Am. Empire Surplus Lines Ins. Co. v. Joseph & Son Restoration Inc.

REPORT AND RECOMMENDATION

CHERYL L. POLLAK, United States Magistrate Judge Eastern District of New York.

On April 24, 2020, plaintiff American Empire Surplus Lines Insurance Company (“American Empire” or “plaintiff”) commenced this action against defendants Joseph & Sons Restoration Inc. (“Joseph” or “defendant”), Alberto Rivera, HP Lafayette Boynton Housing Development Fund Company Inc., Lafayette Nelson Apartments, LLC, and David Ballinas, seeking judgment in the amount of $1, 121, 764, plus interest and attorney's fees, for additional premiums owed by Joseph under two insurance policies issued by plaintiff to Joseph. (Compl.^[1]¶¶ 33-36). In the event that Joseph fails to pay the amount of the judgment, American Empire seeks a declaration that it has no obligation to defend and/or indemnify Joseph under the American Empire policies. (Id. ¶¶ 39, 42).

By notice of motion dated May 6, 2021, American Empire moves for summary judgment. (See ECF No. 35). The motion was referred to the undersigned to prepare a Report and Recommendation. (See Electronic Order Referring Motion, dated May 7, 2021). For the reasons set forth below, it is respectfully recommended that plaintiff's motion for summary judgment and prejudgment interest be granted but its motion for attorney's fees and declaratory judgment be

denied without prejudice.

FACTUAL BACKGROUND

Plaintiff American Empire issued a Commercial General Liability insurance policy to Joseph, bearing Policy Number 18CG0219372 (the “Primary Policy”^[2]), along with an Excess Liability Policy, bearing Policy Number 18CX0219373 (the “Excess Policy”^[3]), for the period March 3, 2018 to March 3, 2019 (collectively, the “Policies”). (Pl.'s 56.1 Stmnt^[4] ¶ 1; cf. Def.'s 56.1 Stmnt^[5] ¶ 1^[6]). The premiums owed on the Policies were computed based on a percentage of Joseph's gross receipts during the policy period. (Pl.'s 56.1 Stmnt ¶ 2; Def.'s 56.1 Stmnt ¶ 2).

American Empire assigned Advance Premiums to the Policies based on an estimate of Joseph's gross receipts, subject to an adjustment, or endorsement, if the receipts exceeded the initial estimates. (Pl.'s 56.1 Stmnt ¶¶ 3-4 (citing Myers Aff.^[7] ¶ 5 and quoting the Primary Policy, Section IV, ¶ 5); Def.'s 56.1 Stmnt ¶¶ 3-4). The Primary Policy contains a provision that states that it is subject to a “minimum policy premium” that applies unless an audit determines that a greater premium is warranted; “[i]n no event shall the premium be less than the minimum policy premium should the policy remain effective the complete policy term.” (Pl.'s 56.1 Stmnt ¶ 5 (citing Myers Aff. ¶ 6 and quoting the Primary Policy at 44); Def.'s 56.1 Stmnt ¶ 5). The Policy also contains a condition making Joseph “responsible for the payment of all premiums” and

permitting examination of Joseph's books and records at any time during the Policy period and up to three years after. (Pl.'s 56.1 Stmnt ¶¶ 6-7 (citing Myers Aff. ¶¶ 7-8 and quoting the Primary Policy at 3); Def.'s 56.1 Stmnt ¶¶ 6-7). The Excess Policy contains a provision for calculating an advance premium and similarly provides for a minimum policy premium unless an audit determines that a greater premium applies. (Pl.'s 56.1 Stmnt ¶ 8 (citing Myers Aff. ¶ 12 and quoting Excess Policy at 10); Def.'s 56.1 Stmnt ¶ 8).

Matson Driscoll & Damico LLP audited Joseph's financial records to determine actual gross receipts during the Policy period and issued its results on December 10, 2019. (Pl.'s 56.1 Stmnt ¶ 9; Def.'s 56.1 Stmnt ¶ 9; see Myers Aff., Exs. 4 & 5). As a result of the audit, it was determined that Joseph owed an additional premium under the Primary Policy of $857, 869 and an additional premium under the Excess Policy of $263, 895, for a total of $1, 121, 764. (Pl.'s 56.1 Stmnt ¶ 10 (citing Myers Aff., Exs. 4 & 5); Def.'s 56.1 Stmnt ¶ 10). Although plaintiff has made due demand to Joseph, the amounts owed remain unpaid. (Pl.'s 56.1 Stmnt ¶ 11; Def.'s 56.1 Stmnt ¶ 11). American Empire further asserts that to date, it has incurred attorney's fees and expenses in the amount of $29, 639 in its efforts to collect the premium amounts owed. (Pl.'s 56.1 Stmnt ¶ 12 (citing Myers Aff. ¶ 16)). Defendant disputes that American Empire is entitled to these fees. (See Def.'s 56.1 Stmnt ¶ 12).

On December 3, 2019, Alberto Rivera commenced an action in New York State Supreme Court, Bronx County, alleging that he sustained injuries on or about November 19, 2018 while performing construction related work in the Bronx. (Pl.'s 56.1 Stmnt ¶¶ 13-14; Def.'s 56.1 Stmnt ¶¶ 13-14); see Alberto Rivera v. HP Lafayette Boynton Housing Development Fund Company Inc. and Lafayette Nelson LLC, Index No. 33628/2018E (Bronx Cnty. Sup. Ct. 2018). A separate action was commenced on the same date in Bronx County Supreme Court by David

Ballinas, who similarly alleges that he was injured on or about November 19, 2018 while performing construction work. (Pl.'s 56.1 Stmnt ¶¶ 16-17; Def.'s 56.1 Stmnt ¶¶ 16-17);^[8] see David Ballinas v. HP Lafayette Boynton Housing Development Fund Company Inc. and Lafayette Nelson LLC, Index No. 33627/2018E (Bronx Cnty. Sup. Ct. 2018).

Following the filing of this federal Complaint, defendant Joseph filed an Answer and the parties exchanged of certain discovery. (See ECF No. 24; Electronic Minute Entry, dated December 30, 2020). Plaintiff now moves for summary judgment, seeking to recover the outstanding amount owed by Joseph in unpaid premiums under the Policies. (Pl.'s Mem.^[9] at 2-3). Plaintiff also seeks a declaration that it has no obligation to defend or indemnify Joseph in either the Rivera or Ballinas actions, and it seeks an award of attorney's fees and prejudgment interest.

DISCUSSION

A. Standard for Summary Judgment

It is well-settled that a party moving for summary judgment under Federal Rule of Civil Procedure 56 (“Rule 56”) has the burden of establishing that no genuine issue of material fact is in dispute and that the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Thompson v. Gjivoje, 896 F.2d 716, 720 (2d Cir. 1990). Since summary judgment is an extreme remedy, cutting off the rights of the non-moving party to present a case to the jury, see Egelston v. State Univ. Coll. at Geneseo,

535 F.2d 752, 754 (2d Cir. 1976); Gibralter v. City of New York, 612 F.Supp. 125, 133-34 (E.D.N.Y. 1985) (stating that “[s]ummary judgment is a drastic remedy and should be applied sparingly”), a court should not grant summary judgment unless “it is quite clear what the truth is [and] that no genuine issue remains for trial.” Auletta v. Tully, 576 F.Supp. 191, 195 (N.D.N.Y. 1983) (internal quotation marks and citations omitted), aff'd, 732 F.2d 142 (2d Cir. 1984). In addition, “‘the inferences to be drawn from the underlying facts . . . must be viewed in the light most favorable to the party opposing the motion.'” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)); see also Coon v. Town of Springfield, Vermont, 404 F.3d 683, 685 (2d Cir. 2005) (stating that the court must “draw all factual inferences and resolve all ambiguities in favor” of the nonmoving party).

Once the moving party discharges its burden of proof under Rule 56(c), the party opposing summary judgment “has the burden of coming forward with ‘specific facts showing that there is a genuine issue for trial.'” Phillips v. Kidder, Peabody & Co., 782 F.Supp. 854, 858 (S.D.N.Y. 1991) (quoting Fed.R.Civ.P. 56(e)). Rule 56(e) “provides that a party opposing a properly supported motion for summary judgment may not rest upon mere allegation or denials of his pleading.” Anderson v. Liberty Lobby, Inc., 477 U.S. at 256. Indeed, “the mere existence of some alleged factual dispute between the parties” alone will not defeat a properly supported motion for summary judgment. Id. at 247-48 (emphasis in original). Rather, enough evidence must favor the non-moving party's case such that a jury could return a verdict in its favor. Id. at 248.

Rule 56 provides that, in moving for summary judgment or responding to such a motion, “[a] party asserting that a fact cannot be or is genuinely disputed must support the assertion by . .

. citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials.” Fed.R.Civ.P. 56(c)(1). “An affidavit or declaration used to support or oppose a [summary judgment] motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.” Fed.R.Civ.P. 56(c)(4). Rule 56's “requirement that affidavits be made on personal knowledge is not satisfied by assertions made ‘on information and belief.'” Patterson v. County of Oneida, New York, 375 F.3d 206, 219 (2d Cir. 2004) (citing Sellers v. M.C. Floor Crafters, Inc., 842 F.2d 639, 643 (2d Cir. 1988)). While the Court need consider only the materials cited by the parties, it may consider any other materials in the record in deciding a motion for summary judgment. Fed.R.Civ.P. 56(c)(3).

B. Analysis

1) Failure to Pay Premiums Owed

Plaintiff's claim is based on a breach of the terms of the Policies. Since insurance policies are “interpreted according to the rules of contract interpretation, ” plaintiff's Complaint alleging that defendant Joseph failed to pay premiums owed under the...