Luizzi v. Pro Transp., Inc.
| Decision Date | 31 July 2013 |
| Docket Number | 02 CV 5388 (CLP) |
| Parties | ROBERT LUIZZI and JOSEPHINE LUIZZI, Plaintiffs, v. PRO TRANSPORT, INC. and LUIS SANCHEZ, Defendants, LUIS SANCHEZ, Defendant/Third Party Plaintiff, v. STATE NATIONAL INSURANCE COMPANY, Third Party Defendant, STATE NATIONAL INSURANCE COMPANY, Second Third Party Plaintiff, v. GREEN MOUNTAIN AGENCY, INC., Second Third Party Defendant. |
| Court | U.S. District Court — Eastern District of New York |
In this coverage action brought by State National Insurance Company ("State National") against Green Mountain Agency, Inc. ("Green Mountain"), State National seeks a declaration that Luis Sanchez ("Sanchez") and Pro Transport, Inc. ("Pro Transport") were covered by Pro Transport Insurance Policy Number RPJ006802 ("the Policy") and its correspondingendorsements for the accident giving rise to the underlying action in this case. (S.N. Mem.1 at 2). Green Mountain argues that State National did not sustain its burden of proving:2 (1) that the Sanchez vehicle qualifies as a "covered auto" under the Policy, pursuant to either Symbol 8 ("hired auto" coverage) or Symbol 9 ("non-owned auto" coverage); or (2) that coverage is available pursuant to the Policy's MCS-90 Endorsement. (See G.M. Mem.3 at 2). Green Mountain contends that because there was no coverage under the Policy for the underlying accident, Green Mountain owes no duty to indemnify State National for the amounts paid in settlement. (G.M. Trial Mem.4 at 1).
For the reasons set forth below, the Court finds that State National has sustained its burden by proving by a preponderance of the evidence that the Sanchez vehicle qualifies as a "covered auto" pursuant to the Policy and that the Policy provided coverage to both Pro Transport and Sanchez for the underlying action in this case. Additionally, the Court holds that State National acted in accordance with the terms of its Policy in settling the underlying action.
On September 22, 2001, the automobile owned and operated by Robert Luizzi came intocontact with a 1985 International tractor-trailer5 driven by Luis Sanchez, in Queens, New York ("the Luizzi-Sanchez accident" or "the accident"). (Luizzi Compl.6 ¶¶ 6-8; S.N. Mem. at 3; Tr.7 at 137; G.M. Mem., Ex. 61). On September 25, 2002, plaintiffs Robert and Josephine Luizzi ("the Luizzis") filed a negligence action in New York State Supreme Court against Sanchez and Pro Transport, a hauling company that hired owner-operator truckers, such as Sanchez, to conduct its hauls. (S.N. Mem. at 3; Luizzi Compl. ¶ 9; Tr. at 61, 70-71). The Luizzis sought to recover for personal injuries suffered as a result of the accident. (Luizzi Compl. ¶¶ 10, 14, 15).
On October 4, 2002, Sanchez filed a Notice of Removal to this Court and filed an Answer to the Complaint on October 17, 2002. Also on October 17, 2002, Sanchez asserted a cross-claim against Pro Transport.8 On June 17, 2007, the parties consented to the jurisdiction of the undersigned, and on December 22, 2004, Pro Transport filed its Answer to the Luizzi Complaint. In its Answer, Pro Transport asserted a cross-claim against Sanchez, alleging that Pro Transport did not at any time own, operate, control, or lease either the tractor or the trailer involved in theLuizzi-Sanchez accident. (P.T. Ans.9 ¶ 19).
On June 3, 2005, Sanchez filed a Third Party Complaint, naming State National as a defendant. Sanchez alleged that on March 9, 2001, Green Mountain, as insurance wholesaler and agent for State National (S.N. Compl.10 ¶¶ 11, 12, 15, 16, 20), issued the Policy to Pro Transport, which covered "scheduled, hired, and non-owned autos operated on behalf of or in the business of Pro Transport." (Sanchez Compl. ¶¶ 29, 30).11 Sanchez asserted that under the Policy, State National and Pro Transport owe a duty to defend, indemnify, and hold Sanchez harmless for any judgments or awards stemming from the Luizzi-Sanchez accident. (Id. ¶¶ 31, 32, 33). On July 29, 2005, State National filed its Answer to Sanchez's Third Party Complaint, claiming as an affirmative defense that "any policy of insurance . . . issued to the defendant . . . was cancelled in a timely and proper manner prior to the date of the alleged accident."12 (S.N. Ans.13 at 6).
On February 9, 2006, State National filed a Second Third Party Complaint against Green Mountain, claiming that: (1) if the Policy was not cancelled properly, it was due to the negligence of Green Mountain; and (2) Green Mountain breached its contract with State Nationalwhen Green Mountain failed to properly cancel the Policy.14 (S.N. Compl. ¶¶ 29, 33-36). On August 8, 2006, Green Mountain filed an Answer to State National's Second Third-Party Complaint. In its Answer, Green Mountain asserted that the Policy was "cancelled in a timely and proper manner prior to the date of the alleged accident . . . ." (G.M. Ans.15 ¶ 43).
On January 17 and 18, 2007, this Court held a framed issue hearing to determine whether the Policy had been properly cancelled due to Pro Transport's non-payment of premiums. On February 25, 2008, the Court found that, due to an error on the part of Green Mountain, the Policy had not been properly cancelled by Green Mountain, and thus, was in effect on the date of the Luizzi-Sanchez accident. (See 2/25/08 Order16 at 35).
On March 13, 2009, State National filed a Motion for Summary Judgment against Green Mountain, claiming that Green Mountain was liable to State National for not properly cancelling the Policy because State National claimed it was foreseeable that State National would be harmed by Green Mountain's failure to cancel the Policy. (S.N. Sum. Judg.17 ¶¶ 18-20). State National also claimed that it was entitled to damages as a third party beneficiary of the contract between Reliant American Insurance Company ("Reliant"), State National's agent in the administration of the Policy, and Green Mountain. (Id. ¶¶ 11, 21-23).
On August 2, 2010, the Court granted Green Mountain's Motion for Summary Judgment with respect to State National's contract claim, but denied both parties' motions with respect to State National's negligence claim, finding that there were material issues of fact in dispute as to "whether it was foreseeable to Green Mountain that its failure to properly cancel [the Policy] would result in economic injury to State National." (8/02/10 Order18 at 18, 34).
On October 27, 2011, the Luizzis settled their action for $1.1 million, discontinuing with prejudice their claims against both Sanchez and Pro Transport. Of the total settlement amount, State National paid $800,000, which it now seeks to recoup from Green Mountain based on Green Mountain's negligent failure to properly cancel the insurance policy.19 (S.N. Reply at 17-18). The question currently before the Court is whether the Policy, which was in effect on the day of the Luizzi-Sanchez accident, provided coverage to Pro Transport and/or Sanchez for the Luizzi-Sanchez accident.
After weighing the evidence presented at the trial that was held on November 14 and 17, 2011, and after considering the briefs submitted by the parties following the trial, the Court finds that State National has proven by a preponderance of the evidence that the Sanchez vehicle was a "covered auto" and that the Policy provided coverage to both Pro Transport and Sanchez for the underlying accident.
At the time of the Luizzi-Sanchez accident, Pro Transport was in the business of facilitating hauls of, among other items, recyclable materials such as newspaper and cardboard. (Tr. at 61). In February of 2001, Vincente Pagan ("Pagan"),20 the owner and principal of Pro Transport, discussed insurance coverage for Pro Transport with a representative from Garden State Brokers ("Garden State"). (Id. at 96-97, 105). Garden State, acting as a commercial insurance underwriter for Green Mountain, was "authorized by Green Mountain to execute insurance contracts, collect premiums, and provide all usual and customary services of an insurance agent" on Green Mountain's behalf. . Garden State submitted the completed application from Pro Transport for the Policy to Green Mountain. (Tr. at 29-30).
Thomas J. Palumbo, a 30% owner and Executive Vice President of Green Mountain, testified that Green Mountain was an insurance wholesaler, specializing in trucking insurance, garage policies, and contractor insurance. (Tr. at 5-7). As Executive Vice President, Palumbo was responsible for back office operations, maintenance of records, and the negotiation of contracts with new carriers. (Id. at 6). Palumbo identified State National's Exhibit 10 as the Policy issued to Pro Transport by Green Mountain, bearing Number RPJ006802. (Id. at 8-9; S.N. Ex. 10). Palumbo testified that the application for the Policy is part of Exhibit 10. (Tr. at 9-10).
According to Palumbo, the Policy's application, which was submitted to Green Mountain, consisted of an ACCORD 125, which is a form that consists of a general information section, a section about the truckers to be hired, and a vehicle schedule. (Id. at 10-11). The application information section of the ACCORD 125 submitted on behalf of Pro Transport includes Pagan's signature and is dated February 27, 2001. (Id. at 11; see also S.N. Ex. 10).
On the second page of the application is a box with a series of "yes" and "no" questions about the applicant's business, to be answered by the insured. (Tr. at 11-12). Palumbo testified that, in general, Green Mountain would not issue a policy unless the questions were answered, and that Green Mountain relies on the answers in determining what kind of policy to issue. (Id.) Palumbo testified that because different truckers have different kinds of businesses, the underwriting of a policy may be simple or it may require Green Mountain to go through additional steps, depending on the answers provided in the ACCORD 125. (Id.)
Question 9 of the ACCORD 125 asks whether...
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