ECB USA, Inc. v. Chubb Ins. Co. of N.J.

• Decision Date: 25 February 2022
• Docket Number: Civil Action No. 20-20569-Civ-Scola
• Citation: 587 F.Supp.3d 1165
• Parties: ECB USA, INC. and others, Plaintiffs, v. CHUBB INSURANCE COMPANY OF NEW JERSEY and Executive Risk Indemnity, Inc., Defendants.
• Court: U.S. District Court — Southern District of Florida

587 F.Supp.3d 1165

ECB USA, INC. and others, Plaintiffs,

v.CHUBB INSURANCE COMPANY OF NEW JERSEY and Executive Risk Indemnity, Inc., Defendants.

Civil Action No. 20-20569-Civ-Scola

United States District Court, S.D. Florida.

Signed February 25, 2022

Davide Proietti, Joel Steven Magolnick, Marko, Magolnick, P.A., John Evron Kirkpatrick, John E. Kirkpatrick & Associates, Miami, FL, for Plaintiffs ECB USA, Inc., Atlantic Ventures Corp., G.I.E. C2B.

Joel Steven Magolnick, Marko & Magolnick, P.A., Roy Mark Hartman, Sacher Zelman Hartman Paul Beiley et al., John Evron Kirkpatrick, John E. Kirkpatrick & Associates, Miami, FL, for Plaintiff Constantin Associates LLP.

Aaron Stenzler Weiss, Steven Jeffrey Brodie, Daniel Gonzalo Enriquez, Carlton Fields Jorden Burt, P.A., Miami, FL, for Defendant Chubb Insurance Company of New Jersey.

Aaron Stenzler Weiss, Carlton Fields, P.A., Miami, FL, for Defendant Executive Risk Indemnity, Inc.

Amended¹ Omnibus Order

Robert N. Scola, Jr., United States District Judge The Defendants—insurance providers—move for summary judgment on all claims asserted by the Plaintiffs—assignees of certain insurance-related claims. (ECF No. 161.) The Plaintiffs also move for partial summary judgment on two specified issues. (ECF No. 154.) The parties filed oppositions in response to each motion (ECF Nos. 186, 187), and each filed a reply in support of their respective motions (ECF Nos. 193, 195). Resolution of these cross motions for summary judgment also entails review and consideration of the Defendants’ motion to dismiss Count One (ECF No. 143) and the Plaintiffs’ motion to substitute (ECF No. 215), both of which were fully briefed. After careful consideration of the briefing, the record, and the relevant legal authorities, the Court grants in part and denies in part the Defendants’ motion for summary judgment (ECF No. 161 ) and grants in part and denies in part the Plaintiffs’ motion for partial summary judgment (ECF No. 154 ). Moreover, the Court denies the Defendants’ motion to dismiss (ECF No. 143 ) and grants the Plaintiffs’ motion to substitute (ECF No. 215 ).

1. Background

As a general matter, insurance policies and insurance salesmen have long been the butt of jokes. The former are not known for beautiful prose nor the latter for exciting conversation. But insurance contracts can provide fodder for scores of attorneys, grammarians, and logophiles, where, as here, the meaning of one phrase and the placement (or omission) of one comma can make the difference between coverage and nothing.

On December 17, 2019, ECB USA, Inc., Atlantic Ventures Corp., and G.I.E. C2B (the "Plaintiffs") sued Chubb Insurance Company of New Jersey ("Chubb") in the Circuit Court of the Eleventh Judicial Circuit for various relief associated with Chubb's denial of insurance coverage in an earlier litigation. (ECF No. 1.) On February 7, 2020, Chubb removed the case to federal court on the basis of diversity jurisdiction. (Id. ) On February 26, 2021, the Plaintiffs and Constantin Associates, LLP ("Constantin") filed the operative pleading, the Fourth Amended Complaint, which brings seven claims against Chubb and Executive Risk Indemnity, Inc. ("ERI"). (ECF No. 79.)

Before addressing the merits of each claim, the Court will briefly provide the relevant factual background. In an insurance dispute such as this, the Court will focus this discussion on: (1) the relevant actors, (2) the terms and negotiations of the relevant insurance policies, (3) the entities that are provided coverage under the relevant insurance policies, (4) the extent of coverage provided under the policies, and (5) the underlying lawsuit that is the subject of the alleged failure to defend and indemnify.

A. The Actors

Control Associates/Constantin Group L.P. ("Control Group") is a limited partnership registered in Delaware that provides professional and consulting services. (ECF No. 156 at ¶ 5; ECF No. 184 at ¶ 5; ECF No. 155-51.) Constantin, a New York limited liability partnership, provides accounting and auditing services. (ECF No. 155 at ¶ 106; ECF No. 156 at ¶ 6; ECF No. 184 at ¶ 6.)

ERI, a Delaware-based corporation, issues professional liability insurance policies in New Jersey. (ECF No. 156 at ¶ 1; ECF No. 184 at ¶ 1.) Chubb is a New Jersey-based entity that also provides professional liability insurance policies in New Jersey. (ECF No. 156 at ¶ 2; ECF No. 184 at ¶ 2.) Both Chubb and ERI are subsidiaries of Chubb Limited. (ECF No. 156 at ¶ 3; ECF No. 184 at ¶ 3.) Sometimes, Chubb and ERI share underwriters, claims staff, and policies and procedures for underwriting and claims processing. (ECF No. 156 at ¶ 4; ECF No. 184 at ¶ 4.) From 2002 to 2019, either Chubb or ERI issued professional liability insurance policies to Control Group. (ECF No. 156 at ¶ 7; ECF No. 184 at ¶ 7.)

B. The Policies

This dispute primarily centers around the terms and negotiations of one policy—the 2017-18 Policy. In 2017, Control Group obtained this professional liability insurance policy, number 8168-4190, from Chubb. (ECF No. 156 at ¶ 9; ECF No. 184 at ¶ 9; ECF No. 156-7.) The policy covered the period from December 12, 2017 to December 12, 2018. (ECF No. 156-7 at 5.)

The parties dispute whether the 2017-18 Policy was a renewal of the prior policy. Control Group had filed previous renewal applications, and the parties agree that the 2016-17 Policy was a renewal of the 2015-16 Policy. (ECF No. 156 at ¶¶ 23–24, 26; ECF No. 184 at ¶¶ 23–24, 26.) The 2017-18 Policy process began around September 2017 when Chubb sent Control Group, through a third party, a "non-renewal letter," indicating that Chubb did not yet have adequate information to underwrite Control Group's "upcoming renewal." (ECF No. 155-40; ECF No. 185 at ¶¶ 166–167; ECF No. 196 at ¶¶ 166–167.) In October 2017, Control Group, through a third party, requested a renewal application. (ECF No. 156-24; ECF No. 185 at ¶ 157; ECF No. 196 at ¶ 157.) One month later, Sean Murray, an underwriter for the Defendants, sent "the renewal app." (ECF No. 185 at ¶ 158; ECF No. 196 at ¶ 158; ECF No. 185-21.) And on December 6, 2017, Control Group submitted a "Professional Error and Omission Insurance Renewal Application." (ECF No. 196 at ¶ 159; ECF No. 196-5.) Indeed, the application form was labeled "Chubb Pro E&O Renewal Application," and, above the signature line, the application is referred to as the "Renewal Application." (ECF No. 196-5.) A week later, Chubb sent a binder letter for the 2017-18 Policy, stating "thank you again for the renewal business for [Control Group]." (ECF No. 185-24.)

C. The Insureds

Control Group's policies from 2003 to 2017 were all under the applicant name "[Control Group] and Subsidiaries." (ECF No. 155 at ¶ 76; ECF No. 185 at ¶ 76.) But the entities provided coverage under the policies (the Insureds) were not necessarily limited to Control Group's subsidiaries. For example, the 2016-17 Policy covered any Insured, which was defined, in relevant part, as "the person or entity stated in Item 1 of the Declarations." (ECF No. 155-16 at 9.) Item 1 of the Declarations was amended by an endorsement—Endorsement No. 5—within the 2016-17 Policy, which provided a list of additional "Named Insured[s]," including Constantin. (ECF No. 93-3; ECF No. 155 at ¶ 79; ECF No. 155-16 at 6, 22; ECF No. 185 at ¶ 79.) Control Group first added Constantin to the "Named Insured list" in the 2015-16 Policy. (ECF No. 155 at ¶ 78; ECF No. 155-15 at 6; ECF No. 155-39; ECF No. 185 at ¶ 78.)

The 2017-18 Policy did not include Endorsement No. 5. (ECF No. 155 at ¶¶ 92, 94; ECF No. 185 at ¶¶ 92, 94.) Nevertheless, Control Group states that it intended that Constantin remain an Insured. (ECF No. 156 at ¶ 35.) Indeed, on December 12, 2017, before the completed binder letter was sent, Control Group was asked to confirm the "list of named insured" for the 2017-18 Policy—the list as proposed included Constantin. (ECF No. 155-43; ECF No. 156-31.)

But the definition of an "Insured" was different in the 2017-18 Policy. To determine who was an Insured, one must wade through multiple definitions:

• "Insured" was defined as "any Organization and any Insured Person."² (ECF No. 156-7 at 8; ECF No. 155-43 at 22.)

• "Organization" was defined as the "Parent Organization and any Subsidiary." (ECF No. 155-43 at 13.)

• The Parent Organization was defined as Control Group. (ECF No. 185-1.)

• Subsidiary was defined, in relevant part, as an entity for which Control Group, directly or indirectly, owns or controls the majority of the "outstanding securities representing the present right to vote for election of or to appoint" management. (Id. )

While the definition of Insured changed from the 2016-17 Policy to the 2017-18 Policy, the parties dispute whether Control Group received adequate notice of this change. (ECF No. 156 at ¶ 36; ECF No. 184 at ¶ 36.) The Defendants did not explicitly communicate to Control Group that there was a different definition of Insured and Subsidiary. The Defendants point to an e-mail dated December 4, 2017, in which Mr. Murray explained that the parties could "either keep [the 2017-18 Policy] on the current form or move it to the new form." (ECF No. 155-42.) Mr. Murray then explained that the "new form" had "a lot of enhancements to it"; Mr. Murray did not identify a change in the list of Insureds or a change in the definition of Insured. (Id. ; ECF No. 185 at ¶ 85.) On January 9, 2018, Control Group was asked to review the 2017-18 Policy, and the Policy was on the "new form" that Mr. Murray had addressed earlier. (ECF No. 155-46.)

D. The Coverage

In relevant part, the 2017-18 Policy provided coverage for claims related to "Management consulting services," which are defined as "services directed toward expertise in banking finance, accounting, risk and systems analysis, design and implementation, asset recovery and strategy planning for financial institutions." (ECF No. 155-37 at 23; ECF No. 185 at ¶ 1.) That definition remained the same from 2002...