ACE Am. Ins. Co. v. Frey
| Decision Date | 27 September 2019 |
| Docket Number | 17 Civ. 6810 (ER) |
| Citation | 417 F.Supp.3d 289 |
| Parties | ACE AMERICAN INSURANCE COMPANY, Plaintiff, v. Sewell L. "Hunter" FREY, Jr., the Estate of Eduardo Nunez, the Estate of Daniela Abreu, Teresa Henriquez, Abel Garcia, Raymond Bautista, and the Estate of Jose Henriquez, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Kurt Michael Mullen, Nixon Peabody LLP, Boston, MA, Seth Lawrence Berman, Abrams, Fensterman, Fensterman, Eisman, Formato, Ferrara, Wo, Lake Success, NY, for Plaintiff.
Philip Michael Hines, Held & Hines, LLP, Brooklyn, NY, Christopher Scott Joslin, Steven Jeffrey Horowitz, David Horowitz, P.C, New York, NY, for Defendants.
Ramos, D.J.:
This case arises out of a rental car accident that resulted in the death of three adults and an unborn child. At the time of the accident, Eduardo Nunez ("Nunez") was driving a car Sewell L. "Hunter" Frey, Jr. ("Frey") rented from National Car Rental ("National"). Frey purchased supplemental insurance for the rental car from Ace American Insurance Company ("Ace" or "Plaintiff"). Ace seeks a declaration that it has no duty to defend or indemnify Frey1 or any other claimant for the claims asserted in three underlying actions related to the accident.2 Defendants counterclaim that Ace is required to cover their losses. Ace moves for summary judgement. For the reasons set forth below, Ace's motion is DENIED.
On January 28, 2012, Frey rented a Chrysler vehicle from National Car Rental ("National") at LaGuardia Airport in Queens, New York. Doc. 71, ¶¶ 1, 16. On February 2, 2012, Eduardo Nunez was driving the vehicle on the Major Deegan Expressway in the Bronx, New York when he lost control of the vehicle, which he was reportedly driving at "a high rate of speed." Id. ¶ 14–15. Nunez crashed into a concrete pillar killing himself, Daniela Abreu ("Abreu") and her unborn child, and Jose Henriquez ("Henriquez"), while seriously injuring Abel Garcia ("Garcia") and Raymond Bautista ("Bautista"). Id. ¶ 15. The parties do not provide information regarding the relationship between Frey and Nunez, if any, or how Nunez got access to the rental vehicle. Defendants do state that Garcia was Frey's employee. Doc. 68, 5. The injured persons and the estates of the deceased (collectively, the "Defendants") filed multiple lawsuits against Frey, Nunez, National, and a variety of other defendants including the City of New York and Chrysler. Doc. 71, ¶ 16. National is defending Frey in the Underlying Actions. Doc. 1, ¶ 6.
Frey rented the vehicle pursuant to the terms of a rental agreement and a policy jacket,3 which formed part of the rental agreement collectively the "Rental Agreement"). Doc. 71, ¶ 1. Frey paid $343.72 to rent the vehicle for one week, an additional $90.65 for Supplemental Liability Insurance ("The Ace Policy"), and $63.00 for a Loss Damage Waiver. Doc. 59-1, 4. The Rental Agreement provided "renters and authorized drivers" with minimum liability coverage of $100,000 per accident involving the death of more than one individual. Id. at 5. It also provided that no one other than the renter or authorized additional drivers ("AADs") could drive the vehicle without National's prior written consent. Doc. 71, ¶ 2. AADs were defined as "any individual in addition to Renter, who is permitted by [National], State law or separate agreement ... to operate the Vehicle." Id. Frey signed the Rental Agreement but did not list any AADs, which Frey would have had to pay an additional driver charge to add. Id. ¶¶ 3–4.
In addition to the Rental Agreement, Frey purchased an optional supplemental insurance policy (the "Ace Policy") offered by National. Doc. 71, ¶ 20. The Ace Policy is excess of the New York State statutory minimum coverage required by law to be included in any vehicle rental. Id. ¶ 6. Frey, the renter, was a "Named Insured," defined in the Ace Policy as the person renting the vehicle or any additional authorized driver, as defined in the Rental Agreement. Id. ¶ 9. The Ace Policy expressly disclaimed liability arising out of the use of the vehicle by any unauthorized driver. Id. ¶¶ 10–11. The Ace Policy included a Supplemental Uninsured/Underinsured Motorists Endorsement ("SUM Endorsement"). Id. ¶ 24. The SUM Endorsement states that Ace will pay for sums that the named insured is legally entitled to recover from the owner or driver of an uninsured motor vehicle. Id. ¶ 25.
Ace filed the complaint on September 7, 2017, seeking a declaration holding that Ace owes no coverage obligation, including any duty to defend or indemnify, to Frey or any other person for the underlying actions. Doc. 1. On November 22, 2017, Defendants Garcia and Bautista answered the complaint, counterclaiming that Ace must cover their losses as a matter of law. Doc. 22. Defendants Abreu and Henriquez responded on December 6, 2017. Doc. 26. Approximately one week later, Ace responded to the counterclaim. Doc. 28. Ace also filed a request to enter default against Frey, the estate of Nunez, and the estate of Henriquez for failure to appear or otherwise respond to the complaint. Doc. 33. After an order to show cause hearing, the Court entered a December 16, 2018 default judgment against Frey. Doc. 46. The Court amended the default judgment order on May 9, 2018 to hold it does not bar Defendants' claims against Ace in this action. Doc. 55. On November 9, 2018, Ace filed the instant motion for summary judgment, a Rule 56.1 statement, and a letter motion for oral argument. 8. Docs. 57, 60, 61.
Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact." Fed. R. Civ. P. 56(a). "An issue of fact is ‘genuine’ if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Senno v. Elmsford Union Free Sch. Dist. , 812 F. Supp. 2d 454, 467 (S.D.N.Y. 2011) (citing SCR Joint Venture L.P. v. Warshawsky , 559 F.3d 133, 137 (2d Cir. 2009) ). A fact is "material" if it might affect the outcome of the litigation under the governing law. Id. The party moving for summary judgment is first responsible for demonstrating the absence of any genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party meets its burden, "the nonmoving party must come forward with admissible evidence sufficient to raise a genuine issue of fact for trial in order to avoid summary judgment." Saenger v. Montefiore Med. Ctr. , 706 F. Supp. 2d 494, 504 (S.D.N.Y. 2010) (quoting Jaramillo v. Weyerhaeuser Co. , 536 F.3d 140, 145 (2d Cir. 2008) ).
The hazards covered under the Ace Policy, death, bodily injury, and damage to property, are prescribed by state law. With respect to New York insurance contracts, the Second Circuit resolves ambiguities strictly against the insurer. Kimmins Indus. Serv. Corp. v. Reliance Ins. Co. , 19 F.3d 78, 81 (2d Cir. 1994) (collecting cases). The Ace Policy pays for amounts of loss exceeding the limits of statutory liability in the underlying insurance (the Rental Agreement), but only for the "hazards" insured by the Rental Agreement. Doc. 59-2, 7. The Ace Policy does not define the term "hazards" and Defendants argue it should be construed against them. Doc. 69-7, 1 n.1.
Defendants Garcia and Bautista claim the hazards are those whose coverage is dictated by public policy, pursuant to the interplay between N.Y. Veh. & Tr. Laws § 370(1) () and § 388 (). Doc. 69-7, 9; see also ELRAC LLC v. Duque , 52 Misc. 3d 30, 32, 35, 35 N.Y.S.3d 627 (N.Y. App. Term. 2016) (). However, the interplay argument does not hold here because the civil liability provision contained in § 388 was preempted in 2009 by federal law. See Stratton v. Wallace , No. 11-CV-0074A SR, 2012 WL 3201666, at *5 (W.D.N.Y. Aug. 2, 2012) (). In any case, Ace agrees that the Ace Policy restricted the losses that it covered to those resulting from bodily injury, including death, and property damage, as mandated by public policy. Doc. 57, 6.
Ace denies liability on the basis that National did not defend Frey pursuant to the minimum statutory limits included in the Rental Agreement, but rather pursuant to the New York financial responsibility laws: N.Y. Veh. & Tr. Law § 370(1) () and N.Y. Ins. Law § 3420(e) (). Doc. 70, 2. The Ace Policy defined "named insured" as (1) the person renting the vehicle, (2) any additional authorized driver as defined in the Rental Agreement, or (3) as required by statute, who has elected to purchase optional "Extended Protection Liability Insurance" (the Ace Policy) for an additional daily charge under the Rental Agreement. Doc. 59-2, 10. Definitions one and three are easily dispensed with. There is no dispute that Frey, and not Nunez, rented the vehicle and paid for the Ace Policy. The Court next addresses whether Nunez was an AAD, and subsequently a named insured covered by § 3420(e).
Nunez was an AAD because § 388 creates a statutory presumption that National consented to his...
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