Great Am. Ins. Co. v. Houlihan Lawrence, Inc., No. 19-CV-1055 (KMK)

CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
Writing for the CourtKENNETH M. KARAS, United States District Judge
Citation449 F.Supp.3d 354
Parties GREAT AMERICAN INSURANCE COMPANY, Plaintiff, v. HOULIHAN LAWRENCE, INC., Defendant.
Docket NumberNo. 19-CV-1055 (KMK)
Decision Date27 March 2020

449 F.Supp.3d 354

GREAT AMERICAN INSURANCE COMPANY, Plaintiff,
v.
HOULIHAN LAWRENCE, INC., Defendant.

No. 19-CV-1055 (KMK)

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

Signed March 27, 2020


449 F.Supp.3d 357

Elana T. Henderson, Esq., Geoffrey W. Heineman, Esq., John J. Iacobucci, Jr., Esq., Eric C. Weissman, Esq., Ropers, Majeski, Kohn & Bentley, New York, NY, Counsel for Plaintiff

Robert J. Boller, Esq., Charles P. Edwards, Esq., Barnes & Thornburg LLP, New York, NY and Indianapolis, IN, Counsel for Defendant

OPINION & ORDER

KENNETH M. KARAS, United States District Judge:

Plaintiff and Counter-Defendant Great American Insurance Company ("Plaintiff") brings this Action for a declaratory judgment against Defendant and Counter-Claimant Houlihan Lawrence, Inc. ("Defendant"), seeking a declaration that Plaintiff has no obligation to defend or indemnify Defendant in connection with an underlying civil action against Defendant in state court. (See generally Compl. (Dkt. No. 1).) Defendant brings a counterclaim against Plaintiff for breach of contract, also seeking a declaratory judgment that Plaintiff has a duty to defend Defendant, that a ruling on Plaintiff's duty to indemnify Defendant is premature, and that Defendant is entitled to be represented by independent counsel of its choosing. (See

449 F.Supp.3d 358

generally Answer and Counterclaim ("Def.'s Answer") (Dkt. No. 13).)

Before the Court are the Parties' cross-motions for judgment on the pleadings, pursuant to Federal Rule of Civil Procedure 12(c) ("Plaintiff's Motion" and "Defendant's Motion," or, collectively, the "Motions"). (See Pl.'s Not. of Mot. ("Pl.'s Mot.") (Dkt. No. 27); Def.'s Not. of Mot. ("Def.'s Mot.") (Dkt. No. 28).) For the following reasons, Plaintiff's Motion is denied, and Defendant's Motion is granted in part and denied in part.

I. Background

A. Factual Background

The following facts are drawn from Plaintiff's Complaint, Defendant's Answer and Counterclaim ("Defendant's Answer"), Plaintiff's Answer, the Policy (as defined herein), exhibits to submissions relied on by or incorporated by reference into the pleadings, and the publicly available documents docketed in the Underlying Action (as defined herein). These sources are properly considered on a Rule 12(c) motion. See 120 Greenwich Dev. Assocs., L.L.C. v. Admiral Indem. Co. , No. 08-CV-6491, 2013 WL 12331487, at *1 n.1, *4 (S.D.N.Y. Sept. 25, 2013) (explaining that on a Rule 12(c) motion, a court may consider the pleadings, exhibits to the pleadings, statements or documents incorporated by reference in the pleadings, any matter of which the court may take judicial notice, and documents that are "integral" to the complaint) (collecting cases).

1. The Policy

Plaintiff issued a Real Estate Professional Liability Insurance Policy (the "Policy") to Defendant for a policy period from July 26, 2016 to July 26, 2017. (Compl. ¶ 18; id. Ex. B ("Policy"); Def.'s Answer ¶ 18.) The Policy had a limit of liability of $5 million per "Claim," which the Policy defined as "a written demand for money or services received by an Insured," or "a civil proceeding in a court of law ... against an Insured ... arising out of an act or omission in the performance of Real Estate Professional Services." (Compl. ¶¶ 19, 22; Policy 1; Def.'s Answer ¶¶ 19, 22.)1 The $5 million limit of liability was "subject to a $50,000 per Claim retention." (Compl. ¶ 19; Def.'s Answer ¶ 19.) Effective January 9, 2017, Defendant cancelled the Policy and purchased an "Extended Reporting Period" from January 9, 2017 to January 9, 2020. (Compl. ¶ 20; Def.'s Answer ¶ 20.) The Extended Reporting Period allows Defendant to report Claims to Plaintiff that are made against Defendant through January 9, 2020 despite the cancellation of the Policy, so long as the Claims are made "by reason of an act or omission, which was committed prior to the end of the Policy Period and on, or subsequent to, the Retroactive Date," and would otherwise have been covered by the Policy. (Compl. ¶ 22; Policy 2; Def.'s Answer ¶ 22.)

As relevant to this Action, the Policy also provided:

The Company will pay on behalf of an Insured all sums in excess of the deductible that the Insured becomes legally obligated to pay as Damages and Claim Expenses as a result of a Claim first made against the Insured during the Policy Period or any applicable Extended Reporting Period by reason of an act or omission ... in the performance of Real Estate Professional Services by the Insured.... The Company has the right
449 F.Supp.3d 359
and duty to defend any claim against an Insured even if any of the allegations of the Claim are groundless, false[,] or fraudulent. Defense counsel may be designated by the Company or, at the Company's option, by the Insured with the Company's written consent and subject to the Company's guidelines.

(Compl. ¶ 21; Policy 1; Def.'s Answer ¶ 21.)2 Also as relevant here, the Policy defined Damages as:

[A]ny monetary judgment or award which an Insured is legally obligated to pay. Damages also means a monetary settlement to which the Company agrees on an Insured's behalf; provided, however, damages do not include ... the return, restitution, reduction, compromise, or refund of fees, commissions, expenses or costs for Real Estate Professional Services performed or to be performed by an Insured and injuries that are a consequence of any fees, commissions, expenses[,] or costs charged by an Insured; ... fines, penalties, forfeitures[,] or sanctions; ... the multiplied portion of any multiplied awards; ... the cost of compliance with any order for, grant of, or agreement to provide non-monetary relief, including services or injunctive relief; ... punitive or exemplary amounts; ... any amounts uninsurable as a matter of law or public policy.

(Compl. ¶ 22; Policy 2; Def.'s Answer ¶ 22.) Section III of the Policy specifically provided that the Policy did "not apply to any Claim ... based on or arising out of any dishonest, intentionally wrongful, fraudulent, criminal[,] or malicious act or omission by an Insured," ("Exclusion A"), and also did not apply to "any Claim ... based on or arising out of ... any disputes involving an Insured's fees, commissions[,] or charges ... [or] the gaining of any personal profit or advantage to which an Insured is not legally entitled," ("Exclusion E"). (Compl. ¶ 23; Policy 5; Def.'s Answer ¶ 23.)

2. The Underlying Action

In July 2018, Pamela Goldstein, Ellyn Berk, Tony Berk, and Paul Benjamin (the "State Plaintiffs") filed a class action complaint against Defendant in the Supreme Court of the State of New York, Westchester County entitled Goldstein, et al. v. Houlihan Lawrence, Inc. , Index No. 6076/2018 (the "Underlying Action"). (Compl. ¶¶ 1, 9; Def.'s Answer ¶ 9.) State Plaintiffs seek to certify a class of consumers in Westchester, Putnam, and Dutchess Counties that includes "[a]ll buyers and sellers of residential real estate in Westchester, Putnam, and Dutchess counties from January 1, 2011 to the present wherein [Defendant] represented both the buyer and seller in the same transaction." (Compl. ¶ 16; Def.'s Answer ¶ 16.)

On October 1, 2018, State Plaintiffs filed a first amended complaint ("State FAC"), which was the operative complaint

449 F.Supp.3d 360

at the time Plaintiff filed its Complaint. (Compl. ¶ 10; id. Ex. A ("State FAC") (Dkt. No. 1-1); Def.'s Answer ¶ 10.) State Plaintiffs asserted claims for breach of fiduciary duty, unjust enrichment, and violations of New York Real Property Law § 443 and New York General Business Law ("GBL") § 349. (State FAC ¶¶ 334–56.) On April 8, 2018, the Supreme Court of the State of New York, County of Westchester, dismissed State Plaintiffs' unjust enrichment claim, as well as their claim under New York Real Property Law § 443 (the "State Opinion"). (Decl. of Philip M. Halpern Esq. ("Halpern Decl.") Ex. 4 ("State Op."), at 19 (Dkt. Nos. 28-1, 28-6).)3 With respect to the unjust enrichment claim, the court found that the allegations were "devoid of any assertions that [State Plaintiffs] contractually agreed to pay a commission," and the court "infer[red] that if the buyer did not pay the commission, ... it is the sellers who paid the commission." (Id. at 17–18.) The court also dismissed State Plaintiffs' claim under New York Real Property Law § 443, finding that the statute does not provide for a private right of action. (Id. at 10–12.)

On May 14, 2019, State Plaintiffs filed a second amended complaint reasserting their claims for breach of fiduciary duty and violation of GBL § 349 ("State SAC"). (Decl. of Eric C. Weissman, Esq. ("Weissman Decl.") Ex. 1 ("State SAC") ¶¶ 334–56 (Dkt. Nos. 27-1–2).)4 ,5 State Plaintiffs alleged that Defendant engaged in a "scheme to lure thousands of homebuyers and sellers into dual[ ]agent transactions," and failed to properly disclose dual agency arrangements in contravention of New York law. (Id. ¶ 5.)6 State Plaintiffs allege

449 F.Supp.3d 361

that Defendant "induce[d] its ... agents" to engage in the "scheme" by paying kickbacks, or extra commission, to agents who received two...

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8 practice notes
  • 7951 Albion, LLC v. Clear Blue Specialty Ins. Co., 2:19-cv-7309 (DRH) (AKT)
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • July 9, 2021
    ...cannot confidently say Plaintiff would have avoided a loss "but for" PCSS. See, e.g. , Great Am. Ins. Co. v. Houlihan Lawrence, Inc. , 449 F. Supp. 3d 354, 370–71 (S.D.N.Y. 2020) ("[T]he Court cannot find that all of the causes of action would not exist but for the existence of commission-r......
  • 7951 Albion, LLC v. Clear Blue Specialty Insurance Company, 2:19-cv-7309 (DRH) (AKT)
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • July 9, 2021
    ...cannot confidently say Plaintiff would have avoided a loss “but for” PCSS. See, e.g., Great Am. Ins. Co. v. Houlihan Lawrence, Inc., 449 F.Supp.3d 354, 370-71 (S.D.N.Y. 2020) (“[T]he Court cannot find that all of the causes of action would not exist but for the existence of commission-relat......
  • The Wentworth Grp. v. Evanston Ins. Co., 20-CV-6711 (GBD) (JLC)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • July 8, 2021
    ...it also “allege[s] wrongs of, at least arguably, an unintentional nature.” Great Am. Ins. Co. v. Houlihan Lawrence, Inc., 449 F.Supp.3d 354, 366 (S.D.N.Y. 2020) (quoting Hotel Des Artistes, 1994 WL 263429, at *2). For example, the Board alleges that “Basonas exacerbated the [defective] cond......
  • Stout Risius Ross, LLC v. Aspen Specialty Ins. Co., 21 Civ. 4412 (ER)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • March 18, 2022
    ...of other courts' opinions, but may not rely on facts adjudicated in the prior case); Great Am. Ins. Co. v. Houlihan Lawrence, Inc., 449 F.Supp.3d 354, 372 (S.D.N.Y. 2020) (taking judicial notice of a state court opinion to determine whether the insurer had a duty to defend). In sum, the Cou......
  • Request a trial to view additional results
8 cases
  • 7951 Albion, LLC v. Clear Blue Specialty Ins. Co., 2:19-cv-7309 (DRH) (AKT)
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • July 9, 2021
    ...cannot confidently say Plaintiff would have avoided a loss "but for" PCSS. See, e.g. , Great Am. Ins. Co. v. Houlihan Lawrence, Inc. , 449 F. Supp. 3d 354, 370–71 (S.D.N.Y. 2020) ("[T]he Court cannot find that all of the causes of action would not exist but for the existence of commission-r......
  • 7951 Albion, LLC v. Clear Blue Specialty Insurance Company, 2:19-cv-7309 (DRH) (AKT)
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • July 9, 2021
    ...cannot confidently say Plaintiff would have avoided a loss “but for” PCSS. See, e.g., Great Am. Ins. Co. v. Houlihan Lawrence, Inc., 449 F.Supp.3d 354, 370-71 (S.D.N.Y. 2020) (“[T]he Court cannot find that all of the causes of action would not exist but for the existence of commission-relat......
  • The Wentworth Grp. v. Evanston Ins. Co., 20-CV-6711 (GBD) (JLC)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • July 8, 2021
    ...it also “allege[s] wrongs of, at least arguably, an unintentional nature.” Great Am. Ins. Co. v. Houlihan Lawrence, Inc., 449 F.Supp.3d 354, 366 (S.D.N.Y. 2020) (quoting Hotel Des Artistes, 1994 WL 263429, at *2). For example, the Board alleges that “Basonas exacerbated the [defective] cond......
  • Stout Risius Ross, LLC v. Aspen Specialty Ins. Co., 21 Civ. 4412 (ER)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • March 18, 2022
    ...of other courts' opinions, but may not rely on facts adjudicated in the prior case); Great Am. Ins. Co. v. Houlihan Lawrence, Inc., 449 F.Supp.3d 354, 372 (S.D.N.Y. 2020) (taking judicial notice of a state court opinion to determine whether the insurer had a duty to defend). In sum, the Cou......
  • Request a trial to view additional results

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