George A. Fuller Co., Inc. v T & H Brokers, Inc.
Annotate this CaseDecided on October 23, 2013
Supreme Court, Westchester County
George A. Fuller Company, Inc., Plaintiff,
against
T & H Brokers, Inc. f/k/a TANENBAUM-HARBER CO., INC., Defendant.
27898/2010
Patrick M. Reilly, Esq.
DelBello Donnellan Weingarten Wise & Wiederkehr, LLP
Attorneys for the Plaintiff
One North Lexington Avenue
White Plains, NY 10601
By Fax: (914) 684-0288
Paul Kovner, Esq.
Rubin Fiorella & Friedman, LLP
Attorneys for the Defendant
630 Third Avenue, 3rd Floor
New York, NY 10017
By Fax: (212) 953-2462
Francesca E. Connolly, J.
The following documents were read in connection with the plaintiff's motion for summary judgment:
Plaintiff's notice of motion, affidavit, affirmation, exhibits1-26
Defendant's affirmation in opposition, affidavits, exhibits27-40 [*2]
Plaintiff's reply affirmation, affidavit, exhibits41-45
The plaintiff George A. Fuller Company, Inc. (hereinafter referred to as Fuller or the plaintiff) moves for an order pursuant to CPLR 3212 for partial summary judgment on liability against the defendant, T & H Brokers, Inc. f/k/a Tanenbaum-Harber Co., Inc., (hereinafter referred to as T & H Brokers or the defendant) and an inquest on damages. The defendant opposes the motion on the ground that questions of fact exist.
PROCEDURAL/FACTUAL BACKGROUND
The plaintiff commenced this action against the defendant, as its insurance broker, by filing a summons and complaint alleging it was negligent in binding the plaintiff to a policy of insurance with AIG at a substantially higher premium rate than the defendant represented or the plaintiff authorized. Specifically, the plaintiff alleges that the defendant was negligent when, on November 9, 2007, it bound the plaintiff without its authorization to a Connecticut Contractor Controlled Insurance Program ("CCIP") with AIG without securing a 25% penalty premium rate if one of two enrolled projects, Trump Parc and the Ritz-Carlton, was not constructed, and later, overlooked the 100% premium penalty rate AIG inserted in the First Binder Addendum issued on January 28, 2008. The plaintiff further contends that the defendant was negligent in representing to the plaintiff that the CCIP coverage contained a 25% premium penalty rate, when the binder it had received and accepted without objection contained a 100% penalty rate.
Fuller's Summary Judgment Motion
The plaintiff now moves for partial summary judgment against the defendant on liability and an inquest on damages. In support of its motion, the plaintiff submits an affidavit from Paul Slaney, the Chief Operating Officer of Fuller, an attorney's affirmation, copies of the pleadings, AIG insurance binders, e-mail correspondence, the transcript of the arbitration proceedings between Fuller and AIG, and the arbitration award. From these documents, the plaintiff contends that the following undisputed facts support an award of partial summary judgment on liability in its favor as a matter of law.
The defendant acted on the plaintiff's behalf as its insurance broker in negotiating with and procuring a CCIP with AIG to cover two construction projects in Stamford, Connecticut. The plaintiff contends that the defendant failed to fully and accurately inform the plaintiff of details of its discussions with AIG and failed to properly document its transactions with AIG, causing the plaintiff to incur additional premium costs in excess of the cost the plaintiff authorized and would have otherwise incurred. The first project was a residential tower, referred to as Trump Parc, with a construction value of $110,530,000, and the second project was a Ritz-Carlton hotel, with a projected construction value of $239,470,000, making the combined construction value $350,000,000. According to the plaintiff, the Trump Parc project would proceed first, with the possibility of the Ritz-Carlton project following. [*3]
T & H Brokers sought alternative pricing proposals with Trump Parc as a stand alone project and alternatively, coverage for both projects, which would have the advantage of lower premium rates due to the greater total construction and payroll costs to be insured. According to Slaney, on or about November 8, 2007, T & H Brokers advised him that if the second project was not built, AIG's premium rate increase applicable to the Trump Parc project would be 25%. Apparently, T & H Brokers relayed this information to Slaney based upon a verbal commitment from AIG. Based upon this representation, Slaney authorized T & H Brokers to procure the CCIP coverage from AIG to cover both projects, subject to the condition that if the second project was eventually not enrolled, the premium rate increase would be 25%. However, on November 9, 2007, unbeknownst to Fuller, T & H Brokers received and accepted, without objection, a CCIP binder from AIG that contained no provision limiting the premium increase in the event the second project was not enrolled.
On November 27, 2007, in response to Fuller's request, in an e-mail, T & H Brokers provided "a spreadsheet showing the cash flow for the combined program versus the stand alone program with a 25% rate penalty." However, the spreadsheet was not reflective of the rates reflected in the CCIP binder T & H Brokers had already accepted from AIG.
On December 4 and 6, 2007, T & H Brokers sent AIG an e-mail requesting a revised payment agreement reflecting the penalty rate that would be in effect if the Ritz-Carlton project was not built. On December 7 and 10, 2007, T & H Brokers sent a proposed side letter agreement to AIG limiting the premium rate increase to 25%. AIG never signed the side letter agreement.
On or about January 28, 2008, unbeknownst to Fuller, T & H Brokers received and accepted a First Binder Addendum from AIG that contained a potential 100% premium rate increase in the event the Ritz-Carlton project was not built. This potential increase was $1 million greater than the amount that had been quoted to Fuller.
Six months later, on June 4, 2008 at 3:23 p.m., T & H Brokers sent Fuller an e-mail advising it that, since the second project had not started, as of July 1, 2008, the premium costs would be increased by 25% in accordance with the addendum to the original insurance binder. Despite this, Fuller never received the anticipated premium increase on July 1, 2008.
On October 27, 2009, T & H Brokers sent Fuller an e-mail requesting the start date for the Ritz-Carlton project and advising that if the project was not going forward, the premium rate would be increased by 25%. Fuller responded that same day and reported that the Ritz-Carlton project would not be commencing on or before November 9, 2009 and requested that they discuss a method to adjust the premiums.
On October 28, 2009, T & H Brokers sent Fuller an e-mail attaching a binder addendum with an invoice, stating that it represented the agreed 25% premium rate increase for the Trump Parc project. On October 29, 2009, Fuller questioned the calculations prepared by T & H Brokers, which were substantially higher than they should have been if the 25% premium penalty rate was [*4]used.
Shortly thereafter, Fuller learned that AIG's calculations were based on its January 28, 2008 First Binder Addendum that reflected premium rate increases that far exceeded the 25% rate increase that Fuller and T & H Brokers had agreed upon, and which Fuller had all along believed would be applicable if the second project was not built. According to Fuller, it was advised by T & H Brokers that it did not see nor realize the discrepancies in the premium rate increase calculations when they received the January 28, 2008 First Binder Addendum, and had believed that the rates reflected only a 25% rate increase because AIG had verbally agreed to this.
Based upon T & H Brokers' representation that AIG had verbally agreed to the 25% premium rate increase, Fuller disputed the issue with AIG at an arbitration held in March 2010. At the arbitration, Robert DiBiasi, Senior Vice President of T & H Brokers, testified favorably for Fuller that AIG had verbally agreed to the 25% premium rate increase, and T & H Brokers first realized there was an issue in October 2009 when AIG sent Fuller a bill nearly doubling the Connecticut CCIP rates. According to DiBiasi, T & H Brokers was "totally blindsided" by the AIG bill, as it did not reflect their agreement and nearly doubled the rates of the existing program. When it received the bill, T & H Brokers contacted AIG and asked it to modify the bill in accordance with their agreement, but AIG refused to do so. At this point in time, T & H Brokers reviewed the First Binder Addendum and realized that the AIG bill was calculated based upon the premium rates set forth within it. According to T & H Brokers, it never agreed to the rates in the binder addendum, which were unreasonable, nor did Fuller, and T & H Brokers did not have unlimited authority to bind Fuller to particular rates.
The arbitrators ruled in favor of AIG, finding that it was not bound by the verbal agreement with T & H Brokers, and that Fuller was obligated to pay a total premium on the Trump Parc project in the amount of $2,823,272 in accordance with the terms of the binder addendum T & H Brokers had accepted on behalf of Fuller.
In sum, Fuller contends that as a result of T & H Brokers' wrongful acceptance of the CCIP on November 9, 2007 and the First Binder Addendum on January 28, 2008, Fuller ultimately became liable for a 100% increase in the premium rates when the second project was not built. Fuller further contends that T & H Brokers then tried, unsuccessfully, to negotiate a side letter agreement with AIG to limit the premium rate increase to 25% in the event the second project was not built. Fuller was never made aware of the on-going negotiations between T & H Brokers and AIG until the litigation with AIG ensued.
T & H Brokers' Opposition to Fuller's Motion for Summary Judgment
In opposition to the motion for partial summary judgment, the defendant submits an attorney's affirmation, affidavits from Matthew Snow, a former employee of T & H Brokers, and Robert DiBiase, a former corporate officer of T & H Brokers, along with e-mail correspondence, portions of the deposition testimony of Paul Slaney on behalf of Fuller, AIG insurance binders, and [*5]the payment agreement.
According to T & H Brokers, Fuller knew that AIG would not have issued a CCIP on the Trump Parc project as a stand alone project because it required a minimum of $350 million in construction values and the Trump Parc project construction values were significantly lower. The Trump Parc project could have been included on the New York CCIP issued by AIG, but the premium rates would have been significantly higher due to the New York Labor Law. T & H Brokers contends that it was not negligent in accepting a binder that was silent as to the penalty rate and that even after receiving the AIG binder, it continued to negotiate on Fuller's behalf for a 25% premium penalty rate. It further contends that had the Trump Parc project remained on the New York CCIP, AIG would have received about the same premium that it sought to charge Fuller on the Connecticut CCIP if the Ritz-Carlton project was not constructed. According to T & H Brokers, Fuller derived a substantial financial benefit from the binder addenda that T & H Brokers procured on Fuller's behalf.
AIG submitted a First Binder Addendum to T & H Brokers on January 28, 2008 that contained a penalty rate of 100%. Although T & H Brokers did not recall when it sent the binder addendum to Fuller, T & H Brokers contends, without specifying dates, that it orally advised Fuller on several occasions that the penalty rate would be 100% if the Ritz-Carlton project was not built, and Fuller agreed to it, stating, in essence, that it would not be an issue because the Ritz-Carlton project was going to be built. T & H Brokers also contends that Fuller admitted in a deposition that it received the First Binder Addendum with the 100 % penalty rate on March 27, 2009, more than a year after its issue date, and that Fuller knew it was bound by its terms, but was looking for a way to avoid its obligation to pay the additional premium.
T & H Brokers submits copies of e-mail exchanges between Snow and Slaney on June 14, 2008, time-stamped at 1:17 p.m. and 1:18 p.m., purportedly to support its claim that Fuller was advised, and approved, of the 100% penalty rate. T & H Brokers attempts to explain away the later e-mail of that same date, time-stamped at 3:23 p.m., and other e-mails exchanged in October 2009, wherein they specifically refer to the 25% rate increase, as typographical errors or, concededly, mistakes made by Snow.
Louis Cappelli, the President and sole shareholder of Fuller, signed a payment agreement with AIG on January 28, 2008. And, although the payment agreement makes no reference to the penalty premium rate, T & H Brokers contends that since the First Binder Addendum containing the 100% penalty premium rate was dated that same date, it is likely that it was sent to Fuller with the payment agreement on or about that date.
Fuller's Reply
In reply and in further support of its motion for partial summary judgment, Fuller disputes T & H Brokers' interpretation of the e-mail exchange of June 14, 2008, as indicating that Fuller accepted the 100% penalty premium. Fuller also points out that T & H Brokers' statements that [*6]Fuller knew of the 100% premium penalty rate sometime in 2008 or 2009 are speculative and contradicted by T & H Brokers' sworn arbitration testimony. Moreover, T & H Brokers makes no effort to reconcile the discrepancies in its affidavits with its prior sworn testimony. Fuller raises the important point that T & H Brokers' speculation as to when Fuller learned of T & H Brokers' error is immaterial, and does not create a material issue of fact, as it was T & H Brokers' failure to bind the 25% rate penalty on November 9, 2007 that resulted in Fuller's loss.
Fuller also disputes T & H Brokers' contention that Fuller had no other option but to accept the AIG proposal, and cites to T & H Brokers' prior sworn testimony that Fuller had the option to obtain coverage for one project from Old Republic at a lower rate than the 100% rate penalty ultimately imposed by AIG.
Fuller contends that T & H Brokers was negligent in accepting the original binder from AIG for the Connecticut CCIP without the 25% penalty premium, and in overlooking the 100% rate penalty contained in the First Binder Addendum dated January 28, 2008. Fuller further contends that the affidavits submitted by T & H Brokers in opposition to the motion for summary judgment merely advance unsupported excuses for T & H Brokers' errors that are contradicted by e-mails, documents and its prior sworn testimony.
DISCUSSION/ANALYSIS
The plaintiff has established its prima facie showing of entitlement to judgment as a matter of law on its cause of action for negligence (see Alvarez v Prospect Hospital, 68 NY2d 320, 324 [1980]). "When an insurance agent undertakes to obtain a policy of insurance for a client, the agent may be held liable for neglect if it fails to procure such a policy" (Tucci v Hartford Cas. Ins. Co., 167 AD2d 387, 388 [2d Dept 1990], citing Spiegel v Metropolitan Life Ins. Co., 6 NY2d 91 [1959]).
"[I]nsurance agents have a common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so" (Murphy v Kuhn, 90 NY2d 266, 270, [1997]).
The affidavit of Paul Slaney on behalf of Fuller, the supporting documents, and the sworn testimony of Robert DiBiase of T & H Brokers at the arbitration proceeding establish that the defendant breached its duty to the plaintiff by binding it to a policy of insurance with AIG at a substantially higher premium rate than the defendant represented and the plaintiff authorized. The plaintiff has established that it authorized the defendant to procure CCIP coverage from AIG to cover two projects, subject to the condition that if the second project was eventually not enrolled, the premium rate increase would be 25%. However, on November 9, 2007, unbeknownst to the plaintiff, the defendant wrongfully received and accepted, without objection, a CCIP binder from AIG that contained no provision limiting the premium increase to 25% in the event the second project was not enrolled, and on January 28, 2008, overlooked the 100% premium penalty rate AIG inserted in the First Binder Addendum. Thus, the burden shifted to the defendant "to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action" (see Alvarez v Prospect Hospital, 68 NY2d at 324).
In opposition, the defendant fails to submit sufficient proof to demonstrate that it was not negligent in failing to procure the requested insurance coverage (see Alvarez v Prospect Hospital, 68 NY2d at 324; American Ref-Fuel Co. of Hempstead v Resource Recycling, Inc., 281 AD2d 574, [2d Dept 2001]). The defendant submits affidavits from its former employees who make conclusory, unsubstantiated statements, without reference to specific dates, that the plaintiff knew that the AIG policy contained a 100% premium penalty rate. However, these affidavits are insufficient to defeat summary judgment (see American Motorists Ins. Co. v Salvatore, 102 AD2d 342, 347 [1st Dept 1984] ["reliance upon mere suspicion or surmise is insufficient" to defeat summary judgment]; S.J. Capelin Associates, Inc. v Globe Mfg. Corp., 34 NY2d 338, 342 [1974] ["Bald conclusory assertions, even if believable, are not enough (to defeat summary judgment)"]).
At best, the defendant's proof establishes that the plaintiff was made aware of the 100% penalty rate on March 27, 2009. However, this was well over a year after the defendant improperly bound the coverage and therefore, this proof fails to create a material issue of fact sufficient to defeat the plaintiff's motion for summary judgment (see American Motorists Ins. Co. v Salvatore, 102 AD2d at 347 [In opposition to summary judgment, a "bona fide triable issue must be established"]). Moreover, the contradictions presented in the defendant's affidavits raise "feigned factual issues" designed to avoid the consequences of its earlier admissions given under oath at the arbitration (see Manzione v Wal-Mart Stores, Inc., 295 AD2d 484, 485 [2d Dept 2002] [disregarding conclusory affidavit where it "raised feigned factual issues designed to avoid the consequences of earlier admissions"]). Since the defendant's proof fails to create a material issue of fact, the plaintiff's motion for partial summary judgment on liability against the defendant and an inquest on damages is granted.
Based upon the foregoing, it is hereby
ORDERED that plaintiff's motion pursuant to CPLR 3212 for partial summary judgment on liability against the defendant and an inquest on damages is granted; and it is further,
ORDERED that the parties are directed to appear for a further settlement conference before this Court on November 8, 2013 at 9:30 a.m., in Courtroom 1402 of the Westchester County Courthouse at 111 Dr. Martin Luther King, Jr., Boulevard, White Plains, New York 10601; and it is further
ORDERED that the parties are directed to appear in the Settlement Conference Part on January 2, 2014 at 9:30 a.m. in Room 1600 of the Westchester County Courthouse at 111 Dr. Martin Luther King, Jr., Boulevard, White Plains, New York 10601, in order to schedule an inquest on damages; and it is further,
ORDERED that all other relief requested and not decided herein is denied.
This constitutes the decision and order of the Court.
[*7]
Dated: White Plains, New York
October 23, 2013
HON. FRANCESCA E. CONNOLLY, J.S.C.
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