Federal Ins. Co. v. Cablevision Systems Dev. Co.

Decision Date01 July 1986
Docket NumberNo. 85 CIV 250.,85 CIV 250.
Citation637 F. Supp. 1568
PartiesFEDERAL INSURANCE COMPANY, Plaintiff, v. CABLEVISION SYSTEMS DEVELOPMENT COMPANY, Charles F. Dolan, Communications Management Corp., Cablevision Systems Holdings Company, Atlantic Cable Television Service Corp., Cablevision of Huntington, Cablevision Systems Huntington Corp., Cablevision Program Services Company, Cablevision Systems Corporation, Cablevision Consolidations Company, Sports-Channel Associates, Long Island Cable Communications Development Company, AM Cable TV Industries, Inc., Lawrence Meli, Robert J. Sullivan, John Tatta, American Employers Insurance Company, Liberty Mutual Insurance Company, National Union Fire Insurance Company of Pittsburgh, Pennsylvania and Mission Insurance Company, Defendants. And Related Counter-Claims and Cross-Claims.
CourtU.S. District Court — Eastern District of New York

Simpson Thacher & Bartlett, New York City, for plaintiff Federal Ins. Co.; Barry R. Ostrager, Mary Kay Vyskocil, Gregory A. Ritter, of counsel.

Sullivan & Cromwell, New York City, for defendant Cablevision and individual defendants; Yvonne S. Quinn, Robert A. Sacks, of counsel.

Wilson, Elser, Moskowitz, Edelman & Dicker, New York City, for defendant American Employers Ins. Co.; Herbert Dicker, Albert A. Foster, Jr., Ellen F. Weisman, of counsel.

Semel & Boeckmann, New York City, for Defendant Liberty Mut. Ins. Co.; Douglas A. Boeckmann, Elisa Schaefer Brickell, James F. Kelleher (admitted Pro Hac Vice), of counsel.

BARTELS, District Judge.

This is a controversy among several insurance companies concerning coverage of their insured. Plaintiff Federal Insurance Company (Federal) brought this action under the Federal Declaratory Judgment Act, 29 U.S.C. § 2201, for a declaration of the rights and liabilities of the various insurance companies providing liability coverage to defendant Cablevision Systems Development Co., its affiliates and several officers and employees (collectively Cablevision), in connection with a law suit brought against Cablevision by one of its competitors, James Nishimura. Currently before the Court are motions for summary judgment brought by Federal and another of Cablevision's insurers, American Employers Insurance Co. (American), which seek, in effect, to determine the liability of a third insurer, Liberty Mutual Insurance Co. (Liberty), to contribute to the defense costs incurred by Cablevision in the underlying action. Liberty, in cross-motion for summary judgment on its claims, asserts that as a matter of law, its policy provides no coverage for any of the claims in the underlying complaint against its insured, and therefore it has no duty to defend. This claim is predicated on provisions in the Liberty policy limiting or excluding coverage where the insured acted knowingly or with intent to cause injury. The background of this action follows.

Background
A. Nishimura Action

The present action has its roots in an earlier suit filed January 11, 1983, against Cablevision by a small, competing cable television company, Huntington TV Cable Corporation (HTVC), and several affiliates, controlled by James Nishimura which operated in Huntington, Long Island. Nishimura, et al. v. Dolan, et al., 599 F.Supp. 484 (the Nishimura action). The bulk of the Nishimura complaint charged Cablevision with various violations of the federal antitrust laws, and also included pendant state antitrust and common law tort claims, the relevant portions of which are discussed below. In addition to the Cablevision defendants, the Nishimura complaint named as defendants several New York City area sports teams (Teams)1 charging that exclusive cablecasting agreements between Cablevision and the Teams violated antitrust laws as well. Cablevision filed counterclaims against plaintiffs and the parties engaged in extensive discovery, involving disputes which, on several occasions, necessitated a series of hearings before this Court.

On October 19, 1984, some 18 months after the Nishimura suit was filed, the Court granted summary judgment dismissing all claims against the Teams on the ground, inter alia, that plaintiffs were without standing to challenge the exclusivity of the agreements between Cablevision and the Teams. Nishimura v. Dolan, 599 F.Supp. 484 (E.D.N.Y.1984). In the Nishimura action, there remain pending the federal antitrust and pendant state law claims against Cablevision alone. However, no further proceedings have occurred before this Court in the Nishimura action since the October 1984 decision. In the proceedings just described, Cablevision apparently has incurred in excess of $2,000,000 in legal expenses. The liability of Cablevision's various insurers for this sum, as well as possible future defense costs, is the subject of the declaratory action before this Court.

B. Present Action

In January 1985, Federal filed the present declaratory action against Cablevision, its insured, and three other insurers who have provided coverage to Cablevision at various times — American, Liberty, and National Union Insurance Company of Pittsburgh, Pennsylvania (National Union) — to determine the various insurers' obligations, if any, to defend or indemnify Cablevision with respect to the claims asserted against it in the Nishimura action. Defendant Cablevision subsequently impleaded a fifth insurer, Mission Insurance Company (Mission), overlooked in the Federal Complaint, which had also provided potential liability coverage. Federal subsequently was granted permission to assert claims directly against Mission. Three of these insurers — Federal, American and Liberty — issued to Cablevision policies providing virtually identical coverage, although effective during different time periods. Liberty, whose policy is at issue in these motions, issued to Cablevision a policy of Comprehensive General and Broad Form Comprehensive General Liability insurance covering the period September 1, 1979 to September 1, 1980.2

Generally, the Comprehensive General Liability portion of the Liberty policy covers Cablevision for liabilities Cablevision incurs as a result of an "occurrence" during the policy period causing "bodily injury" or "property damage" as those terms are defined in the policy and subject to various exclusions discussed in more detail below. The Broad Form Comprehensive General Liability Endorsement provides further coverage to Cablevision for liabilities Cablevision incurs because of "personal injury" as defined in the policy, also subject to certain exclusions. Although the Broad Form Endorsement appears to provide Cablevision with coverage for "advertising injury" as well, a separate "Amendatory Endorsement" explicitly excludes advertiser's liability from the policy. In addition to the indemnity coverage just described, Liberty's policy also obligates it to defend or reimburse defense costs of any action against Cablevision in which any claim is asserted that may be covered by Liberty's policy "even if any of the allegations of the suit are groundless, false or fraudulent." The policies issued by Federal and American are virtually identical to Liberty's except that unlike Liberty, they also provide coverage for advertising injury.3

Following commencement of the Nishimura action in January 1983, and after Cablevision had retained as its attorneys Sullivan & Cromwell to defend that action, Cablevision, through its insurance brokers, notified its insurers of the suit and provided them with copies of the Nishimura summons and complaint. American, by letter dated July 13, 1983, informed Cablevision of possible coverage under the American policy of a number of the claims in the Nishimura complaint concerning allegations of instigation of customer dissatisfaction, disparagement through false and misleading statements and interference with plaintiffs' relationship with customers, although the policy would not cover the antitrust claims. Therefore, American stated, "the company will defend the entire action and will indemnify the insured if it develops that the plaintiff offers proof of a covered claim not subject to any exclusions." (American Appendix Amer.App. Exh C). Similarly, Federal, by letter dated September 1, 1983, informed Cablevision that, while the bulk of the Nishimura complaint involved claims for which there was no coverage, it believed that the "allegations contained in Counts 10, 11, 13-17 present issues as to whether coverage will be provided under the terms of the policy," and therefore Federal, "while standing ready to defend you in this litigation, agrees to allow your own attorneys to continue to defend you, at your own expense and we will contribute to the attorneys' fees generated by such defense." (Amer. App.Exh B). Liberty, however, has consistently denied coverage, despite several requests by Cablevision that it reconsider its decision in light of American's and Federal's decision to cover Cablevision. (Amer.App.Exh D; Federal App.Exh C).

Following the commencement of this action by Federal, all the other insurers cross-claimed against each other and against Cablevision, and counterclaimed against Federal, each denying its own liability under various theories and asserting the liability of Federal alone, or alternatively demanding apportionment of liability among all the insurers. In the motions now before the Court, American and Federal seek summary judgment on their claims against Liberty for a declaration that Liberty is liable to contribute to the costs of Cablevision's defense in the Nishimura action.4 Liberty, in turn, seeks summary judgment on its claim for a declaration that it is not obligated to defend Cablevision or to contribute with the other insurers to Cablevision's defense costs, to which motion Cablevision has responded.

Discussion

The general principles of law governing an insurer's duty to defend are well known. Under New York law5 an insurer's duty to defend, under a policy such as Liberty's, is broader than...

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