Federal Ins. Co. v. American Home Assur. Co.

• Decision Date: 13 October 2009
• Docket Number: No. 07 Civ. 6422(VM).,07 Civ. 6422(VM).
• Citation: 664 F.Supp.2d 397
• Parties: FEDERAL INSURANCE COMPANY a/s/o AAA Mid-Atlantic, Inc., Plaintiff, v. AMERICAN HOME ASSURANCE COMPANY et al., Defendants.
• Court: U.S. District Court — Southern District of New York

664 F.Supp.2d 397

FEDERAL INSURANCE COMPANY a/s/o AAA Mid-Atlantic, Inc., Plaintiff, v. AMERICAN HOME ASSURANCE COMPANY et al., Defendants.

No. 07 Civ. 6422(VM).

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

October 13, 2009.

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Judith Feinberg Goodman, Thomas Joseph Cirone, Goodman & Jacobs LLP, New York, NY, Steven David Usdin, Barrasso, Usdin, Kepperman, Freeman & Sarver, LLC, New Orleans, LA, for Plaintiff.

Lisa C. Wood, Michael Herbert Cohen, Saiber, L.L.C., Florham Park, NJ, for Defendants.

DECISION AND ORDER

VICTOR MARRERO, District Judge.

Plaintiff Federal Insurance Company ("Federal") a/s/o AAA Mid-Atlantic, Inc. ("AAAMA") brought this action in New York Supreme Court, New York County, against defendants American Home Assurance Company ("AHA") and National Union Fire Insurance Company of Pittsburgh, PA ("NUIC") (collectively "Defendants"), seeking a declaratory judgment and ancillary relief relating to the obligations of the parties to defend and indemnify AAAMA in an underlying personal injury action (the "Action"). Defendants removed the action to this Court, invoking the Court's diversity jurisdiction pursuant to 28 U.S.C. § 1441 and 28 U.S.C. § 1332(a). Federal now moves for summary judgment under Federal Rule of Civil Procedure 56 ("Rule 56") arguing that AAAMA is insured under policies issued to American Automobile Association, Inc. ("AAA") by AHA and NUIC, and seeking reimbursement for $25 million of the $26.5 million it paid to settle the Action. Defendants also move for summary judgment, arguing that they do not insure AAAMA with respect to the liability arising from the Action, and alternatively, if they do insure AAAMA, they are obligated to pay, according to the principles of equitable contribution, only half of the $25 million Federal seeks. For the reasons stated below, Federal's motion is GRANTED in part and DENIED in part and Defendants' motion is GRANED in part and DENIED in part.

I. BACKGROUND¹

A. AAA'S RELATIONSHIP TO THE INDIVIDUAL MEMBER CLUBS

AAA is an affiliation of independently operated automobile clubs ("Member Clubs"), including AAAMA. AAA's activities include maintaining "a strong federation of not-for-profit Member Clubs organized to achieve the objects and purposes of [AAA] in assigned service territories." (Dfts.' 56.1 ¶ 23.) These objects and purposes, as stated by AAA's Certificate of Incorporation and Bylaws (the "Certificate" and the "Bylaws", respectively), include "serv[ing] the personal and motoring needs of individual Member Clubs." (Pl.'s 56.1 ¶ 50.)

Each Member Club operates in an assigned service area as an independent and sovereign entity chartered under the laws of the state in which it operates. AAA does not own or operate the Member Clubs; does not issue memberships to the public; does not directly receive revenue from members; and does not contract with the towing companies that provide emergency road service.

Individuals who are members of any Member Club can obtain emergency roadside service anywhere in the United States by calling 1-800-AAA-HELP, the number listed on the AAA membership card distributed to all members. When a member is serviced by a Member Club to which he does not belong, the foreign Member Club is reimbursed by the home Member Club. AAA coordinates payment through a reciprocal clearing bureau that allocates charges among the Member Clubs.

Member Clubs must go through AAA's accreditation process, which includes an inspection to verify that the procedures, services rendered, documents, and appearance of the Member Club are in compliance with AAA's standards. Each Member Club must be accredited at least once every five years, and Member Clubs must submit their audited financial statements on an annual basis.

One element of AAA's accreditation process is an evaluation of the automotive services rendered by the Member Club, and emergency roadside services are emphasized within that evaluation. Once accredited, AAA monitors individual Member Clubs' emergency roadside services based on response times and requiring certain member satisfaction scores on the emergency roadside Member Satisfaction Survey.

Pursuant to its Bylaws, AAA has the right to assign service areas to Member Clubs; approve activities to be undertaken by Member Clubs; make, publish, amend and enforce rules and regulations defining Member Club services to assure their uniform availability to motorists throughout the United States and Canada; and censure, expel, or revoke the accreditation of any Member Club that violates the Bylaws, quality standards, or any of AAA's rules and regulations.

B. THE UNDERLYING PERSONAL INJURY CLAIM

On September 6, 2001, on Route 1 South in Woodbridge, New Jersey, a tow truck operated by Gerard M. Taber ("Taber") collided with a stalled vehicle operated by Richard Douglas Cannon ("Cannon"), causing Cannon serious permanent injury. Taber's employer and the owner of the truck, E & D Auto Repair Towing ("E & D"), was an AAAMA Preferred Service Provider ("Provider"). As an AAAMA Provider, E & D was contractually obligated to provide roadside assistance to AAA Members, and in return was authorized to display the AAA insignia and emblem. At the time of the accident, Taber was responding to a roadside assistance call originating from the 1-800-AAA-HELP line.² Taber testified that he became distracted by the digital data system in the truck, heard honking and looked behind the truck to check for loose chains, and then glanced at a woman in a nearby vehicle before slamming into the rear of Cannon's vehicle.

Cannon filed an action for damages in Superior Court of the State of New Jersey, County of Middlesex, entitled Richard Douglas Cannon v. E & D Auto Repair Towing et al., No. MID-L-677-02, against Taber, E & D, AAAMA, and AAA, among other defendants.³ Before the close of trial, AAAMA and Cannon agreed to settle for $27.25 million, with Federal contributing $26.5 million, its policy limit, and AAMA's excess insurer, Fireman's Fund, contributing $750,000.

Despite the settlement, Cannon was tried to a verdict. The jury awarded Cannon $12 million and found E & D 85% liable, AAAMA 14% liable, and Cannon 1% liable. Additionally, the jury found that E & D and Taber were agents of AAAMA, and that AAAMA was the agent of AAA.

C. THE INSURANCE POLICIES

Federal issued three policies insuring AAAMA for the relevant time period, including a primary policy with a limit of $1 million for each occurrence (the "Federal Primary Policy"); an umbrella policy with a limit of $25 million (the "Federal Umbrella Policy"), and a business auto policy with a limit of $500,000 per accident (the "Federal Business Auto Policy").

AHA issued a primary commercial general liability policy with a limit of $1 million per occurrence (the "AHA Policy") to AAA, insuring AAA for the relevant time period. The AHA Policy contained an endorsement numbered CL 261 (the "AHA Endorsement") naming Member Clubs as additional insureds under the AHA Policy, "but only with respect to liability arising out of [AAA] operations or premises owned by [AAA]." (Pl.'s 56.1 ¶ 19.)

NUIC issued a commercial liability policy with a limit of $25 million that covered AAA during the relevant time period (the "NUIC Policy"). Neither party disputes that the NUIC Policy provides coverage for the Member Clubs to the extent that Member Clubs qualify as insureds under the AHA Policy.

In April 2007, AAAMA and Federal first tendered demands for insurance coverage under the AHA Policy and the NUIC Policy. On May 8, 2007, Defendants disclaimed coverage under both policies. Federal filed the state court action on June 16, 2007.

II. DISCUSSION

A. LEGAL STANDARD

In connection with a Rule 56 motion, "[s]ummary judgment is proper if, viewing all the facts of the record in a light most favorable to the non-moving party, no genuine issue of material fact remains for adjudication." Samuels v. Mockry, 77 F.3d 34, 35 (2d Cir.1996) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). The role of a court in ruling on such a motion "is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party." Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir.1986). The moving party bears the burden of proving that no genuine issue of material fact exists or that, due to the paucity of evidence presented by the non-movant, no rational jury could find in favor of the non-moving party. See Gallo v. Prudential Residential Servs., L.P., 22 F.3d 1219, 1223-24 (2d Cir.1994).

B. CHOICE OF LAW

Because this Court is sitting in diversity, it will use the choice of law rules of its forum state, New York, to determine the applicable law. See Guaranty Trust Co. of N.Y. v. York, 326 U.S. 99, 108-09, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945). When addressing a conflict of contract laws, New York courts first identify the contract's "center of gravity" or "grouping of contacts," see Maryland Cas. Co. v. Continental Cas. Co., 332 F.3d 145, 151 (2d Cir. 2003) (citing Auten v. Auten, 308 N.Y. 155, 124 N.E.2d 99, 101-02 (1954)), and then apply "the law of the place which has the most significant contacts with the matter in dispute." Id. When considering insurance contracts in this analysis, New York courts consider: "the location of the insured risk; the insured's principal place of business; where the policy was issued and delivered; the location of the broker or agent placing the policy; where the premiums were paid; and [the] insurer's place of business." Olin Corp. v. Insurance Co. of N. Am., 743 F.Supp. 1044, 1049 (S.D.N.Y. 1990), aff'd, 929 F.2d 62 (2d Cir.1991). To determine whether Defendants' policies cover. AAAMA, and thus whether Defendants are required to contribute to the...