in at least two different locations." In two additional cases, Engineering Technology, Ltd. v. Aetna Casualty & Surety Co., 1991 US App LEXIS 30636,*5 (6th Cir 1991) and Tri-Clover, Inc. V. DSO Sanitary Supply Co., 2000 US Dist LEXIS 9981*29 (ED Wis 2000], the courts refused to extend the right of privacy to trade secret misappropriation. As noted above, courts that have addressed the subject have refused to conflate trade secret misappropriation with a violation of a right of privacy as Sportsfield asked this Court to do.
A contract is unambiguous if the "language it uses has a definite and precise meaning, unattended by danger of misconception in the purport of the agreement itself, and concerning which there is no reasonable basis for a difference of opinion." White v. Continental Cas. Co., 9 NY3d at 267, 848 N.Y.S.2d 603 (2007). It is for the insured to establish coverage, not the insurer. Consol. Edison Co of NY v. Allstate Ins. Co., 98 NY2d 208, 218 (2002). The Court finds that Sportsfield is unable to prove coverage or that the allegations in the underlying complaint trigger CastlePoint's duty to defend.
2. NoticeWith regard to the notice provisions of the policy: Sportsfield argues that timely notification of the underlying action was made to CastlePoint; CastlePoint cannot defeat coverage based on late notice; Castlepoint cannot establish that it was prejudiced and any delay should be excused based on its reasonable belief of non-coverage and belief that the underlying action would not result in an excess judgment that would trigger the Umbrella policy coverage.
CastlePoint argues with regard to notice that Sportsfield breached a condition precedent to coverage by failing to provide notice to CastlePoint as soon as reasonably possible.
While the date that Sportsfield was served with the ABT state complaint is not found in the motion papers, it is undisputed that on November 6, 2009, an employee of Harding faxed a copy of the ABT state complaint and a letter from counsel for ABT to Twin City in Hartford with a document entitled "Acord General Liability Notice of Occurrence/Claim." It is also undisputed that CastlePoint first became aware of the underlying complaint on August 15, 2011 when Harding submitted an "Acord General Liability Notice of Occurrence/Claim" to WHGreene & Assoc, Inc., ("WHGreene") who emailed it to the claims department at CastlePoint. After a claims representative of CastlePoint attempted to contact counsel for Sportsfield, CastlePoint received a letter from counsel for Sportsfield August 19, 2011 which demanded that CastlePoint pay Sportsfield's past defense costs and all continuing defense costs going forward and demanded that CastlePoint indemnify it for any judgment awarded. In a letter dated September 13, 2011, CastlePoint denied coverage for the incident, claim and lawsuit brought by ABT.
A prompt notice requirement "protects the carrier against fraud or collusion; gives the carrier an opportunity to investigate the claims while evidence is fresh; allows the carrier to make an early estimate of potential exposure and establish adequate reserves and gives the carrier the opportunity to exercise early control of claims, which aids settlement." Argo Corp. v. Greater NY Mutual Ins Co., 4 NY3d 332, 339, 794 NYS2d 704, 706 (2005); Security Mut. Ins. Co. v. Acker-Fitzsimmons Corp. 31 NY2d 436, 340 NYS2d 902 (1972).
With regard to notice to an umbrella carrier, the focus is on when the insured could reasonably have known that the claim might exhaust the primary coverage and trigger the excess coverage and whether a delay was reasonable under the circumstances. Reynolds Metal Co. v. Aetna Casualty & Surety Co., 259 AD2d 195, 696 NYS2d 563 (3rd Dept 1999). When Twin City disclaimed coverage on Sportsfield's primary policy in February 2010, Sportsfield had no other possibility of insurance coverage except the CastlePoint umbrella policy. Sportsfield acknowledges that it did not notify CastlePoint about the incident or underlying claim prior to the verdict.
While the traditional rule in New York is that an insurer is not required to prove that it was prejudiced by an insured's untimely notice, for policies issued after January 17, 2009, which includes the CastlePoint policy, that rule changed. Insurance Law §3420(a)(5) now states that failure to provide notice within the time described shall not invalidate any claim unless the failure to provide timely notice has prejudiced the insurer. The statute further provides in paragraph ( c)(2)(b), "...an irrebuttable presumption of prejudice shall apply, if prior to notice, the insured's liability has been determined by a court of competent jurisdiction or by binding arbitration; or if the insured has resolved the claim or suit by settlement or other compromise."[*8]Sportsfield had a verdict returned against it on July 28, 2011 and notified CastlePoint about three weeks later, on August 15, 2011. The insured's liability was determined at this point. Thus, CastlePoint has shown that there is an irrebuttable presumption of prejudice if notice is provided after liability has been established.
The Court has considered Sportsfield's remaining arguments and found them to be without merit.
In conclusion, the insured has failed to establish coverage and the insurer has proven that an exclusion in the policy applies to defeat coverage. Consolidated Edison Co. of NY, Inc. V. Allstate Ins. Co., 98 NY2d 208, 218, 746 NYS2d 622, 625 (2002).
It is therefore
ORDERED, that the Twin City cross-motion to dismiss plaintiff Sportsfield's complaint is granted; and it is further
ORDERED, that CastlePoint's cross-motion to dismiss plaintiff Sportsfield's complaint is granted: and it is further
ORDERED, that Sportsfield's motion for partial summary judgment is denied; and it is further
ORDERED, that Twin City has no duty to defend or indemnify Sportsfield Specialities, Inc in the matter of ABT, Inc v Peter Juszczyk and Sportsfield Specialities, Inc., Civil Action No.: 5:09-cv-0019 (W.D.N.C.), and it is further
ORDERED, that CastlePoint has no duty to defend or indemnify Sportsfield Specialities, Inc in the matter of ABT, Inc v Peter Juszczyk and Sportsfield Specialities, Inc., Civil Action No.: 5:09-cv-0019 (W.D.N.C.).
Dated: November 2, 2012
____________________________________
HON. CARL F. BECKER
ACTING SUPREME COURT JUSTICE Footnotes
Footnote 1:Exhibit B, Twin City Cross motion filed 3/7/12
Footnote 2:Id.
Footnote 3:Id.
Footnote 4:ABT, Inc v Peter Juszczyk and Sportsfield Specialities, Inc., Civil Action No 5:09-cv-00119 (W.D.N.C.).
Footnote 5:Ex. E, Twin City Cross-motion filed 3/7/12
Footnote 6:Ex. F, Twin City Cross-motion filed 3/7/12; Ex. B, Sportsfield Motion, filed 1/18/12.
Footnote 7:Id. The Twin City Cross-motion also includes verdict forms with regard to ABT's claims against Peter Juszczyk at Exhibit F.
Footnote 8:Ex. G, Twin City Cross-motion filed 3/7/12
Footnote 9:Ex. 4, Sportsfield motion for partial Summary Judgment, filed 1/18/12
Footnote 10:Ex. I, Twin City Cross-motion, filed 3/7/12
Footnote 11:Id. Ex. J
Footnote 12:Ex. A, W. Oliver Aff., Sportsfield Motion 1/18/12
Footnote 13:Twin City Insurance Company is located at One Hartford Plaza, Hartford, CT
Footnote 14:Id. Ex. B.
Footnote 15:Ex. C, Sportsfield motion for partial Summary Judgment, 1/18/12.
Footnote 16:Id. Ex. E
Footnote 17:Id. Ex. G.
Footnote 18:Id. Ex. D
Footnote 19:Id. Ex. 5.
Footnote 20:Young Aff. Ex 6
Footnote 21:Ex. A-1 of defendant Twin City's plaintiff's Cross-motion for Summary Judgment
Footnote 22:The Twin City policy states that words and phrases that appear in quotation marks are defined in Section V of the policy.
Footnote 23:The court held, "Although the term "person" is not defined in the policy, the definition of "personal and advertising injury" in the policy distinguishes between "person" and "organization"...Since [claimant corporation was] not a natural person, [it was] not covered by [the] definition of "personal and advertising injury". Id. at 954, 611
This case presents a factual situation which is nearest that can be found in New York case law to the scenario presented by the Sportsfield underlying complaint and the interpretation of the word "person" in the "personal and advertising injury" section in a policy with language similar to that of the Twin City policy and the primary question before the Court, i.e., the existence of coverage under the Twin City policy. Neither the New York Court of Appeals nor the Appellate Division, Third Department has addressed whether a "person's right of privacy" inclusion in an insurance policy shall be interpreted to include a corporation. Until either court holds otherwise, this Court is bound by the ruling in 47 Mamaroneck Ave. Corp. v. Hartford Fire Ins. Co., 50 AD23d 952, 954, 857 NYS2d 610, 611 (2nd Dept 2008). [See Mountain View Coach Lines v. Storms, 102 AD2d 663, 476 NYS2d 918 (2nd Dept. 1984)]. The facts of the underlying complaint [FN24]
The complaint referred to throughout is the state court complaint sent to Twin City by Harding on November 6, 2009 and upon which Twin City's disclaimer of coverage dated February 8, 2010 was based.
Footnote 25:Form Nos & pages....
Footnote 26:Twin City policy form no. GN 25 29 14 (ED.8/01), page 1
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