Globecon Group, LLC v. Hartford Ins. Co.

• Decision Date: 09 January 2006
• Docket Number: Docket No. 04-4399-CV.
• Citation: 434 F.3d 165
• Parties: GLOBECON GROUP, LLC, Plaintiff-Appellant, v. HARTFORD FIRE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

434 F.3d 165

GLOBECON GROUP, LLC, Plaintiff-Appellant, v. HARTFORD FIRE INSURANCE COMPANY, Defendant-Appellee.

Docket No. 04-4399-CV.

United States Court of Appeals, Second Circuit.

Argued: August 5, 2005.

Decided: January 9, 2006.

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Lee M. Epstein (John W. Fried and Linda J. Karpell, of counsel), Fried Epstein & Rettig LLP, New York, N.Y., for Plaintiff-Appellant.

Stephen E. Goldman (Wynstan M. Ackerman, of counsel), Robinson & Cole LLP, Hartford, Conn., for Defendant-Appellee.

Laura A. Foggan (Alicia C. Ritter, of counsel), Wiley Rein & Fielding LLP, Washington, D.C., for Amicus Curiae Complex Insurance Claims Litigation Association.

Before: CALABRESI and RAGGI, Circuit Judges, MURTHA, District Judge.^*

CALABRESI, Circuit Judge.

The Globecon Group LLC ("New Globecon"), a New York corporation, appeals the district court's grant of summary judgment to the Hartford Fire Insurance Company ("Hartford"), a Connecticut corporation, in a breach of contract action. New Globecon also appeals the district court's earlier, and at the time interlocutory, grant of Hartford's motion to dismiss New Globecon's claims for consequential damages and attorneys' fees. New Globecon argues that Hartford breached its insurance agreements by failing to compensate it for alleged property damage and loss of business income suffered by New Globecon's predecessor in interest, The Globecon Group, Inc. ("Old Globecon"), as a result of the September 11, 2001, terrorist attack on the World Trade Center. Hartford contends that, pursuant to a "no-transfer" clause in the insurance agreement with Old Globecon, its obligations under the policy did not survive New Globecon's acquisition of Old Globecon in January 2002.

We conclude that under New York law, an insured may, at least for some purposes and in some circumstances, make over to an assignee the indemnification it is owed under an insurance contract, and do so notwithstanding a no-transfer clause in the insurance policy. Because it cannot be determined at the summary judgment stage whether Old Globecon's claims for property damage and for loss of its business income were of a sort that could validly be assigned to New Globecon, we vacate the district court's grant of summary judgment on these claims. We affirm, however, the grant of summary judgment on New Globecon's claims for business losses allegedly incurred after its acquisition of Old Globecon's assets, and we affirm the Rule 12(b)(6) dismissal of New Globecon's claims for consequential damages and attorneys' fees.

Background

Old Globecon was a financial educational services company. It presented educational workshops to financial professionals, both online and through classroom instruction. In November 2000, Old Globecon entered into an agreement with Hartford for property insurance and business interruption insurance. Specifically, the policy provided compensation to Old Globecon for "direct physical loss of or damage to Covered Property" and for "the actual loss of Business Income. . . sustain[ed] due to the necessary suspension of . . . `operations' during the period of restoration." As one of its "Common Policy Conditions," the agreement stated that the "rights and duties [of the insured] under th[e] policy may not be transferred without [Hartford's] written consent except in the case of death of an individual Named insured."

Old Globecon's place of business was approximately 250 feet from the World Trade Center. On September 11, 2001, Old Globecon suffered physical damage to its office, its telephone and data lines, and its computer servers, and was subsequently forced to suspend its operations.

The parties dispute what, exactly, happened subsequently. What is undisputed is that sometime after September 11, Hartford contacted Old Globecon and, around September 24, established two claim files, for Old Globecon's property damage and for its business income losses respectively. Hartford contends that Old Globecon's CEO, Gerald Kramer, and its CFO, Lorenzo Vanore, told Hartford that Old Globecon sustained minimal property damage and no loss of income as a result of the September 11 attack. Hartford asserts further that Old Globecon did not provide any itemization of its property damage and ultimately chose not to file a claim with Hartford. New Globecon insists that Old Globecon was in the process of establishing its claim at the time of its asset sale.

Approximately one month after September 11, Old Globecon filed for Chapter 11 bankruptcy reorganization.¹ In January 2002, Starweaver Venture Partners I, LLC ("Starweaver") entered into an asset purchase agreement with Old Globecon. The agreement provided that Starweaver would acquire "substantially all of the assets" of Old Globecon, including "all right, title and interest" of Old Globecon in, inter alia, "[a]ll of [Old Globecon's] insurance policies and insurance claims and other claims against third parties for any matter . . . ." Asset Purchase Agreement art. 1.1(1).² Nothing in the record indicates that Hartford either consented to, or was informed of, the purchase agreement at the time.

The purchase agreement was approved by the Bankruptcy Court for the Southern District of New York on January 15, 2002. Soon after, Starweaver changed its name to The Globecon Group LLC (called "New Globecon" herein) and relocated Old Globecon's offices to midtown Manhattan.

On March 14, 2002, New Globecon, through counsel, wrote a letter to Hartford asserting a claim "on behalf of Globecon" for $6,506,500. This amount included $68,000 for property damage, $5,718,000 for business interruption and lost business income, and $720,500 for "extra expenses" relating to Globecon's costs in mitigating lost business income, in relocating to midtown, and in litigating a dispute with its previous landlord. The letter did not mention Old Globecon's bankruptcy reorganization, or Starweaver's purchase of Old Globecon's assets.

On April 12, 2002, New Globecon's chairman and CEO, Paul Siegel, sent an e-mail message to Hartford's underwriter, BK International, for the purpose of changing the name of the insured on Old Globecon's Hartford policy to The Globecon Group LLC. Attached to the e-mail were, inter alia, the asset purchase agreement between Old Globecon and Starweaver, and the order of the bankruptcy court approving the acquisition. Three days later, Hartford issued an endorsement changing the name of the insured as requested. Hartford thereafter accepted insurance premiums from New Globecon.

Having received no response from Hartford to the letter of March 14, 2002, Siegel sent another letter on April 25, 2002. In the second letter, Siegel referenced Old Globecon's Chapter 11 reorganization and complained of Hartford's non-responsiveness to New Globecon's prior letter.

A series of communications followed in which each party attempted to substantiate the losses. In an internal document dated June 24, 2002, Hartford preliminarily set business income loss for "the insured" at $230,000, and physical damage at $66,000. On October 24, 2002, New Globecon submitted to Hartford a Sworn Statement in Proof of Loss, in the amount of $1,878,917. This amount included $1,777,010 in business interruption losses, $97,077 in property damage, and $5,000 in "claim preparation costs."

Hartford responded to New Globecon's claim with a November 15, 2002 letter stating that it "neither accepted nor rejected" New Globecon's proof of loss, and would need additional time to investigate "both the accuracy of the claim and . . . the question of whether any part of the claim is covered under the policy." In that letter, as in all of its official correspondence with New Globecon, Hartford inserted language reserving its rights under the policy and under applicable law.

New Globecon filed the original complaint in this action on January 2, 2003. On or about February 14, 2003, Hartford sent a letter to New Globecon reporting the results of its investigation. Hartford concluded that New Globecon was not insured under any Hartford policy, citing the "no-transfer" provision of its agreement with Old Globecon. Hartford stated, moreover, that it had fixed Old Globecon's loss at $10,502.75, which represented property damage alone. Hartford enclosed a check in that amount with its letter, again reserving its "rights to contest any obligation whatsoever" that it might have to New Globecon.

New Globecon filed an amended complaint on March 6, 2003. In the amended complaint, New Globecon claimed that, through February 2002, "Globecon" sustained physical damage as well as business income losses and extra expenses amounting to $1,879,017, as a direct result of the September 11 attack. Amended Complaint ¶¶ 15, 21. New Globecon argued further that Hartford had breached an implied covenant of good faith and fair dealing through the delays in responding to New Globecon's communications and through Hartford's alleged failure to adhere to the language of the policy. New Globecon claimed consequential damages, ranging from forced layoffs and attrition, to cut-backs in sales and marketing efforts, to the use of inadequate office equipment, all stemming from Hartford's alleged breach of the implied covenant of good faith and fair dealing. Id. ¶ 64.

Hartford then moved, successfully, to dismiss New Globecon's claims for consequential damages and attorneys' fees. In an order dated September 16, 2003, the district court held that consequential damages are not available in an insurance action under New York law unless the alleged injury was covered by a specific contractual provision, and that attorneys' fees are not available in an affirmative action brought by an insured to settle its rights under an insurance policy.

On July 13, 2004, the district court granted Hartford's motion for summary judgment on New Globecon's remaining claims. The court ruled that, because Hartford did not consent in writing to Old...