Geico Marine Ins. Co. v. Great N. Ins. Co.

• Decision Date: 11 September 2017
• Docket Number: 16-CV-1788 (GHW) (RLE)
• Parties: GEICO MARINE INSURANCE COMPANY f/k/a SEAWORTHY INSURANCE COMPANY, Plaintiff, v. GREAT NORTHERN INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

GEICO MARINE INSURANCE COMPANYf/k/a SEAWORTHY INSURANCE COMPANY, Plaintiff, v. GREAT NORTHERN INSURANCE COMPANY, Defendant.

16-CV-1788 (GHW) (RLE)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

September 11, 2017

REPORT AND RECOMMENDATION

TO THE HONORABLE GREGORY H. WOODS, U.S.D.J.:

I. INTRODUCTION

On March 9, 2016, Plaintiff GEICO Marine Insurance Company f/k/a Seaworthy Insurance Company ("GEICO") filed this action against Great Northern Insurance Company ("GNIC") for declaratory relief, alleging an obligation to indemnify GEICO for defense costs and expenses, as well as the settlement amount paid, for the underlying personal injury action in this District. (Doc. No. 1.) On October 7, 2016, GEICO and GNIC each filed motions for summary judgment. (Doc. Nos. 24, 32.) On November 4, 2016, each filed opposition papers to the other's motion. (Doc. Nos. 44, 40.)

For the reasons set forth below, I recommend that the Court DENY each Party's motion for summary judgment.

II. BACKGROUND

Defendant Great Northern Insurance Company issued a "Masterpiece Policy" to Carl Schlanger in April 2013. (Doc. No. 35-1.) GNIC's policy provided various types of coverage to Schlanger, including liability coverage of $1 million, for the period of April 1, 2013, to April 1, 2014. (Id. at 10-11.) On August 24, 2013, Schlanger was involved in an incident while operating a personal watercraft ("PWC" or "jet ski"), causing Peter Weiss to sustain injuries. (Doc. No. 31 at 2.) This incident was the basis for the underlying action Peter Weiss v. Carl Schlanger, 14-cv-06452 (RLE) (2014) ("Weiss case"). (Id.) GEICO provided insurance coverage for the PWC under its "Personal Watercraft Policy." (Doc. No. 36 at 2.) This policy insured the PWC from May 20, 2013, to May 20, 2014, providing liability coverage of $300,000 per accident. (Id.) GNIC and GEICO acknowledged their responsibility to defend and indemnify Schlanger for costs, fees, and liability resulting from the Weiss case. (Doc. No. 31 at 2.) GEICO defended Schlanger up to the settlement of the Weiss case on March 16, 2016, for $490,000. (Id. at 3.) The total costs to defend Schlanger remains disputed, with GEICO claiming costs of $71,921.32, (Id.), and GNIC claiming defense costs to be $69,342.16, (Doc. No. 36 at 9.) GNIC paid fifty percent of the settlement amount, $245,000, and $34,671.08 toward defense costs and expenses. (Doc. No. 36 at 9.) GEICO alleges that GNIC must reimburse 100% of the settlement and defense costs, because of GEICO's interpretation of both insurers' policies and their respective "other insurance" clauses.¹,² (Doc. 31 at 3.) GNIC's "other insurance" clauses provide:

Vehicles and Uninsured/Underinsured Motorists: When liability insurance applies to covered damages, we will pay our share. Our share is the proportion that the amount ofcoverage under this policy bears to the total of all applicable amounts of coverage. However, for non-owned motorized land vehicles, this insurance is excess over any other insurance, except that written specifically to cover excess over the amount of coverage in this policy.

Personal and Excess: This insurance is excess over any other insurance except that written specifically to cover excess over the amount of coverage that applies in this policy.

(Doc. No. 35-3 at 19.) GEICO's "other insurance" clause ("GEICO Clause") provides:

If there is any other available insurance that would apply in the absence of this policy, this insurance shall apply as excess over the other insurance, but the combined amount shall not exceed the limits of this policy for any loss under Coverage A, Hull and Equipment or Coverage E, Boat Trailer.

(Doc. No. 34-5 at 13.)

The insurers both maintain that GNIC's policy is clear and unambiguous, (Doc. Nos. 30 at 8-14, 33 at 16-23), but reach opposite conclusions on (1) their interpretation of the policy and (2) allocation of coverage. GEICO claims that, because the PWC used in the incident was a "vehicle," GNIC's "Vehicles and Uninsured/Underinsured Motorists" "other insurance" pro rata clause ("Vehicles Clause") is triggered.³ (Doc. No. 30 at 7.) As GNIC's pro rata Vehicles Clause would apply simultaneously with the excess GEICO Clause, GEICO asserts that in regards to allocation of coverage, GNIC must act as primary insurance by covering defense and settlement amounts.⁴ In contrast, GNIC contends that the Vehicles Clause does not apply to this accident. Instead, GNIC argues that its "Personal and Excess" clause ("Excess Clause") governs the Weiss case, and that its only responsibility under this clause would be to share equally withGEICO in defense costs and expenses, and settlement amounts.⁵ (Doc. No. 40 at 5-6.) GEICO replies that even if GNTC's Excess Clause were to apply, the policies' excess clauses would cancel each other out, and both insurance companies would be responsible for coverage pro rata, in proportion to the insurers' policy coverage limits.⁶ (Doc. No. 44 at 24-30.)

III. DISCUSSION

A. There are no material facts in dispute.

Rule 56 of the Federal Rules of Civil Procedure provides that a court shall grant a motion for summary judgment if it determines that "there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). See also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Filing cross-motions for summary judgment does not disrupt the standard of review. "[E]ach party's motion must be examined on its own merits, and in each case all reasonable inferences must be drawn against the party whose motion is under consideration." Morales v. Quintel Entm't, Inc., 249 F.3d 115, 121 (2d Cir. 2001) (citing Schwabenbauer v. Bd. of Educ., 667 F.2d 305, 314 (2d Cir. 1981)). Where parties cross-move for summary judgment, "a court need not enter judgment for either party." (Id.) (citing Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir.1993)).

Pursuant to Local Civil Rule 56.1, the parties submitted statements of undisputed facts, (Doc. Nos. 31, 36), and counterstatements, (Doc. Nos. 42, 45). The matter is ripe for summaryjudgment because the parties allege no disputes of material facts.⁷ (Doc. Nos. 30 at 7, 40 at 13.)

B. GNIC's policy is ambiguous as it relates to the meaning of the word "vehicle."

The resolution of these motions depends on the breadth and scope of the word "vehicle" as referenced in GNIC's policy. GEICO and GNIC have failed to show how GNIC's policy is unambiguous, which makes this case unsuitable for summary judgment.

GNIC argues that a "vehicle" is an object other than a PWC, (Doc. No. 33 at 22), and likely refers to an automobile, (Id. at 19-20). Because Schlanger never purchased "vehicle" coverage, and the incident involved a PWC, GNIC maintains that the Vehicles Clause is not applicable. (Id.) GNIC further argues that because the Excess Clause applies, the Court must base allocation on the concurrently applicable excess "other insurance" clauses.

GEICO argues simply that a PWC is "vehicle" and therefore the Vehicle Clause applies. (Doc. No. 30 at 8.)

1. New York's rules of contract interpretation apply.

Federal courts exercising diversity jurisdiction apply the choice-of-law rules of the forum state. Int'l Bus. Machines Corp. v. Liberty Mut. Ins. Co., 363 F.3d 137, 143 (2d Cir. 2004); Gilbert v. Seton Hall Univ., 332 F.3d 105, 109 (2d Cir. 2003). The Parties agree that New York choice-of-law rules apply. (Doc. Nos. 33 at 12-13, 44 at 27.) New York courts are not required, however, to apply a choice-of-law analysis where there is no conflict between the laws of competing jurisdictions. Int'l Bus. Machines Corp., 363 F.3d at 143. A conflict exists if "the applicable law from each jurisdiction provides different substantive rules." Curley v. AMR Corp., 153 F.3d 5, 12 (2d Cir. 1998). Where there is no substantive difference, and New York isone of the competing jurisdictions, New York courts "are free to apply" New York law. Int'l Bus. Machines Corp., 363 F.3d at 143.

In the present case, the competing jurisdictions are New York, Connecticut, New Jersey, and Pennsylvania. Each state's interest is derived from a different source: Pennsylvania, from the location of GEICO's insured risk—the PWC; Connecticut, from the domicile of GNIC's insured—Schlanger; New Jersey, from the address provided by the PWC owners under GEICO's insurance; and New York, from the location where GNIC's policy was issued.

Under Pennsylvania law, the objective of insurance policy interpretation is to ascertain the most reasonable, probable intention of the parties, while focusing on the reasonable expectations of the insured. See Madison Const. Co. v. Harleysville Mut. Ins. Co., 557 Pa. 595, 606 (1999); Everett Cash Mut. Ins. Co. v. Krawitz, 430 Pa. Super. 25, 28 (1993); Galvin v. Occidental Life Ins. Co. of Cal., 206 Pa. Super. 61, 64-65 (1965). These intentions derive from the plain language of the document—considered as a whole—reading the policy to avoid ambiguities. Am. & Foreign Ins. Co. v. Jerry's Sport Ctr., Inc., 606 Pa. 584, 608 (2010); Tenos v. State Farm Ins. Co., 716 A.2d 626, 628-29 (Pa. Super. Ct. 1998). Ambiguities arise when language is "reasonably susceptible of different constructions and capable of being understood in more than one sense." Madison Const. Co. v. Harleysville Mut. Ins. Co., 557 Pa. 595, 606 (1999) (quoting Hutchison v. Sunbeam Coal Co., 513 Pa. 192, 201 (1986)). If the insurance policy is ambiguous, courts may "look to parol evidence to determine the contract's meaning [but if] unfruitful, the court may then resort to rules of construction." Penn Twp. v. Aetna Cas. & Sur. Co., 719 A.2d 749, 751 (Pa. Super. Ct. 1998) (citation omitted). Where such ambiguities are found, a court may use extrinsic evidence of the purpose of the insurance, its subject matter, the situation of the parties, and the circumstances surrounding the making of the contract, toreveal the apparent intention of the parties....