Certain Underwriting Members of Lloyd's, London v Navigators Mgt. Co., Inc.
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Certain Underwriting Members of Lloyd's, London v Navigators Mgt. Co., Inc. 2011 NY Slip Op 34279(U) October 25, 2011 Supreme Court, New York County Docket Number: 651817/2010 Judge: O. Peter Sherwood Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 11/01/2011 1] INDEX NO. 651817/2010 NYSCEF DOC. NO. 53 RECEIVED NYSCEF: 11/01/2011 SUPREME COURT OF THE STATE OF NEW YORK - NEW YORK COUNTY PRESENT: 0. PETER SHERWOOD PART 49 Justice CERTAIN UNDERWRITING MEMBERS OF LLOYD'S, LONDON, INDEX NO. 651817/2010 MOTION DATE Oct. 4, 2011 Plaintiffs, -against- 001 MOTION SEQ. NO. NA VI GATORS MANAGEMENT COMPANY, INC., (f/k/a New York Marine Managers, Inc.), MOTION CAL. NO. Defendant. The following papers, numbered 1 to ~9_ _ were read on this motion for summary judgment z U) 0 w U) 0 <( _w 1-U) .., ::::> 0 a:: z 3: C> PAPERS NUMBERED Notice of Motion/ Order to Show Cause - Affidavits - Exhibits ... 1-4 Answering Affidavits - E x h i b i t s - - - - - - - - - - - - - - 5-7 Replying A f f i d a v i t s - - - - - - - - - - - - - - - - - - 8-9 Cross-Motion: w a:: a:: ..J ..J 0 ~ Yes ~ No Upon the foregoing papers, it is ordered that this motion is decided in accordance with 1-- 0 c l the accompanying decision and order. LL. WW LL. w J: I-- a:: a:: >O ..J LL. ..J ::::> LL. 1-- 0 w c.. U) w Dated: October 25, 2011 o~.~ 0. PET SHERWOOD, J.S.C. a:: U) w U) <( z 0 0 j:: 0 ::!!: Check one: ~ FINAL DISPOSITION Check if appropriate: = SUBMIT ORDER/ JUDG. =:=l DO NOT POST L~ON-FINAL DISPOSITION ~- ~ REFERENCE _ SETTLE ORDER/ JUDG. [* 2] SUPREME COURT OF THE ST ATE OF NEW YORK COUNTY OF NEW YORK : IAS PART 49 -----------------------------------------------------------------------------)( CERTAIN UNDERWRITING MEMBERS OF LLOYD'S, LONDON, Plaintiffs, -against- DECISION AND ORDER 1 Index No. 651817/2010 NAVIGATORS MANAGEMENT COMPANY, INC., (f/k/a New York Marine Managers, Inc.), Defendant. -----------------------------------------------------------------------------)( 0. PETER SHERWOOD, J.: I. Overview On motion sequence 001, defendant, Navigators Management Company, Inc ..{"Navigators"), moves for summary judgment on all claims brought against it. The causes of action are for breach of contract, unjust enrichment, breach of good faith and fair dealing, and money had and received. Plaintiffs, Certain Underwriting Member of Lloyd's London ("Lloyd's"), cross-move for summary judgment on their breach of contract claims (first through third causes of acti~m) and, in the ' ' alternative, to amend the complaint should the court find that Lloyd's lacks standing to sue. On motion sequence 002, Navigators moves to strike evidence it asserts is inadmissible communications of settlement discussions between the parties. II. Background I The essential facts are not in dispute. Lloyd's wrote reinsurance agreements (referred to as "Treaties") with insurers. It entered into three reinsurance treaties with Navigators pursuant to which Lloyd's agreed to reimburse Navigators in the amount of the reinsured losses NaJigators incurred as a result of catastrophic events, including acts of terrorism. As a result of the bon1bing of Pan Am Flight 103 ("Flight 103 ")on December 21, 1988 and an explosion on the Piper Alpha oil production [* 3] platform ("Piper Alpha") on July 6, 1988, Lloyd's paid Navigators tens of millioihs of dollars in reinsurance claims. i The Treaties provided that a proportionate share of any subrogation recovery Navigators I obtained be paid to Lloyd's. The Treaties have no explicit provision regarding ~hether interest would be required if Navigators delayed payment of subrogration recoveries. Navigators obtained substantial subrogation recoveries in 2002, 2003, and 2005 but failed to reimburse Lloyd's until ;I September 2009, after Lloyd's made demands therefor. Navigators received subrogation recoveries •! with respect to the Piper Alpha loss in 2002 and 2003. It received subrogation recoveries relating I to the Flight 103 loss in 2005. In January 2009, Navigators advised Lloyd's of the Piper Alpha I I recoveries and in August 2009, admitted it had received recoveries relating to Flight 103. Payment of the principal owed was made in September 2009. Beginning in the Spring of 2009, Lloyd's made repeated demands of representatives of :: Navigators for payment of interest on the recoveries withheld (see Affidavit of Collum Duncan, ~4 ). Navigators declined to agree or acknowledge that any interest was due despite its unJxplained multi- ! I year delay of payment (see id). On October 15, 2009, Navigators declared that "n~ interest is due or owning" and flatly refused to make any interest payments (see Lloyd's Rule 19-a Statement, ~19). Lloyd's commenced this litigation on October 22, 2010. The amount of interest claimed exceeds $4 million. III. Standard of Review To succeed on a motion for summary judgment, a movant must establish its ~laim or defense "sufficiently to warrant the court as a matter of law in directing judgment" (CPLRI 32 l 2[b]), and it "must do so by tender of evidentiary proof in admissible form" (Zuckerman v City 'of New York, 49 2 [* 4] NY2d 557, 562 (1980]). To defeat a motion for summary judgment, the opposing p~ must "show facts sufficient to require a trial for any issue of fact" (CPLR 3212 [b ]). "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." I I (Winegradv NY Univ. Med. Ctr., 64 NY2d 851, 853 [1985]). Once the proponent "has met its burden, it is incumbent upon [the opposing party] to establish, by admissible eviden~e, that a triable I issue of fact exists" (SCP Inc. v Bermuda Ltd., 224 AD2d 214, 216 [1st Dept 1996]). IV. Discussion The issues in this case are straightforward: a) whether Lloyd's has standing to sue; b) whether in the absence of a contractual or statutorily right, there is an entitlement to interest and c) assuming Lloyd's had such a right, whether they waived it when they accepted tender of th~ principal apart from interest. Navigators owed Lloyd's money, but purposefully delayed making payment for years. Lloyd's now wants interest reflecting the time the money was withheld. Navigators refuse to pay any interest. A. Standing to Sue I' As to the standing defense, Navigators asserts that effective June 30;· 2009, Lloyd's I transferred to Equitas Insurance Limited ("Equitas") its" 1992 and prior non-life business" including the right to bring the suit at issue here. In Navigators' view, only Equitas has stan~ing to sue. The defense lacks merit. As Lloyd's note, a High Court in London has declared in a. Transfer Order relating to the Equitas transaction, that: The transfer effected by the scheme, even if sanctioned by this court, will not be recognized or enforced in the courts of the USA unless and until a formal application is made by Equitas to a US court, in which event recognition will be a rriatter for determination of that court. 3 [* 5] Equitas has made no such application, and thus, according to Lloyd's, the Transfer i~ not recognized in the United States. Even if the Transfer were recognized in the United States, the Transfer would not preclude the right of Lloyd's to bring this lawsuit. The Transfer Order provides for Lloyd's tb transfer assets "subject to all encumbrances (if any) affecting the Transferring Assets." (Aff d of Randi Ellias, Ex. ! B, p. 2). Schedule 2 of the Transfer Order defines encumbrance as "any ... third party ~ight or interest, and any other type of preferential arrangement," including the right to sue in s.ubrogation (id, .; Schedule 2, p.6). Consequently, Equitas took subject to the encumbrance and did not receive in the Transfer Order any right to bring this lawsuit. B. Interest Claim Navigators next argues that Lloyd's has no right to interest and that, even ~f they did, they waived that right when, in 2009, they accepted the subrogration recoveries withoJt also receiving the interest claimed. Under the terms of the Reinsurance Treaty pursuant to whi~h Lloyd's paid claims relating to the Flight I 03 loss, Navigators is obligated to give an account(ng within three months of the close of the quarter in which recoveries are received and to pay to Lloyd's their proportionate share of such recoveries within two months thereafter. As to the Rein~urance Treaties pursuant to which losses relating to the Piper Alpha explosion were paid, an accounti,ng was required to be given within 45 days of the close of the quarter in which recoveries are received and payment made within 45 days thereafter. Navigators breached the contracts by failing to proVide the required accountings in a timely fashion and failing to make payments promptly. In New York, if a party to a contract breaches an obligation to make payment upon a fixed date, the adversely affected party is entitled to interest as damages for that breach (see Restatement 4 [* 6] (Second) of Contracts §354 cmt. c [1979]; Parkway Windows, Inc. v River Tower Assoc., 108 AD2d 660, 665 [1st Dept 1985]). Interest is in the nature of damages for withholding money that is due (see TIG Insurance Co. v Newmont Mining Corp., 2005 WL 2446234*8[SDNY, October 4, 2005]). However, where the plaintiff accepted a late payment, knowing it was late, and without reserving its right to collect interest, it loses the right to claim interest (see Shephard v City ofNew York, 216 NY 251, 256-57 [l 915][right to interest lost where "acceptance [of principal] was unconditional or without any suggestion of a future claim to interest"]). In this case, Lloyd's demanded payment of interest on the principal due both prior to and after it received payment of principal. 1 Having made the demand, Lloyd's were entitled to retain the principal and thereafter assert a claim for unpaid interest as damages arising from the unreasonable delay of payment of their proportionate share of the subrogation sums recovered. The decision of the New York Court of Appeals in Crane v Craig, 230 NY 452 ( 1921) which held that "where the interest is not payable by the terms of the contract...the receipt of the principal bars a subsequent claim for interest" is not applicable here. In Crane, plaintiff had been awarded the principal sum 1 Documentary proof of these demands appear in email communications most of which were sent or received by Callum Duncan, a Navigators employee. In motion sequence number 002, Navigators has moved to strike evidence of the demands from the record pursuant to CPLR 4547 on the grounds that the emails are inadmissible evidence of settlement discussions. The rule of exclusion is applicable only when the evidence is being offered as proof of the claim or its amount and further only when the statements were made during negotiations aimed at compromising the dispute. Pre-dispute communications made outside the negotiation context (even iflater repeated in a negotiation) do not fall within the exclusionary rule (see CPLR 4547; Alexander, Practice Commentaries, McKinney's Cons Laws of NY, Book 78, CPLR 4547). None of these conditions are present here. The documents Navigators seeks to exclude were not offered for either of the purposes to which CPLR 4547 applies. Further, the documents are in the nature of pre-dispute communications made outside the negotiation context for two reasons; they reflect Lloyd's demand for interest necessarily made before any settlement talks could begin and the communications involving Mr. Duncan cannot be considered settlement negotiations as he concedely had no authority to compromise the claim. The motion to strike must be denied. 5 [* 7] plus interest. The issue presented to the Court of Appeals was "whether or not the acceptance of the principal awarded has barred the realtor from recovering ... additional interest" (erpphasis added). Having determined that Lloyd's are entitled to a grant of the cross-motion for summary judgment as to their First (Treaty 8W2) Second (Treaty 7Rl) and Third (Treaty :i8P5) Causes of Action for breach of contract, Navigators' motion for summary judgment as to those~auses of action must be denied and the court need not address Navigators' request to dismiss Lloyd'~ Fourth through Eighth Causes of Action for breach of good faith and fair dealing, breach of fiduciary duty, unjust enrichment and money had and received. Accordingly, Navigator's motion for suJmary judgment (motion sequence number 001) is denied in its entirety. Lloyd's cross-motion for partial summary I judgment as to its First through Third Causes of Action is granted. Navigators' motion to strike certain documents relating to alleged settlement talks (motion sequence number 002) is denied. Accordingly, it is ORDERED that the motion of defendant, Navigators Management Co., Irie., for summary ! judgment dismissing the complaint (motion sequence number 001) is DENIED; and it is further ORDERED that the cross-motion of plaintiffs, Certain Underwriting Members of Lloyd's London, for partial summary judgment as to their First, Second and Third Causes of Action is GRANTED; and it is further ORDERED that defendant's motion to strike (motion sequence number 002) is DENIED; and it is further ORDERED that within 14 days of service of this Decision and Order with notice of entry, counsel for the parties shall meet and confer for the purpose of determining the amount of damages to be awarded to the date of this Decision and Order and the daily interest to be assessed from said 6 [* 8] date until judgment is entered at the statutory rate of 9% and, within 7 days thereafter to submit a stipulated order to be "so ordered" by the court; and it is further ORDERED that if said stipulated order has not been submitted prior to December 12, 2011, counsel shall appear for a status conference at Part 49, Room 252 on Wednesday, December 14, 2011 at 9:30 A.M. for the purposes of fixing the form of order to be entered, settin;g a schedule of further proceedings, if needed and any other outstanding matters. This constitutes the decision and order of the Court. DATED: October 25, 2011 ENTER, tJ.?~ 0. PETER SHERWOOD J.S.C.
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