Macklin v. Lexington Ins. Co.

• Decision Date: 30 September 2022
• Docket Number: 20 Civ. 5372 (ER)
• Parties: TAMEAKE MACKLIN, Individually and as assignee of HAPPY CHILD TRANSPORTATION LLC, ALL STAR BUS SERVICE CO., LLC, and LEVANDER POLK, Plaintiffs, v. SPARTA INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

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TAMEAKE MACKLIN, Individually and as assignee of HAPPY CHILD TRANSPORTATION LLC, ALL STAR BUS SERVICE CO., LLC, and LEVANDER POLK, Plaintiffs, v. SPARTA INSURANCE COMPANY, Defendant.

No. 20 Civ. 5372 (ER)

United States District Court, S.D. New York

September 30, 2022

OPINION & ORDER

EDGARDO RAMOS, U.S.D.J.

Tameaka Macklin brings this action against Sparta Insurance Company (“Sparta”) to collect on the remainder of a $6 million judgment for injuries she sustained in a school bus accident. Pending before the Court are Macklin's motions to strike certain of Sparta's denials and affirmative defenses, and to quash third-party subpoenas issued by Sparta. For the reasons set forth below, Macklin's motions are DENIED.

I. BACKGROUND^[1]

a. Sparta and the Accident

Sparta, a liability insurance company that operates in New York, issued a package insurance policy (the “Policy”) to Happy Child Bus Service Co. LLC (“Happy Child”) for the period January 1, 2014 to January 15, 2015 (the “Policy”). ¶¶ 21-23. The Policy included a business auto coverage form (the “Business Auto Part”), providing $1,000,000 in coverage; a commercial general liability coverage form (the “CGL Part”), providing $1,000,000 in coverage; and personal injury protection benefits (the “PIP Benefits”), providing up to $50,000 in coverage. ¶¶ 24-26. The portion of the Policy concerning “Duties In The Event Of Accident, Claim, Suit Or Loss” provides:

We have no duty to provide coverage under this policy if the failure to comply with the following duties is prejudicial to us: In the event of accident, claim, suit or loss, you or someone on your behalf must give us or our authorized representative notice as soon as reasonably possible of the accident or loss. Include: (1) [h]ow, when and where the accident or loss occurred; [t]he insured's name and address; and (3) [t]o the extent possible, the names and addresses of any injured persons and witnesses. Written notice by or on behalf of the injured person or any other claimant to our authorized representative shall be deemed notice to us. Additionally, you and any other involved insured must . . . [s]end us copies of any request, demand, order, notice, summons or legal paper received concerning the claim or suit as soon as reasonably possible.

Doc. 81-44 at 9-10 (internal quotation marks omitted).

On May 5, 2014, Macklin sustained injuries while riding as a bus attendant in a school bus (the “School Bus”) operated by Happy Child-and driven by Levander Polk, an employee of Happy Child-that collided with another vehicle driven by Jasmine T. Williams.^[2] ¶¶ 28-29. Macklin alleges that Happy Child leased the School Bus from Altfest Auto Leasing Inc. (“Altfest”) pursuant to a lease agreement (the “Lease Agreement”), Doc 54-18, and that Altfest owned the School Bus but that it was registered to Happy Child.^[3] ¶¶ 112-14. All Star Bus Service Co., LLC (“All Star”), who Sparta claims is Happy Child's sister company, see Doc. 109 ¶ 6, provided transportation services to Happy Child, pursuant to a sub-contract. See Doc. 54-17.

Under the sub-contract, All Star was responsible for operating the buses that brought students and school attendants to and from school. Doc. 54-17 at 2.

The following month, on June 3, 2014, Macklin's counsel, Koenigsberg & Associates P.C. (“Koenisberg”), sent a demand to Sparta's “Bodily Injury Claims Department,” requesting coverage for, inter alia, personal injuries she sustained as a result of the May 5, 2014 accident (the “Bodily Injury Letter”); the letter attached a corresponding police report. See Doc. 54-3. Also on June 3, 2014, Koenisberg sent a separate letter to Sparta's “No Fault Claims Department,” requesting coverage for personal injuries under the Policy (the “No Fault Letter,” together with the Bodily Injury Letter, the “June 2014 Letters”). See Doc. 54-2. The June 2014 Letters were received by Sparta. ¶ 49.^[4] The following week, on June 10, 2014, Gallagher Bassett-Capital City (“Gallagher”), a third-party administrator for Sparta, acknowledged receipt of Macklin's claim.^[5] ¶ 51.

According to Sparta, the following week, in a June 17, 2014 telephone call, Happy Child's insurance broker, Capacity, told Gallagher that the School Bus was insured by Progressive Insurance Company (“Progressive”) and was not covered under the Policy.^[6] See Doc. 110 at 13.

One month later, on July 9, 2014, Macklin's counsel called Gallagher to follow up on one, or both, of the June 2014 Letters.^[7] ¶ 54. As reflected in Sparta's records, an employee of

Gallagher stated that Macklin's claim was reported to Gallagher in error and that the insurer of the claim was Progressive Insurance.^[8] See Doc. 54-6 at 23.

Another month later, on August 7, 2014, Gallagher sent Macklin a “New York Motor Vehicle No-Fault Insurance Law Denial of Claim Form,” see Doc. 54-7, which denied Macklin coverage for “Loss of Earnings,” “Health Service Benefits,” or “Other Necessary Expenses,” on the basis that:

“The vehicle involved in this accident, is not a covered vehicle under the policy noted above. As such, there is no personal injury protection coverage afforded for this claim. The vehicle is not listed on [the Policy]. In addition, the Claimant is not a policyholder, is not a named insured or an eligible injured person under our insured's policy. Claim is denied, the Claimant was not an occupant of the insured vehicle.”

Id. at 2.^[9] Although Macklin has taken the position in this action that the denial was improper, she has not made a claim for no fault benefits in this litigation. See Doc. 109 ¶ 8.

b. The Underlying Action

Four months later, on December 24, 2014, Macklin filed an action, Macklin v. All Star, Altfest, Happy Child, and Polk., Index No. 241/2015 (the “Underlying Action”), in the New York Supreme Court for the County of Kings. ¶¶ 28, 30. There, Macklin sued All Star, Altfest, Happy Child, and Polk (the “Underlying Defendants”), for injuries she sustained in the May 5, 2014 accident (the “Underlying Accident”). The Donohue Law Firm (“Donohue”) represented the Underlying Defendants, and Koenisberg represented Macklin. See Doc. 84 ¶¶ 5, 33. The Law Offices of Sher, Herman, Bellone & Tipograph (“Sher Herman”) separately represented Macklin on questions related to worker's compensation. Id.

Three years into the Underlying Action, on April 13, 2018, the court issued an order precluding the Underlying Defendants from testifying or offering any affidavits at trial to support their defenses (the “Preclusion Order”) because the Underlying Defendants had previously failed to produce discovery. See Doc. 107 ¶ 12; Doc. 107-10. As a consequence of the Preclusion Order, the court later declined to consider an affidavit from Joseph Marzo, Jr., a member of All Star, supporting arguments on summary judgment that: (1) Macklin's claim was barred by New York Worker's Compensation Law because she was an employee of Happy Child, and (2) Altfest, a leasing company, should be dismissed pursuant to the Graves Amendment.^[10] See Doc. 107 ¶ 12; see Doc. 107-11 at 6-7. The court denied the Underlying Defendants' motion for summary judgment. See Doc. 107 ¶ 12.

The following year, on September 18, 2019, Macklin sent AIG Insurance Company-the parent company of Lexington Insurance Company (“Lexington”), another insurer of Happy Child^[11]-a settlement letter (the “Settlement Letter”), as trial was about to commence in the Underlying Action, copying the Underlying Defendants' counsel, Donohue. Doc. 54-8; ¶ 10.

The Settlement Letter provided:

As you know, this matter was scheduled for Final Jury Selection today and Jury Selection has commenced....This is to advise that my client is willing to settle this matter with your insureds' policy limits at the present time . . . for a total of $5,000,000.00....I am authorized to extend this offer for a short time only and the offer will expire at 5 P.M. on Friday September 20, 2019 after which time I am instructed to pursue this matter to verdict.

Doc. 54-8 at 2. Two days later, on September 20, 2019 (the same day Macklin's offer was set to expire), Happy Child's broker, Capacity, verbally informed Sparta of the Settlement Letter. See Doc. 110 at 13; See Doc. 109 ¶ 12. At that point, the trial was scheduled to begin the following week. Doc. 110 at 13. After the settlement negotiations failed, Capacity forwarded a copy of the complaint in the Underlying Action to Gallagher on September 26, 2019, the day before trial. Id. This was the first time Sparta received a copy of the complaint. See id.

Having learned of the Underlying Action and the Settlement Letter, Sparta sent a disclaimer letter to Happy Child on September 27, 2019, indicating “that there is no coverage available under the [Sparta] Policy for the [Underlying Action]” for five reasons:

[(1)] At this time, it is unclear whether the School Bus is covered [as a] Specifically Described “Auto[],” as we are not in possession of the School Bus'[s] VIN number[; (2)] Macklin's allegations and the police report indicate that the School Bus was owned by Happy Child. Thus the School Bus is not covered under Symbol 8 Hired “Autos” Only, and is likewise not covered under Symbol 9 Nonowned “Autos” Only[; (3)] even if the [Underlying Action] concerned a covered “auto,” coverage for Happy Child would be precluded [under the] “Employee Indemnification And Employer's Liability” [exclusion, or the] “Fellow Employee” [exclusion, because] the notice of claim states that Macklin was an employee of Happy Child on the date of the accident, and, thus, there is no coverage for her injuries[; (4)] Macklin's allegations and the notice of claim also confirmed that Polk, the School Bus driver, was also an employee of Happy Child on the date of

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