Great Lakes Reinsurance (UK) SE v. Herzig

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GREAT LAKES REINSURANCE (UK) SE, Plaintiff, v. PETER HERZIG, Defendant.

No. 16 Civ. 9848 (PGG)

United States District Court, S.D. New York

June 29, 2023

MEMORANDUM OPINION & ORDER

PAUL G. GARDEPHE UNITED STATES DISTRICT JUDGE

This is an insurance dispute regarding Defendant Peter Herzig's claim for damage to his yacht under a policy issued by Plaintiff Great Lakes Reinsurance (the “Policy”). A bench trial is scheduled for July 10, 2023. (June 9, 2023 Order (Dkt. No. 134))

On May 18, 2023, this Court granted Great Lakes' motion for summary judgment as to its Second Cause of Action - a declaratory judgment that a December 29, 2016 release the parties executed regarding Herzig's claim (the “Release”) is valid and binding - and otherwise denied the motion. This Court also granted Great Lakes' motion to strike the declaration of Herzig's former lawyer, Adam Heffner, which Herzig had filed in support of his opposition to Great Lakes' summary judgment motion. This Court's May 18, 2023 decision does not address Herzig's counterclaims, because Great Lakes did not seek summary judgment on those counterclaims. (May 18, 2023 Memorandum Opinion and Order (Dkt. No. 123)) See Great Lakes Reinsurance (UK) SE v. Herzig (“Herzig”), No. 16 CIV. 9848 (PGG), 2023 WL 3560578 (S.D.N.Y. May 18, 2023).

Given the ruling that the Release is valid, this Court ordered Herzig to “submit a letter stating whether he intends to proceed to trial on his First, Second, and Third Counterclaims, and [to] show[] cause why his Fourth Counterclaim [- alleging breach of contract in connection with Great Lakes' failure to pay the reasonable cost of repairs -] should not be dismissed.” Herzig, 2023 WL 3560578, at *34.^[1]

Pending before this Court are (1) Herzig's response to the show-cause order (Dkt. No. 130); (2) Herzig's motion for reconsideration pursuant to Local Rule 6.3 (Dkt. Nos 131-32); and (3) Great Lakes' cross-motion for reconsideration (Dkt. No. 137).^[2]

For the reasons stated below, Herzig's motion for reconsideration will be denied; Herzig's Fourth Counterclaim will be dismissed; and Great Lakes' cross-motion for reconsideration will be denied.

BACKGROUND^[3]

I. FACTS^[4]

In July 2016, Great Lakes' underwriter and claims agent, Concept Special Risks Ltd., issued an insurance policy “provid[ing] coverage of $600,000 for the Crescendo,” a 62-foot yacht that Herzig bought in 1998 for approximately $1.4 million. Herzig, 2023 WL 3560578, at *1, *4.

“On or about October 7, 2016, Hurricane Matthew caused damage to the Crescendo while it was in port near Jacksonville, Florida.... [Herzig] submitted a claim under the Policy to Concept.” Id. at *4 (footnote omitted).

While Herzig's claim was pending, “Concept's endorsement department . .issued an endorsement, dated November 18, 2016 [(the “November 2016 Endorsement”)], which states that ‘[t]he Hull Sum insured [i.e., the coverage limit] is reduced to $300,000. . . . [i]n consideration of which, a Return Premium of US$1,954 is due.'” Concept did not obtain Herzig's consent before issuing the November 2016 Endorsement, and although Concept sent a copy of the Endorsement to Herzig's insurance broker, John Poplawsky, the day it was issued, the copy it sent was not approved and stamped by the Excess Line Association of New York, as required under New York law. Id. at *5 (quoting November 2016 Endorsement).

After Concept's surveyor inspected the Crescendo, Herzig obtained a repair estimate from two boat yards and retained a lawyer - Adam Heffner. Heffner had represented Herzig in negotiations with AIG regarding [an] earlier insurance claim. Herzig then began negotiating a settlement of his claim with [Doug] Wager, Concept's adjuster.

Wager made a settlement offer to Herzig, and on December 19, 2016, Herzig emailed a counterproposal to Wager. In the December 19, 2016 email .... Herzig proposed that Concept make a lump-sum payment of $300,000 to him by December 26, 2016; that the Policy remain in effect for its duration; and that Herzig provide Concept with a release accepting responsibility for any costs above the agreed payment of $300,000.

On December 21, 2016, Great Lakes filed the Complaint. (Dkt. No. 1) The Complaint seeks a declaratory judgment that the Policy provides coverage for “no more than the reasonable cost of repairs,” and that here the reasonable cost of repairs amounted to no more than $175,000. (Id. at 5-6)

Id. at *6 (further citations and quotations omitted).

Between December 27 and December 29, 2016, Heffner and Great Lakes' lawyer, Steven Goldman, negotiated Herzig's claim by phone, email, and letter. Herzig contends that Goldman made a number of misrepresentations and threats during the negotiations. Id. at *6-9, *20. At summary judgment, the parties submitted the emails and letters exchanged during the negotiations, and Herzig submitted declarations from himself and Heffner regarding the negotiations. (Def. R. 56.1 Stmt., Exs. G, N, 17 (Herzig Decl.), and 18 (Heffner Decl.) (Dkt. Nos. 108-8, -15, -18, -19); Heffner/Goldman Ltrs. (Dkt. No. 115))

On December 29, 2016, [following the negotiations,] Herzig executed a policyholder's release (the “Release”). The Release states that - in exchange for a payment of $175,000 - Herzig

“[r]elease[s], acquit[s], and forever discharge[s] [Great Lakes] and Concept Special Risks Ltd....of and from any and all [actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever in law, admiralty, or equity] which [Herzig or his] heirs, executors, administrators and assigns ever had, now have, or hereafter can, shall, or may have for . . . any and all known and unknown damage and/or property damage resulting . . . from the incident and the resulting claim for insurance coverage involving . . . Crescendo insured under [the Policy] which is alleged to have occurred on or about October 7, 2016 . . . which incident and resulting claim under [the Policy] was the subject of the Complaint in [this case]. .... In making this release and agreement it is understood and agreed that I am relying wholly upon my own judgment, belief, and knowledge of the nature, extent and duration of said injuries, and that I have not been influenced to any extent whatever in making this release by any representations or statements regarding said injuries, or regarding any other matters, made by persons, firms or corporations who are hereby released, or by any person or persons representing him or them. ....

It is further agreed that a Stipulation for Dismissal with Prejudice pertaining to the above referenced Complaint filed by the Releasors [defined as ‘Peter Herzig'] and/or the latter's counsel will be provided by Releasors and/or their counsel within 30 days of the date of this agreement.”

Herzig, 2023 WL 3560578, at *9 (citations omitted).

Heffner died on August 31, 2022, after Great Lakes' summary judgment motion was fully briefed. Id.

II. PROCEDURAL HISTORY

On June 13, 2018, Great Lakes filed the Second Amended Complaint (“SAC”), which asserts four causes of action. The First Cause of Action seeks a declaration that Great

Lakes owes no more than $175,000 under the Policy, that being the reasonable cost of repairing the October 2016 damage to the Crescendo. The Second Cause of Action seeks a declaration that the Release is valid and binding. The Third and Fourth Causes of Action seek declarations that Herzig's misrepresentations of material fact in procuring the Policy rendered the Policy void ab initio and entitle Great Lakes to restitution of its $175,000 payment in connection with the Release. (Dkt. No. 48)

On July 2, 2018, Herzig filed his Answer to the SAC with counterclaims. (Dkt. No. 49) The counterclaims are for fraud, rescission, and breach of contract. (Id. at 15-21, ¶¶ 37 77)

On January 29, 2021, Great Lakes moved for summary judgment on the SAC's Second, Third, and Fourth Causes of Action. As noted above, Great Lakes did not seek summary judgment on Herzig's counterclaims. (Dkt. No. 91)

In an October 13, 2022 letter, Herzig informed this Court of Heffner's death. (Dkt. No. 114) In a December 22, 2022 order, this Court directed the parties to make supplemental submissions addressing whether the Court should consider Heffner's declaration -offered in opposition to Great Lakes' summary judgment motion - given his death. (Dkt. No. 116) On January 5, 2023, Great Lakes moved to strike Heffner's declaration (Dkt. No. 118), and on January 12, 2023, Herzig filed his opposition to Great Lakes' motion to strike, arguing that Heffner's declaration was admissible under the residual exception to the hearsay rule, pursuant to Rule 807 of the Federal Rules of Evidence. (Dkt. No. 119)

On May 18, 2023, this Court granted Great Lakes' motion to strike and granted in part Great Lakes' motion for summary judgment.

As to Great Lakes' motion to strike, the Court concluded that “the Heffner declaration contains hearsay statements that are not admissible under the residual exception. Accordingly, Great Lakes' motion to strike the declaration will be granted. This Court will likewise not consider any of the corresponding paragraphs of the Herzig declaration, in which Herzig reports what Heffner told him about what Goldman had said.” Herzig, 2023 WL 3560578, at *20. The Court nonetheless analyzed the relevant portions of the Heffner declaration, and noted that it “would reach the same conclusion even if the Heffner declaration were admissible.” Id. at *27 n.20, *30 nn.23, 25; see also id. at *7 n.9.

The Court granted Great Lakes summary judgment on its...