Peck v. Public Service Mut. Ins. Co.

• Decision Date: 17 April 2003
• Docket Number: No. 01-9459.,01-9459.
• Parties: Ellen M. PECK, Plaintiff-Appellant, v. PUBLIC SERVICE MUTUAL INSURANCE COMPANY, Defendant-Appellee, Greater New York Mutual Insurance Company, Defendant.
• Court: U.S. Court of Appeals — Second Circuit

326 F.3d 330

Ellen M. PECK, Plaintiff-Appellant, v. PUBLIC SERVICE MUTUAL INSURANCE COMPANY, Defendant-Appellee, Greater New York Mutual Insurance Company, Defendant.

No. 01-9459.

United States Court of Appeals, Second Circuit.

Argued: October 1, 2002.

Decided: April 17, 2003.

John W. Mills, Murphy and Karpie, LLC, Bridgeport, CT, for Plaintiff-Appellant.

Oliver B. Dickins, Simsbury, CT, for Defendant-Appellee.

Before: MINER, SOTOMAYOR, and KATZMANN, Circuit Judges.

MINER, Circuit Judge.

Plaintiff-appellant Ellen M. Peck appeals from a summary judgment entered in the United States District Court for the District of Connecticut (Goettel, J.) dismissing her action to recover damages from defendant-appellee Public Service Mutual Insurance Company ("Public Service") under Connecticut's direct action statute, Conn. Gen.Stat. § 38a-321 (2000). This action arises out of an underlying tort action brought by Peck in Connecticut Superior Court against, inter alia, South Norwalk Redevelopment Limited Partnership ("South Norwalk"). South Norwalk never notified its insurer, Public Service, of Peck's tort action. A default judgment was subsequently entered against South Norwalk as a result of its failure to respond to Peck's outstanding discovery requests, and a jury later awarded Peck $250,000 in damages. As part of a settlement with Peck, South Norwalk assigned to her whatever claims it had against Public Service.

After Peck filed the instant diversity action against Public Service, the latter moved for summary judgment on several grounds, one of which was that Public Service had been materially prejudiced by South Norwalk's failure to provide it with timely notice of Peck's underlying tort action. It was solely upon this ground that the District Court entered summary judgment for Public Service and dismissed Peck's complaint. For the reasons set forth below, we conclude that the District Court erred in holding as a matter of law that Peck failed to carry her burden of showing that Public Service was not materially prejudiced by any untimely notice Public Service received of Peck's underlying tort action. Accordingly, we vacate the summary judgment and remand the case to the District Court for proceedings consistent with this opinion.

BACKGROUND

I. Events Leading Up to Peck's Underlying Tort Action

South Norwalk, a Connecticut limited partnership, owned the Washington Market Building in South Norwalk, Connecticut. On May 12, 1992, South Norwalk entered into a ten-year commercial lease with Rattlesnake Ventures, Inc. ("Rattlesnake"), a Connecticut corporation, for premises in Washington Market Building to be used for the operation of a "full-service restaurant" called the Rattlesnake Bar and Grill. The lease required, in relevant part, that Rattlesnake purchase commercial liability insurance, that Rattlesnake name South Norwalk as an additional insured on the policy, and that Rattlesnake deposit the policy with South Norwalk.

Peck owned and resided in a condominium unit located directly above the premises leased by Rattlesnake in the Washington Market Building. In or about October 1992, live rock and roll bands began performing several nights a week between the hours of 9:00 p.m. and 2:00 a.m. at the Rattlesnake Bar and Grill. According to Peck, these live performances resulted in "incredibly loud noises and vibrations ... emanat[ing]" into the street and throughout her condominium unit, in violation of local noise ordinances. Peck's complaints to the Rattlesnake Bar and Grill about the noise went unremedied. Instead, Peck alleged that she was subjected to "vulgar and obscene comments" from the staff of the Rattlesnake Bar and Grill and threatened with physical harm. On one occasion, Peck claimed that someone spread cooking grease on the stairs leading to her condominium.

II. Peck's Filing of the Underlying Tort Action and South Norwalk's Bankruptcy Filing

Neither the noise nor Peck's distaste for the late night rock and roll music abated. Consequently, on June 23, 1994, Peck filed suit in Connecticut Superior Court against Rattlesnake, South Norwalk, and William Opper, the President of Rattlesnake, pleading causes of action for negligence per se, intentional and negligent infliction of emotional distress, and violations of Connecticut's Unfair Trade Practices Act, Conn. Gen.Stat. §§ 42-110b et seq. In particular, Peck alleged that she had been "routinely and regularly ... subjected to excessively loud music, vibration, and crowd noise ... on an ongoing, regular basis since October 1992," resulting in: "[r]egular loss of sleep"; "[n]eedless anxiety and severe emotional distress"; "[r]egular deprivation of her rightful enjoyment to the peace, quiet and enjoyment of her home"; and "[s]evere impairment to the value of and diminution in her dwelling place." She sought money damages and injunctive relief. Five days after Peck's complaint was filed, attorney G. Kenneth Bernhard of the Law Firm Goldstein and Peck, P.C.¹ entered an appearance on behalf of "[a]ll defendants."

On August 15, 1994, South Norwalk filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Connecticut.² Two weeks later, Peck filed a Revised Complaint, and on October 6, Rattlesnake and Opper filed their answer. On December 6, 1994, attorney Paul L. McCullough filed a notice of appearance for South Norwalk. McCullough had represented South Norwalk in connection with the Rattlesnake lease.

III. The Public Service Insurance Policy

It was not until January 10, 1995 — more than six months after the underlying tort action was commenced and about five months after South Norwalk filed for bankruptcy — that Public Service, a New York corporation, issued an insurance policy to Rattlesnake, naming South Norwalk as an additional insured. The policy defined the policy period as "12/01/94 to 12/01/95 12:01 a.m." The policy further provided that it applied to "bodily injury" or "property damage" only if the "bodily injury" or "property damage" occurred "during the policy period." The policy defined "bodily injury" as "bodily injury, sickness or disease sustained by a person" and "property damage" as "[p]hysical injury to tangible property, including all resulting loss of use of that property." Finally, South Norwalk was required to notify Public Service "as soon as practicable" of any occurrence that might result in a claim or of any claim or suit, and "immediately" to send copies of any demands, notices, summonses, or legal papers received in connection with a claim or lawsuit.

IV. The Underlying Litigation Progresses and Rattlesnake Notifies Public Service of the Underlying Tort Action

On January 23, 1995, the law firm of Gildea & Stevens, which had been retained by another Rattlensake insurer, Greater New York Mutual Insurance Company,³ filed a notice of appearance on behalf of Rattlesnake and Opper. On March 23, attorney Thomas E. Stevens of Gildea & Stevens filed an amended answer and special defense on behalf of Rattlesnake and Opper. The following month, Peck made an offer to Rattlesnake, agreeing to accept $75,000 in full settlement of her claims. The offer was rejected.

By letter dated September 8, 1995, attorney Eugene E. Cedarbaum of Goldstein and Peck, requested that Ronald Fitelson, Rattlesnake's insurance broker, notify Public Service of the underlying tort action. Four days later, Fitelson faxed to Public Service a Loss Notice and the Summons, which separately listed each defendant in the underlying action. Fitelson also instructed Public Service to contact attorney Cedarbaum. On September 14, Daniel Jaconetti, the head of litigation at Public Service, set up a claims file and filled out a "Claims Division Transaction Sheet." The following day, he opened a claims file in which he made handwritten notes about the claims alleged in Peck's complaint, and assigned the file to insurance adjuster Barry Blecher. As to the Ninth and Tenth Counts of the complaint, which alleged negligence per se and negligent infliction of emotional distress against South Norwalk, Jaconetti wrote "Possibly Depending upon lease Agr. and if Co- Δ is ADD'l. INSD. on Policy." Jaconetti also wrote "Has Co- Δ Sought Def. + Indem. From Insd?" and "Has Anyone Answered For Co- Δ Yet?"

On September 29, attorney Cedarbaum forwarded a copy of Peck's August 1994 Revised Complaint to Public Service. On October 5, Blecher faxed a two-page document to Cederbaum, asking him to identify South Norwalk and whether it was the landlord of the property leased by Rattlesnake. A week later, Blecher sent another letter to attorney Cederbaum confirming receipt of the original summons and complaint, the Revised Complaint, and explaining that he needed a copy of the lease to help Public Service determine its "position regarding the availability of coverage." On October 20 attorney Cederbaum sent Blecher copies of various papers pertaining to the litigation, and indicated that he would soon send a copy of the lease. Additionally, Cederbaum informed Blecher that "[t]he premises on which the restaurant is located is rented from South Norwalk" and that Peck's deposition was scheduled for October 26.

In early November, Public Service received a copy of the lease agreement. On November 28, Public Service sent a letter to Rattlesnake denying insurance coverage to Rattlesnake on the grounds that (1) the date of the loss was October 1992, prior to the 1994 effective date of the policy; (2) notice of the claim was not timely provided by Rattlesnake (over a year after service of the complaint); and (3) intentional acts were excluded from the policy's coverage. No disclaimer of coverage was ever sent to South Norwalk, and South Norwalk was not referred to in the letter.

V. Default Judgment Entered Against South Norwalk in the Underlying Tort Action

On August 28, 1996 — six months after the automatic...