Bodewes v. Ulico Cas. Co.

• Citation: 336 F.Supp.2d 263
• Decision Date: 25 September 2004
• Docket Number: No. 01-CV-365C.,01-CV-365C.
• Parties: Terrence L. BODEWES, James A. Maloney, Ernest Bouchard, Vincent Fetes, Daryl Bodewes, James Biddle, Sr., George Ferraro and Thomas Herr, Plaintiffs, v. ULICO CASUALTY COMPANY, Defendant.
• Court: U.S. District Court — Western District of New York

336 F.Supp.2d 263

Terrence L. BODEWES, James A. Maloney, Ernest Bouchard, Vincent Fetes, Daryl Bodewes, James Biddle, Sr., George Ferraro and Thomas Herr, Plaintiffs, v. ULICO CASUALTY COMPANY, Defendant.

No. 01-CV-365C.

United States District Court, W.D. New York.

September 25, 2004.

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Boylan, Brown, Code, Vigdor & Wilson, LLP, Mark A. Costello, of counsel, Rochester, NY, for Plaintiff Terrence L. Bodewes.

Damon & Morey LLP, R. Scott DeLuca, of counsel, Buffalo, NY, for Plaintiffs James Biddle, Sr. and George Ferraro.

Cohen & Lombardo, P.C., Daniel J. Sperrazza, of counsel, Buffalo, NY, for Plaintiff Thomas Herr.

Shaw Pittman LLP, Daniel Aronowitz, of counsel, McLean, VA, for Defendant Ulico Casualty Company.

Levy Ratner, P.C., Jennifer Middleton, of counsel, New York City, for Amici Curiae Curtis Zamerski and Richard Kohl.

CURTIN, District Judge.

In this action, current and former Trustees of the Buffalo Carpenters Health Care Premium Benefit, Annuity & Pension Funds (the "Funds," or the "Plan") seek declaratory judgment pursuant to 28 U.S.C. § 2201 for the purpose of determining the rights and obligations of the parties to a Trustee and Fiduciary Liability Insurance Policy (the "Policy") issued by the Ulico Casualty Company ("Ulico"). The Court heard argument on the parties' cross-motions for summary judgment (Items 5, 10) on June 28, 2004. For the following reasons, Ulico's motion is denied, and the Trustees' motion is granted.

BACKGROUND

On January 19, 2000, plaintiffs Thomas W. Burke,¹ Curtis Zamerski, and Richard Kohl, as Trustees of and/or participants in the Funds, brought an action (Burke, et al. v. Bodewes, et al., No. 00-CV-65C, referred to herein as the "underlying action") pursuant to section 502 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132, seeking equitable relief and damages for alleged breach of fiduciary duty by eight current and former Trustees of the Funds (referred to collectively herein as the "Trustees" or "defendant Trustees"). An amended complaint was filed on April 17, 2000, pursuant to this court's order of April 7, 2000, allowing plaintiffs to make certain insubstantial changes to the original pleading. In addition to the ERISA breach of fiduciary duty claims, the original and amended complaints also asserted claims against the Segal Company, the Funds' former actuary and consultant, pursuant to state common law for negligence professional malpractice, and misrepresentation, and the defendant Trustees asserted cross-claims against Segal for contribution and indemnity. In a decision and order dated June 21, 2002, this court dismissed the claims and cross-claims against Segal with prejudice upon approval of a settlement agreement entered by plaintiffs and Segal on May 10, 2002 (see No. 00-CV-65C, Item 150). Then, in a decision and order dated February 28, 2003, the court denied the motion for summary judgment made on behalf of four of the defendant Trustees, and allowed the plaintiffs to file a second amended complaint to plead fraud with the particularity required by Rule 9(b) of the Federal Rules of Civil Procedure (see No. 00-CV-65C, Item 175). The second amended complaint was filed in the underlying action on April 4, 2003.

In the meantime, between January 27, 2000 and February 17, 2000, each of the individual Trustee defendants (acting either on their own behalf or through counsel) sent a letter to Ulico giving notice of the claims and requesting that Ulico undertake defense of the underlying action pursuant to the terms of the Policy (see Item 7, Appx. 30-34). By letter dated February 28, 2000, counsel for Ulico notified all Trustee defendants that "the policies that Ulico issued to the [Funds] do not afford any coverage for the claims made in the Lawsuit..." (Item 7, Appx. 35). This disclaimer letter explained Ulico's position that, although the Policy had expired on July 10, 1999, a letter dated May 14, 1999 from Owen Rumelt, special counsel to the Trustees, "potentially could afford coverage for future claims ..." (id. at page 2). In his May 14 letter, Mr. Rumelt advised Ulico that claims would likely be made under the Policy as the result of his law firm's investigation of the decline in the financial status of the Pension Fund (see Item 7, Appx. 24). The Ulico disclaimer letter went on to state that, notwithstanding this notice of potential claims, coverage was precluded by Endorsement No. 2 of the Policy, which "expressly excludes coverage for any claim or allegation which, directly or indirectly, in whole or in part, arises out of assertions, allegations, causes of action or demands by or on behalf of an Insured"-namely, Mr. Burke, the current Chair of the Pension Fund Board of Trustees (Item 7, Appx. 35, page 2). The disclaimer letter also states that, apart from Endorsement No. 2, the Policy would not afford coverage for any claims in the underlying complaint which were not referred to in Mr. Rumelt's May 14, 1999 letter (id. at pages 2-3).

The defendant Trustees then answered the complaint, and alleged various third-party claims against Ulico seeking defense and indemnification under the Policy (see, e.g., No. 00-CV-65C, Items 11, 16, 17, 24, 43). Defendants James Biddle and George Ferraro also asserted a breach of contract claim against Ulico for refusing to provide coverage (No. 00-CV-65C, Item 24). By order of this court entered upon approval of the parties' stipulation (No. 00-CV-65C, Item 101), the third-party claims against Ulico were severed from the underlying action to proceed and be tried separately as Civil No. 01-CV-365.

Ulico has moved for summary judgment (Item 5) seeking dismissal of the defendants' third-party complaints. Defendant Trustees Terrence L. Bodewes, Thomas Herr, James Biddle, Sr., and George Ferraro have cross-moved for summary judgment (Item 10) seeking an order requiring Ulico to assume defense of the underlying action and to reimburse them for defense costs and attorneys' fees incurred, in accordance with the terms of the Policy.

DISCUSSION

I. Standard for Summary Judgment

Summary judgment is properly granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see R.B. Ventures, Ltd. v. Shane, 112 F.3d 54, 57 (2d Cir.1997). In a dispute about the meaning of language in an insurance policy, a motion for summary judgment may be granted only where the policy language is unambiguous and conveys a definite meaning. See Sayers v. Rochester Telephone Corp., 7 F.3d 1091, 1094 (2d Cir.1993).

The interpretation of unambiguous provisions in an insurance policy is a question of law for the court, which (the parties agree) is to be determined under principles of New York law. See Century 21, Inc. v. Diamond State Ins. Co., 2004 WL 1117897, at *2 (S.D.N.Y. May 18, 2004) (citing Mazzuoccolo v. Cinelli, 245 A.D.2d 245, 246-47, 666 N.Y.S.2d 621, 622-23 (1st Dep't 1997)). If the language is susceptible to different reasonable interpretations, and "where there is relevant extrinsic evidence of the parties' actual intent," then the meaning of the policy becomes an issue of fact precluding summary judgment. Seiden Assocs. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir.1992); see also Hartford Accident & Indem. Co. v. Wesolowski, 33 N.Y.2d 169, 172, 350 N.Y.S.2d 895, 305 N.E.2d 907 (1973).

The mere fact that the parties to an insurance policy assert opposing interpretations of the policy's provisions does not constitute an ambiguity precluding summary judgment. Sayers, 7 F.3d at 1095; In re County Seat Stores, Inc., 280 B.R. 319, 324 (Bankr.S.D.N.Y.2002). Instead, where the parties disagree as to the proper interpretation of the policy language, the court should seek to determine the parties' intent by construing the policy as a whole. Village of Sylvan Beach, N.Y. v. Travelers Indem. Co., 55 F.3d 114, 115 (2d Cir.1995). "By examining the entire contract, we safeguard against adopting an interpretation that would render any individual provision superfluous." Sayers, 7 F.3d at 1095 (citing Two Guys from Harrison-N.Y., Inc. v. S.F.R. Realty Assocs., 63 N.Y.2d 396, 403, 482 N.Y.S.2d 465, 472 N.E.2d 315 (1984)).

Thus, where both parties contend that the policy language is clear and unambiguous, yet urge opposing interpretations of it, the court should adopt the interpretation "which gives meaning to every provision of [the policy]. A construction which renders a clause meaningless should be avoided." Trump v. Refco Properties, Inc., 194 A.D.2d 70, 605 N.Y.S.2d 248 (1st Dep't 1993) (citation omitted), leave to appeal denied, 83 N.Y.2d 754, 612 N.Y.S.2d 108, 634 N.E.2d 604 (1994). When making this determination, the court should be guided by the "reasonable expectation and purpose of the ordinary business man when making an ordinary business contract." Bird v. St. Paul Fire & Mar. Ins. Co., 224 N.Y. 47, 51, 120 N.E. 86 (1918).

Ulico contends that it is entitled to summary judgment dismissing the third-party complaints against it because the claims in the underlying action are clearly and unambiguously excluded from coverage under either the "Insured vs. Insured" exclusion or the "Insufficient Contributions" exclusion contained in the Policy. The defendant Trustees contend that they are entitled to summary judgment granting the relief sought in their third-party complaints against Ulico-namely, that the clear and unambiguous policy language obligates Ulico (1) to undertake the defense of the ERISA breach of fiduciary duty claims made against the Trustees in the underlying action, and (2) to indemnify them against any damages that may be awarded on any of those claims.

II. The Claims

As set forth above, the underlying complaint which Ulico...