Everest Indem. Ins. Co. v. All Risks Ltd

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EVEREST INDEMNITY INSURANCE COMPANY, Plaintiff, v. ALL RISKS LTD et al., Defendants.

Civil Action No. 16-3582 (GC) (TJB)

United States District Court, D. New Jersey

June 30, 2023

NOT FOR PUBLICATION

MEMORANDUM DICISION

GEORGETTE CASTNER, UNITED STATES DISTRICT JUDGE

This matter comes before the Court upon Third-Party Defendants Summit Global Partners (“Summit”) and USI Southwest, Inc.'s (“USI”) (collectively “USI”)^[1] Motion for Summary Judgment on all Counts of Third-Party Plaintiff All Risks, LTD's (“All Risks”) Second Amended Third-Party Complaint (“SAC”) (ECF No. 126). (ECF No. 145.) All Risks opposed (ECF No. 151), and USI replied (ECF No. 156). After careful consideration of the parties' submissions, the Court decides USI's motion without oral argument pursuant to Local Civil Rule 78.1. For the reasons outlined below USI's motion is GRANTED IN PART and USI is granted leave to file a renewed motion for summary judgment consistent with this Memorandum Opinion as to Plaintiffs remaining claims.

I. BACKGROUND^[2]

All Risks is a wholesale insurer located in Maryland. (Pl.'s Statement of Material Facts (“PSMF”) ¶ 1, ECF No. 152; Defs.' Resps. to Pl.'s Statement of Material Facts (“DRPSMF”) ¶ 1, ECF No. 156.) USI is an independent insurance broker located in Texas. (PSMF ¶ 2; DRPSMF ¶ 2.)

In February 2004, All Risks and USI entered into a Broker Agreement (the “Broker Agreement”). (PSMF ¶ 3; Defs.' Moving Br., Ex. A, ECF No. 145-4.) Under the Broker Agreement, USI could solicit insurance coverage for its customers from Everest Indemnity Insurance Company (“Everest”) by submitting insurance applications to All Risks. (PSMF ¶ 3; see Defs.' Moving Br., Ex. A.) In pertinent part, the Broker Agreement provides:

4. Disclaimer ... It is the responsibility of [USI] to service [its] account and to inform All Risks ... as to the type and amount of coverage to be considered for quotation. All Risks . . . assumes no responsibility toward [USI], policy holder, sub-producer [,] or any other party with regard to the adequacy, amount[,] or form of coverage obtained through any insurance carrier.

10. Broker Violation ... In the event [USI] violates this agreement, by failure to pay premiums due or by any other act or omission, [it] shall be liable for all costs and damages incurred by [All Risks] as a result of [USI's] violation including all court costs and reasonable attorney's fees.

16. Good Faith... [USI] agrees to perform all duties and obligations to the best of [its] ability to honor the terms of the agreement.

(Defs.' Moving Br., Ex. A. ¶¶ 4, 10, 16 (emphases omitted).)

In 2002, All Risks entered into a Program Administrator Agreement (“PA Agreement”) with Mt. McKinley Managers, LLC (“McKinley”) in McKinley's capacity as an underwriting manager for Everest. (Defs.' Statement of Material Facts (“DSMF”) ¶¶ 1, 13, ECF No. 145-1; Pl.'s Resp. to Defs.' Statement of Material Facts (“PRDSMF”) ¶¶ 1, 13, ECF No. 152; see also Defs.' Moving Br., Ex. B *6,^[3] ECF No. 146-3.) Under the PA Agreement, All Risks was designated an Administrator who acted as an agent for McKinley in procuring and evaluating insurance “applications for surplus lines insurance” on behalf of Everest. (See Defs.' Moving Br., Ex. B at 1, ECF No. 146; see also SAC ¶ 18.) The PA Agreement, in part, provided that All Risks “shall not waive any condition or make any change to [Everest's] insurance policies, endorsements [,] or applications without [McKinley's] prior written consent.” (Defs.' Mot. for Summ. J., Ex. B at 2.)

Years later, in 2012, USI, acting as an insurance broker, sought a commercial general liability insurance policy for its client Monitronics International, Inc.^[4] (“Monitronics”). (PSMF ¶¶ 5-6, 10; DSMF ¶¶ 5-6, 10.) Prior to USI's search, Monitronics had a general commercial liability insurance policy from First Mercury Insurance Company (“First Mercury”). (PSMF ¶ 9; DRPSMF ¶ 9.)

On June 5, 2012, USI transmitted two insurance applications on behalf of Monitronics from USI's office in Houston, Texas to All Risks in Maryland. (PSMF ¶ 11; DRPSMF ¶ 11.) Specifically, USI sought to procure a comprehensive general liability policy and umbrella policy (the “CGL”) for Monitronics and requested a quote from All Risks. (PSMF ¶ 11; DRPSMF ¶ 11; see DSMF ¶ 37; PRDSMF ¶ 37.)

On August 20, 2012, All Risks's underwriter Janies LaPlante (“LaPlante”) emailed USI a quote for a Monitronics CGL through Everest. (DSMF ¶¶ 19, 41; PRDSMF ¶¶ 19, 41.) The initial quote was subject to certain terms and conditions, including, in pertinent part, a Recording and Distribution of Material or Information in Violation of Law Exclusion (the “RDM Exclusion”).^[5] (PSMF¶ 16; DRPSMF¶ 16.)

On August 21, 2021, after discussions with USI, LaPlante issued a revised quote for the proposed CGL. (DSMF ¶ 42; PRDSMF ¶ 42.) As part of this revised quote, and at USI's request, All Risks deleted the RDM Exclusion from the CGL. (PSMF ¶¶ 44-45; DRPSMF ¶¶ 44-45.) After further discussions between Rob Broz (“Broz”), a senior vice president at USI, and LaPlante, LaPlante emailed his supervisor Chris McGovern (“McGovern”), a senior vice president and program director with All Risks. (DSMF ¶¶ 4, 9, 44; PRDSMF ¶¶ 4, 9, 44.) LaPlante wrote in his email correspondence to McGovern:

[USI] has a concern with our including attached [RDM Exclusion].

[USI] claims Monitronics would not violate any laws - but they have no control over their dealers who would. They have a Cyber Liability policy so that would cover [what the RDM Exclusion typically would cover].....Can we delete [the RDM Exclusion]? Don't want this to be a deal breaker.”

(DSMF ¶ 45; PRDSMF ¶ 45.) McGovern replied “[a]s long as these exposures are covered elsewhere, I do not see a problem deleting the form.” (DSMF ¶ 46; PRDSMF ¶ 46.) LaPlante then emailed Broz that he had obtained approval to delete the RDM Exclusion. (PSMF ¶ 44; DRDSMF ¶ 44.) Accordingly, on August 22, 2012, LaPlante emailed Broz a second amended quote for the CGL. (DSMF ¶ 49; PRDSMF ¶ 49.) The updated quote did not contain the RDM Exclusion. (DSMF ¶ 49; PRDSMF ¶ 49.)

On August 23, 2012, All Risks and USI continued negotiations regarding other terms and conditions of the CGL. (DSMF ¶ 50; PRDSMF ¶ 50.) On August 31, 2012, Monitronics accepted the proposed CGL from Everest, and accordingly, All Risks bound insurance policies for Monitronics on behalf of Everest without the RDM Exclusion (DSMF ¶ 51-52; PRDSMF ¶ 51-52; PSMF ¶ 46; DRPSMF ¶ 46.)

After the policy was issued, USI reported a number of TCPA claims to Everest on behalf of Monitronics. (PSMF ¶ 48; DRPSMF ¶ 48.) Everest elected to defend and indemnify at least some of the TCPA claims against Monitronics. (PSMF ¶ 49; DRPSMF ¶ 49.) As a result, on October 11, 2013, Lauren Quigley, a Program Manager at Everest, sent an e-mail correspondence to McGovern reading:

It has come to the attention of Everest... [that the CGL was issued] without an [RDM Exclusion]. As a result of All Risks's failure to include th[e RDM Exclusion], Everest is currently facing, and will continue to face, additional unanticipated claim/loss exposure on the policies.

Please be advised that Everest will seek full reimbursement from All Risks for any and all losses, damages[,] and/or expenses incurred by Everest as a result of All Risks's failure to include [the RDM Exclusion].

(Defs.' Moving Br., Ex. I, ECF No. 145-7.)

The reimbursement that Everest sought to pursue eventually served as the basis for the original Complaint filed on this docket against All Risks. (See generally Compl., ECF No. 1.) On August 10, 2020, Everest settled its claims against All Risks. (Settlement Order, ECF No. 125.)

McGovern, All Risks's corporate designee in this matter,^[6] testified that All Risks made its settlement payment to Everest to settle claims premised on McGovern's lack of authority to unilaterally delete the RDM Exclusion. (DSMF ¶ 59; PRDSMF ¶ 59.)

Shortly after this lawsuit was initiated by Everest, All Risks brought its original Third-Party Complaint against USI. (See generally Third-Party Complaint, ECF No. 13.) All Risks maintains that it would not have omitted the RDM Exclusion but for four material misrepresentations made by USI when negotiating the CGL. (See DSMF ¶ 62; PRDSMF ¶ 62; SAC ¶ 28.) These four misrepresentations, as alleged by All Risks in its SAC, are:

(a) USI represented to All Risks that Monitronics'[s] former insurance carrier, First Mercury. . ., had not included the RDM [Exclusion as part of its prior insurance policies;

(b) USI represented to All Risks that as an alarm monitoring service, Monitronics did not engage in any telemarketing or other activities that could put Monitronics at risk of violating the TCPA statute;

(c) USI represented to All Risks that Monitronics required all of its third-party vendors that engaged in telemarketing to execute subcontracts containing favorable hold harmless clauses obligating them to defend and indemnify Monitronics in connection with TCPA claims; and

(d) USI represented to All Risks that Monitronics possessed a cyber liability insurance policy with $10 million in applicable coverage that would primarily respond to any claim or loss arising out of alleged violations of the TCPA or other similar laws and did not contain the RDM [E]xclusion or other exclusionary language.

(SAC ¶ 28.)

Ultimately, in seeking a judgment against USI, All Risks brings seven counts: (1) breach of contract; (2) breach of warranty; (3) breach of the implied covenant of good faith and fair dealing; (4) fraud in the inducement;^[7] (5) negligent misrepresentation; (6) declaratory judgment; and (7) common-law indemnity. (SAC ¶¶ 40-81.) USI moves for summary judgment on all counts.

II. LEGAL STANDARD

The Federal...