Knight v. U.S. Fire Ins. Co.

Decision Date22 October 1986
Docket NumberNo. 55,D,55
Citation804 F.2d 9
Parties, 55 USLW 2264 Frederick W.A. KNIGHT, Plaintiff-Appellant, v. U.S. FIRE INSURANCE COMPANY, Insurance Company of North America, Centennial Insurance Company, Reliance Insurance Company, Federal Insurance Company, Royal Insurance Company of America, Northwestern National Insurance Company, Highlands Insurance Company and Continental Insurance Company, Defendants-Appellees. ocket 86-7294.
CourtU.S. Court of Appeals — Second Circuit

Mary L. Montgomery, New York City (Kirlin, Campbell & Keating, James J. Higgins, Donald Burke, Robert A. Milana, of counsel), for plaintiff-appellant.

Donald M. Waesche, New York City (Waesche, Sheinbaum & O'Regan, P.C., Louis P. Sheinbaum, Richard W. Stone, II, John R. Keough, III, of counsel), for defendants-appellees.

Before FEINBERG, Chief Judge, CARDAMONE, Circuit Judge and KELLEHER, District Judge. *

FEINBERG, Chief Judge:

Frederick W.A. Knight appeals from an order of the United States District Court for the Southern District of New York, Constance Baker Motley, Ch. J., granting summary judgment to defendant insurance companies. Knight argues that summary judgment was inappropriate because several genuine issues of material fact remain unresolved. Upon review, we conclude that no such issues are present. Therefore, we affirm the holding of the district court.

I. Facts

The relevant facts are as follows: Between 1976 and 1979, Knight purchased in Thailand 222 antique stone and bronze statues for approximately $65,000. In 1980, an appraiser hired by Knight valued the collection at $20,205,000. The same appraiser revised his estimate to $27,000,000 in April 1981 and then to $30,307,500 in September 1981, the month in which he died. The appraiser was to receive for his services 5% of the proceeds from the eventual sale of the statues.

Meanwhile, Knight had transported the statuary from Thailand to Singapore. In February 1981, Knight obtained through the insurance brokerage firm of Hogg Robinson & Gardner Mountain (Marine) Ltd. (Hogg Robinson) coverage of $20,205,000 from London underwriters for shipment of the collection from Singapore to Holland. In May 1981, after receiving the first revised estimate from his appraiser, Knight requested and obtained through Hogg Robinson an additional $10,000,000 coverage for the voyage.

In June 1981, however, after the approximately $30 million risk had been placed, Robert Jensen, Knight's broker at Hogg Robinson, received two anonymous phone calls reporting that Knight was planning to perpetrate a fraud. Jensen conveyed this information to the lead London underwriters who, in response, ordered their own appraisal of the statuary. A few days later, Jensen sent a telex to Knight informing him that the underwriters had voided his policy because of his material nondisclosures and misrepresentations regarding his collection. Jensen stated in the telex that, based on their appraiser's inspection of some of the statues, the underwriters believed that the collection was "grossly over-valued and, in some, if not all cases, replicas.... The evidence currently available to underwriters suggests that the proper value of the consignment is nominal only (possibly approximately 1 pct of the value declared)."

In the spring of 1982, Knight again attempted to obtain insurance for the same statues, this time through a New York brokerage firm, H.E. Yerkes & Associates, Inc. Knight obtained $30 million of coverage with several American underwriters for a voyage from Singapore to France. However, the collection ultimately was not shipped and the policy lapsed.

In October 1982, Knight approached Yerkes & Associates to reinstate his $30 million of coverage, claiming that he was preparing to ship the statues to a purchaser in Greece. The brokers succeeded in placing $30,630,750 of risk for the voyage from Singapore to Greece with several American insurance companies. Many of these insurers had agreed to insure the earlier projected voyage from Singapore to France. These are the policies contested in this lawsuit. For convenience, we will refer to them hereafter as one policy (the New York policy).

In January 1983, the statues were loaded on board a vessel for the voyage from Singapore to Greece. On February 7, 1983, the ship sank in the Indian Ocean and the statues were lost.

After the loss of his statues, Knight attempted to collect on the insurance provided by defendant underwriters. Defendants refused and, instead, voided the New York policy ab initio because of Knight's alleged material nondisclosures and misrepresentations. Thereafter, Knight brought this lawsuit. Defendants moved for summary judgment before Judge Motley, and she granted the motion in a 16-page memorandum opinion. This appeal followed.

II. Summary Judgment

Rule 56(c) 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 moving party is entitled to a judgment as a matter of law." In considering the motion, the court's responsibility is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party. Anderson v. Liberty Lobby, Inc., --- U.S. ----, 106 S.Ct. 2505, 2509-11, 91 L.Ed.2d 202 (1986); Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 249 (2d Cir.1985).

Before rendering summary judgment, a court must also determine that any unresolved issues are not material to the outcome of the litigation. "[T]he mere existence of factual issues--where those issues are not material to the claims before the court--will not suffice to defeat a motion for summary judgment." Quarles v. General Motors Corp., 758 F.2d 839, 840 (2d Cir.1985) (per curiam). Nor may a party rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment. Id. Similarly, a "bare assertion that evidence to support a fanciful allegation lies within the exclusive control of the defendants, and can be obtained only through discovery, is not sufficient to defeat a motion for summary judgment." Eastway, 762 F.2d at 251.

Properly used, summary judgment permits a court to streamline the process for terminating frivolous claims and to concentrate its resources on meritorious litigation. Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir.1980). As the Supreme Court recently explained:

Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed "to secure the just, speedy and inexpensive determination of every action." Fed.Rule Civ.Proc. 1.... Rule 56 must be construed with due regard not only for the rights of persons asserting claims and defenses that are adequately based in fact to have those claims and defenses tried to a jury, but also for the rights of persons opposing such claims and defenses to demonstrate in the manner provided by the Rule, prior to trial, that the claims and defenses have no factual basis.

Celotex Corp. v. Catrett, --- U.S. ----, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986).

It appears that in this circuit some litigants are reluctant to make full use of the summary judgment process because of their perception that this court is unsympathetic to such motions and frequently reverses grants of summary judgment. Whatever may have been the accuracy of this view in years gone by, it is decidedly inaccurate at the present time, as borne out by a recent study by the Second Circuit Committee on the Pretrial Phase of Civil Litigation, chaired by Professor Maurice Rosenberg. The Committee analyzed the published and unpublished decisions of the Second Circuit for the period from July 1, 1983 to June 30, 1985 and found that the affirmance rate on appeals from orders granting summary judgment was 79%. 1 Final Report of the Second Circuit Committee on the Pretrial Phase of Civil Litigation 16-17 (June 1986). Thus it is evident that grants of summary judgment are upheld on appeal in most cases. That figure is comparable to this circuit's 84% affirmance rate for appeals in civil cases generally. Id. The widespread misperception regarding the disposition of appeals of summary judgment may be due to the fact that reversals are much more likely to be reported in published opinions than affirmances, which frequently are disposed of by unpublished orders under our Local Rule Sec. 0.23. Id. We hope that the Committee's study dispels the misperception so that litigants will not be deterred from making justifiable motions for summary judgment.

III. Discussion

Judge Motley granted summary judgment for defendants in this case because Knight had failed to inform them of a material fact. After rejecting several alternative grounds for the voidance of the New York policy, Judge Motley ruled that Knight's nondisclosure of the prior London cancellation together with the cancelling underwriters' opinion that the statues were overvalued and inauthentic justified defendant underwriters' voidance of the policy ab initio. With respect to this nondisclosure, Judge Motley found that there was no genuine issue as to any material fact. Although Knight presents several challenges to Judge Motley's decision, his arguments center around two main issues: whether the omitted fact was material and whether the underwriters had knowledge of that fact.

A.

In evaluating whether particular facts are material, we must turn to the substantive law governing marine insurance. It is well-established under the doctrine of uberrimae fidei that the parties to a marine insurance policy must accord each other the highest degree of good faith. Puritan Ins. Co. v. Eagle S.S. Co. S.A., 779 F.2d 866, 870 (2d Cir.1985). This...

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