Journal Pub. Co. v. American Home Assur. Co.

• Decision Date: 02 July 1990
• Docket Number: No. 87 Civ. 4174 (PKL).,87 Civ. 4174 (PKL).
• Parties: JOURNAL PUBLISHING COMPANY, and Albuquerque Publishing Company (NSL), Plaintiffs, v. AMERICAN HOME ASSURANCE COMPANY, and National Union Fire Insurance Company, Defendants.
• Court: U.S. District Court — Southern District of New York

740 F. Supp. 1015

JOURNAL PUBLISHING COMPANY, and Albuquerque Publishing Company (NSL), Plaintiffs, v. AMERICAN HOME ASSURANCE COMPANY, and National Union Fire Insurance Company, Defendants.

No. 87 Civ. 4174 (PKL).

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

July 2, 1990.

Pryor, Cashman, Sherman & Flynn, New York City (Nathaniel H. Akerman, of counsel), for plaintiff Journal Pub. Co.

Rodey, Dickason, Sloan, Akin & Robb, Albuquerque, N.M. (William S. Dixon, of counsel), for plaintiff Albuquerque Pub. Co.

Sheft & Sweeney, New York City (David Holmes, of counsel), for defendants American Home Assur. Co. and Nat. Union Fire Ins. Co.

OPINION AND ORDER

LEISURE, District Judge:

Plaintiffs Journal Publishing Company and Albuquerque Publishing Company (collectively referred to as "Journal Publishing") commenced this action against defendants American Home Assurance Company and National Union Fire Insurance Company (collectively referred to as "American Home"),¹ seeking recovery under two insurance policies issued by defendants for attorneys' fees incurred by plaintiffs in the defense of a libel suit. The Court's jurisdiction arises from the diversity of citizenship of the parties.² This matter is before the Court on the parties' cross-motions for summary judgment.

BACKGROUND

American Home issued two umbrella insurance policies to Journal Publishing, covering liability in excess of the amount covered by Journal Publishing's primary policy and covering occurrences not covered by the primary insurer. The first policy was issued on January 8, 1974, effective through January 28, 1977. That policy was renewed by a second policy issued on January 28, 1977, effective through January 28, 1978. The terms of the policies were identical. See Plaintiffs' Exhibit 5. Employers Reinsurance Corporation ("Employers") was Journal Publishing's primary insurer during that time period and the parties agree that the Employers policy did not cover defense costs.

William Marchiondo commenced the underlying action against Journal Publishing on June 13, 1975, seeking damages for allegedly defamatory material published by Journal Publishing ("Marchiondo Action").³ The primary insurance policy issued by Employers and the umbrella policies issued by American Home were in force at the time of the allegedly defamatory publications. On August 1, 1975, Journal Publishing notified its insurance broker, who in turn notified American Home by letter, of the commencement of the Marchiondo Action. American Home created a claims file on the Marchiondo Action on September 15, 1975, and maintained that file throughout the litigation. In March 1983, the Marchiondo jury returned a verdict in favor of Journal Publishing on the libel claims.

On March 8, 1984, Journal Publishing made a written claim against American Home for indemnification under the umbrella policies of its legal costs incurred in the defense of the Marchiondo Action. On March 31, 1984, Mr. Marchiondo's appeal was denied and that action was concluded. American Home notified Journal Publishing by letter on January 24, 1985 that it denied coverage for legal fees under the umbrella policies. Plaintiffs commenced this action on June 15, 1987, for recovery of over $2.5 million in legal costs incurred from 1975 through 1984 in defending the Marchiondo Action. Defendants American Home have now moved for summary judgment, claiming that plaintiffs failed to comply with the twelve month definite claim condition of the policies and thus cannot recover. Plaintiffs have cross-moved for summary judgment, arguing that the policies cover defense costs and thus defendants are obligated to reimburse them.

DISCUSSION

Rule 56(c) provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." "`Summary judgment is appropriate when, after drawing all reasonable inferences in favor of the party against whom summary judgment is sought, no reasonable trier of fact could find in favor of the non-moving party.'" Horn & Hardart Co. v. Pillsbury Co., 888 F.2d 8, 10 (2d Cir.1989), quoting Murray v. National Broadcasting Co., 844 F.2d 988, 992 (2d Cir.), cert. denied, 488 U.S. 955, 109 S.Ct. 391, 102 L.Ed.2d 380 (1988).

The substantive law governing the case will identify those facts which are material, and "only disputes over facts that might affect the outcome of the suit under the governing law will probably preclude the entry of summary judgment.... While the materiality determination rests on the substantive law, it is the substantive law's identification of which facts are crucial and which facts are irrelevant that governs." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). "The judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there does indeed exist a genuine issue for trial." Id. at 249, 106 S.Ct. at 2510; see also R.C. Bigelow, Inc. v. Unilever N.V., 867 F.2d 102, 107 (2d Cir.), cert. denied, sub nom. Thomas J. Lipton, Inc. v. R.C. Bigelow, Inc., ___ U.S. ___, 110 S.Ct. 64, 107 L.Ed.2d 31 (1989).

The party seeking summary judgment "always bears the initial responsibility of informing the district court of the basis for its motion" and identifying which materials it believes "demonstrates the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); see also Trebor Sportswear Co. v. Limited Stores, Inc., 865 F.2d 506, 511 (2d Cir. 1989). "The burden on the moving party may be discharged by `showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Celotex, supra, 477 U.S. at 325, 106 S.Ct. at 2553. Indeed, once a motion for summary judgment is properly made, the burden then shifts to the nonmoving party, who "must set forth facts showing that there is a genuine issue for trial." Anderson, supra, 477 U.S. at 250, 106 S.Ct. at 2511. The nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986) (citations omitted).

In general, where the Court is faced with an issue of contract interpretation in a motion for summary judgment, it will analyze the language of the contract according to "its plain meaning giving due consideration to `the surrounding circumstances and apparent purpose which the parties seek to accomplish.'" Thompson v. Gjivoje, 896 F.2d 716, 721 (2d Cir 1990), quoting William C. Atwater & Co. v. Panama R.R. Co., 246 N.Y. 519, 524, 159 N.E. 418 (1927). "In an action on a contract ... summary judgment is perforce improper unless the terms of the agreement are `wholly unambiguous.'" Wards Co. v. Stamford Ridgeway Associates, 761 F.2d 117, 120 (2d Cir.1985), quoting Heyman v. Commerce & Industry Ins. Co., 524 F.2d 1317, 1320 (2d Cir.1975). "The mere assertion of an ambiguity by the nonmoving party does not suffice to make an issue of fact. Ambiguity resides in a writing when — after it is viewed objectively — more than one meaning may reasonably be ascribed to the language used." Thompson, supra, 896 F.2d at 721 (citations omitted).

Under New Mexico law, as in most states, an ambiguity in an insurance policy, unlike in other contracts, is ordinarily construed in favor of the insured. See Atlas Assurance Co. v. General Builders, Inc., 93 N.M. 398, 401, 600 P.2d 850, 853 (Ct. App.1979); see also, Vargas v. Pacific Nat'l Life Assurance Co., 79 N.M. 152, 155, 441 P.2d 50, 53 (1968); Couey v. Nat'l Benefit Life Ins. Co., 77 N.M. 512, 518, 424 P.2d 793, 796 (1967). Thus, as a matter of substantive state insurance contract law, ambiguities in an insurance policy are to be construed by the Court against the insurer. See e.g. McCormick and Company, Inc. v. Empire Ins. Group, 878 F.2d 27, 30 (2d Cir.1989); Vella v. Equitable Life Assurance Society of the U.S., 887 F.2d 388, 391 (2d Cir.1989); Uniroyal Inc. v. Home Ins. Co., 707 F.Supp. 1368, 1376 (E.D.N.Y.1988).

A) Defendant's Motion For Summary Judgment

Defendants have moved for summary judgment on the grounds that plaintiffs failed to comply with Condition 10 of the insurance policies and are thus precluded from recovery under those policies. Condition 10 states:

10. Loss Payable. Liability of the Company under this policy with respect to any occurrence shall not attach unless and until the insured, or the Insured's underlying insurer, shall have paid the amount of underlying limits on account of such occurrence. The insured shall make a definite claim for any loss for which the Company may be liable under the policy within twelve (12) months after the insured shall have paid an amount of ultimate net loss in excess of the amount borne by the insured or the insured's underlying insurer or after the insured's Liability shall have been fixed and rendered certain either by final judgment against the insured after actual trial or by written agreement of the insured, the claimant and the Company. If any subsequent payment shall be made similarly from time to time, such losses shall be due and payable within thirty (30) days after proof of loss and been furnished to the Company in a satisfactory form. (emphasis added).

Assuming, for the purposes of defendants' motion, that the policies cover defense costs, the parties agree that under Condition 10 the insured must make a "definite claim" for loss within twelve months after a certain event in order to obtain coverage. However, the parties vigorously dispute when the actual loss occurred, whether a definite claim was made and...