Hartford Underwriters Ins. Co. v. Hanover Ins. Co.

Decision Date11 August 2015
Docket NumberNo. 14–CV–8213 (RA).,14–CV–8213 (RA).
Parties HARTFORD UNDERWRITERS INSURANCE COMPANY, Plaintiff, v. HANOVER INSURANCE COMPANY, Defendant.
CourtU.S. District Court — Southern District of New York

Marci Goldstein Kokalas, Stephen Michael Lazare, Lazare Potter & Giacovas, LLP, New York, NY, for Plaintiff.

Robert Laurent Joyce, Littleton Joyce Ughetta Park & Kelly LLP, Purchase, NY, for Defendant.

OPINION & ORDER

RONNIE ABRAMS, District Judge:

Plaintiff Hartford Underwriters Insurance Company ("Hartford") brings this action against Defendant Hanover Insurance Company ("Hanover") seeking declaratory relief concerning the priority of coverage and allocation of defense and indemnity costs between Hartford and Hanover in connection with an underlying lawsuit brought against their mutual insured, Massivemedia, Inc. ("Massivemedia"). Before the Court is Hanover's motion to dismiss the Complaint for failure to state a claim and Hartford's cross motion for summary judgment. For the reasons that follow, Hanover's motion is granted. Because the case is dismissed on Hanover's motion, Hartford's summary judgment motion is denied as moot.

BACKGROUND
I. Factual Background

Massivemedia, a media and marketing vendor, entered into an independent contracting agreement with Ramak E. Hamzeh, whereby Hamzeh was to work at an event sponsored by Massivemedia. Compl. ¶ 9. On March 24, 2011, following the event, Hamzeh was driving back to the event venue to pick up Massivemedia's marketing materials when she struck and injured three pedestrians (the "Claimants") with her car. Id. at ¶ 10. The car was not owned by Massivemedia, but by Hamzeh's grandmother. Id. at ¶ 11.

The Claimants subsequently commenced a personal injury action against, among others, Hamzeh and Massivemedia (the "Underlying Action"). Id. at ¶ 12. Massivemedia sought coverage from both Hartford and Hanover in connection with the Underlying Action. Id. at ¶ 1. Hartford had issued a commercial auto policy to Massivemedia, which, under the policy's "other insurance" clause, provided excess coverage for "nonowned autos" (the "Hartford Policy"). Id.1 Hanover, meanwhile, had issued a businessowners policy to Massivemedia, which also included an "other insurance" clause that provided excess coverage for any "non-owned autos" (the "Hanover Policy"). Id. Both policies, in relevant part, otherwise provided primary coverage. See Joyce Decl. Ex. B ("Hartford Policy") at 57; Joyce Decl. Ex. C ("Hanover Policy") at 108.2

Because the accident involved a car that was not owned by Massivemedia, but was driven at the time by Hamzeh in connection with Massivemedia's business, the accident implicated the "nonowned auto" provisions of the insurers' policies. Id. at ¶ 28. Hartford took the position that Hanover should provide co-insurance for Massivemedia and sought Hanover's participation in the defense of Massivemedia as well as in settlement discussions and the payment of any settlement amount. Id. at ¶ 31. Hanover, however, disputed the priority of coverage and did not consider itself to be co-insurers with Hartford, therefore declining to participate in settlement negotiations or to contribute to any settlement amount. Id. at ¶¶ 32–33, 36.

Hartford assumed coverage for Massivemedia's defense and indemnification in connection with the Underlying Action, which was ultimately settled. Id. at ¶¶ 13, 27. As part of the settlement, Hartford paid $750,000 on behalf of Massivemedia to two of the Claimants (the "Settlement Amount"). Id. at ¶¶ 14, 33. Hartford reserved its right to litigate the priority of coverage issue and pursue contribution from Hanover. Id. at ¶ 34.

On October 14, 2014, Hartford filed the Complaint in this action, seeking a declaratory judgment that the Hanover Policy be read as co-insurance with the Hartford Policy and that Hanover reimburse Hartford for its pro rata share of the Settlement Amount and costs associated with the Underlying Action. Id. at ¶¶ 38–41. Hanover responds that the language of the policies requires that Hartford exhaust its policy limit first, before Hanover pays for any loss. See Def.'s Br. at 11–14. In other words, Hanover contends that its policy is excess over Hartford's policy.

II. The Policies

"Where the same risk is covered by two or more policies, each of which was sold to provide the same level of coverage ... priority of coverage ... among the policies is determined by comparison of their respective ‘other insurance’ clauses." Sport Rock Int'l, Inc. v. Am. Cas. Co. of Reading, Pa., 65 A.D.3d 12, 878 N.Y.S.2d 339, 344 (1st Dep't 2009) (citation and alteration omitted). The key portions of the parties' respective insurance policies are thus the "other insurance" clauses, which both purport to provide primary coverage except, in relevant part, in the case of non-owned autos, where coverage will only be on an excess basis.

The Hartford Policy's "other insurance" clause states, in relevant part, the following:

5. Other Insurance
a. For any covered "auto" you own, this Coverage Form provides primary insurance. For any covered "auto" you don't own, the insurance provided by this Coverage Form is excess over any other collectible insurance....
d. When this Coverage Form and any other Coverage form or policy covers on the same basis, either excess or primary, we will pay only our share. Our share is the proportion that the Limit of Insurance of our Coverage Form bears to the total of the limits of all the Coverage Forms and policies covering on the same basis,

Hartford Policy at 57.

The Hanover Policy's "other insurance" clause provides, in relevant part, as follows:

H. Other Insurance
....
2. SECTION II–LIABILITY
If other valid and collectible insurance is available to the insured for a loss we cover under SECTION II—LIABILITY, our obligations are limited as follows:
a. Primary Insurance
This insurance is primary except when Paragraph b. below applies ...
b. Excess Insurance
This insurance is excess over:
1) Any other insurance, whether primary, excess, contingent or on any other basis:
....
(d) If the loss arises out of the maintenance or use of aircraft, "autos" or watercraft to the extent not subject to Exclusion g.
Aircraft, Auto or Watercraft of Section II—Liability;3 and ... When this insurance is excess, we will have no duty under SECTION II LIABILITY to defend the insured against any "suit" if any other insurer has a duty to defend the insured against that "suit." If no other insurer defends, we will undertake to do so, but we will be entitled to the insured's rights against all those other insurers.
c. When this insurance is excess over other insurance, we will pay only our share of the amount of the loss, if any, that exceeds the sum of:
1) The total amount that all such other insurance would pay for the loss in the absence of this insurance; and
2) The total of all deductible and self-insured amounts under all that other insurance.d. We will share the remaining loss, if any, with any other insurance that is not described in this provision and was not bought specifically to apply in excess of the Limits of Insurance shown in the Declarations for this Coverage.
e. Method of Sharing
If all of the other insurance permits contribution by equal shares, we will follow this method also. Under this approach each insurer contributes equal amounts until it has paid its applicable limit of insurance or none of the loss remains, whichever comes first.
If any of the other insurance does not permit contribution by equal shares, we will contribute by limits. Under this method, each insurer's share is based on the ratio of its applicable limit of insurance to the total applicable limits of insurance of all insurers.

Hanover Policy at 108.

DISCUSSION

Hanover has moved to dismiss Hartford's declaratory judgment action, arguing that its policy is excess to Hartford's.

I. Motion to Dismiss Standard

To survive a motion to dismiss for failure to state a claim, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Id. (citation omitted).

"For purposes of a motion to dismiss, we have deemed a complaint to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference, as well as ... documents that the plaintiffs either possessed or knew about and upon which they relied in bringing suit." Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir.2000) (citations omitted). Because the Hartford and Hanover Policies were clearly relied upon in bringing this action, those contracts, subsequently submitted by the parties, may be relied upon to resolve this motion. See Arch Ins. Co. v. Harleysville Worcester Ins. Co., No. 13–CV–7350 (DLC), 2014 WL 3377124, at *4 (S.D.N.Y. July 7, 2014). "Issues of contract interpretation are generally matters of law and therefore are suitable for disposition on a motion to dismiss." Citadel Equity Fund Ltd. v. Aquila, Inc., 371 F.Supp.2d 510, 516 (S.D.N.Y.2005), aff'd, 168 Fed.Appx. 474 (2d Cir.2006) (citation and alteration omitted).

II. Ratable Contribution Does Not Apply

It is undisputed that the Hartford and Hanover Policies are primary policies with "other insurance" clauses that render them excess coverage with regard to "non-owned autos," i.e., the subject of the Underlying Action. Pl.'s Mem. of Law. in Support of Mot. for Summary Judgment and in Opp. to Def.'s Mot. to Dismiss ("Opp.") at 4. The parties dispute, however, the priority of coverage between the two policies.

Under New York law, which the parties agree governs this action, there is generally an "equitable right...

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