Mu Yan Lin v. Burlington Ins. Co.

• Decision Date: 21 March 2012
• Docket Number: 11 Civ. 33 (PGG)
• Parties: MU YAN LIN, Plaintiff, v. BURLINGTON INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

MU YAN LIN, Plaintiff,

v.BURLINGTON INSURANCE COMPANY, Defendant.

11 Civ. 33 (PGG)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Dated: March 21, 2012

MEMORANDUM OPINION & ORDER

PAUL G. GARDEPHE, U.S.D.J.:

This case involves an insurance coverage dispute. Plaintiff Mu Yan Lin obtained a default judgment in state court against Panestone Contracting Corp. ("Panestone") relating to damage Panestone caused to Lin's property. At the time the damage occurred, Panestone held a comprehensive general liability policy issued by Defendant The Burlington Insurance Company ("Burlington"). In this action, Lin seeks a declaration that Burlington has an obligation to pay the default judgment she obtained against Burlington's insured, Panestone.

The parties have cross-moved for summary judgment. For the reasons stated below, Burlington's motion will be GRANTED and Lin's motion will be DENIED.

BACKGROUND¹

I. THE BURLINGTON INSURANCE POLICY

Burlington issued a comprehensive general liability policy to Panestone, policy number 356B01918, for the period between June 11, 2003 and March 1, 2004 (the "Policy"). (Def. R. 56.1 Stmt. ¶ 1) The Policy provides, in pertinent part:

SECTION I - COVERAGES

COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. . . .

* * * *

SECTION IV - COMMERCIAL GENERAL LIABILITY CONDITIONS

* * * *

2. Duties In The Event of Occurrence, Offense, Claim Or Suit

a. You must see to it that we are notified as soon as practicable of an "occurrence" or an offense which may result in a claim. To the extent possible, notice should include:

(1) How, when and where the "occurrence" or offense took place;

(2) The names and addresses of any injured persons and witnesses; and

(3) The nature and location of any injury or damage arising out of the "occurrence" or offense.

b. If a claim is made or "suit" is brought against any insured, you must:

(1) Immediately record the specifics of the claim or "suit" and the date received; and

(2) Notify us as soon as practicable.

You must see to it that we receive written notice of the claim or "suit" as soon as practicable.

c. You and any other involved insured must:

(1) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or "suit";

* * * *

(3) Cooperate with us in the investigation or settlement of the claim or defense against the "Suit";

* * * *

3. Legal Action Against Us

No person or organization has a right under this Coverage Part:

a. To join us as a party or otherwise bring us into a "suit" asking for damages from an insured; or

b. To sue us on this Coverage Part unless all of its terms have been fully complied with.

* * * *

SECTION V - DEFINITIONS

* * * *

13. "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

* * * *

18. "Suit" means a civil proceeding in which damages because of . . . "property damage" . . . to which this insurance applies are alleged.

(Id. ¶ 2; Keizer Decl., Ex. A at TBIC000136, TBIC000144-45, TBIC000147, TBIC000148)

II. THE INCIDENT

On or about September 1, 2003, Panestone entered into a contract with Tom Lin, Plaintiff's brother, to perform work at a residential property Plaintiff owns at 142-47 Booth Memorial Avenue, Flushing, New York. (Def. R. 56.1 Stmt. ¶ 3; Jack Decl., Ex. J at ¶ 6; Keizer Decl., Ex. C at TBIC000092) The contract required Panestone to purchase "Builders Risk insurance to insure both [the] existing house and the remodeling before [the] start [of] the construction" (Jack Decl., Ex. J at Art. 4.2), and to "take responsibility for any damage [that]arise[s] at the existing house. . . ." (Id., at Art. 6.7) As noted above, Panestone obtained a comprehensive general liability insurance policy from Burlington. (Def. R. 56.1 Stmt. ¶ 1)

On or about November 14, 2003, while Panestone was performing work on Lin's building, the interior was damaged by rain. (Def. R. 56.1 Stmt. ¶ 3; Keizer Decl., Ex. B at TBIC000106, Ex. C at TBIC000092) Apparently, "during the roof renovation portion of the work [on Lin's building], [Panestone's] workers failed to secure the premises from water and weather element related damage[,] allowing the interior of the premises to be flooded and damaged." (Keizer Decl., Ex. B at TBIC000106) Neither Panestone nor Lin gave notice to Burlington at that time of the potential claim. (Def. R. 56.1. Stmt. ¶ 5; Keizer Decl. ¶ 4)

Despite the property damage allegedly sustained on November 14, 2003, Panestone continued to work on Lin's building until February 2004. At that time, Panestone's work on Lin's building apparently ceased, and Panestone refused to repair the water damage. (Def. R. 56.1 Stmt. ¶ 4; Keizer Decl., Ex. B at TBIC000106, Ex. C. at TBIC000092)

III. NOTICE TO BURLINGTON

In a February 25, 2004 letter to Panestone , Lin's then attorney - Carmine V. Musumeci - accused the contractor of causing water damage to the interior of Lin's building by failing to "secure the premises from water and weather element related damage" during roof renovation. The letter requested Panestone's "prompt attention to rectify this situation immediately, due to the negligence of your workers." (Def. R. 56.1 Stmt. ¶ 5; Keizer Decl., Ex. B) The local agent who had written the Policy was copied on the letter. (Keizer Decl., Ex. B at TBIC000107) On March 9, 2004, the insurance broker on the Policy, Morstan General Agency, Inc., faxed a copy of Musumeci's February 25, 2004 letter, along with a Notice of Occurrence/loss form, to Burlington. (Def. R. 56.1 Stmt. ¶ 5; Keizer Decl., Ex. B)

IV. BURLINGTON'S INVESTIGATION OF THE INCIDENT

After Burlington received the insurance broker's March 9, 2004 fax, it hired R.M.G. Investigations, Inc. ("RMG") to investigate the incident and to locate Panestone and/or Andy Wang, Panestone's President. (Def. R. 56.1 Stmt. ¶ 8) As part of its investigation, RMG made multiple telephone calls to Wang, sent a letter to Panestone, contacted the broker as well as the local agent for the Policy, contacted a real estate attorney who had referred Lin to Panestone, performed various database and public record searches concerning Panestone and Wang, and made several site visits to locations where it believed Panestone and/or Wang might be located, and interviewed individuals at these locations. (Id.; Keizer Decl., Ex. C at TBIC000019-20, TBIC000039, TBIC000049-50, TBIC000053-55, TBIC000078-80) Tim Yang, the local insurance agent who wrote the policy, advised RMG that he had contacted Panestone in March 2004 about an unpaid insurance premium, but had never received a response. Yang told RMG that Panestone had "go[ne] out of business." RMG contacted two telephone numbers provided by Yang, without success. (Keizer Decl., Ex. C at TBIC000049-50) RMG also sought Plaintiff's counsel's assistance in locating Panestone and/or Wang. (Def. R. 56.1 Stmt. ¶ 8; March 15, 2011 Gear Aff., Exs. F, G) RMG was unable to locate Wang or anyone else affiliated with Panestone. (Def. R. 56.1 Stmt. ¶ 8; Keizer Decl. ¶ 5, Ex. C)

V. THE UNDERLYING ACTION

On August 17, 2004, Lin filed a complaint against Panestone in Supreme Court of the State of New York, Kings County, Index No. 26059/04 (the "Underlying Action"). (Def. R. 56.1 Stmt. ¶ 9(b)² , Jack Decl. ¶ 4, Ex. J) Panestone did not respond to the complaint, and Lin obtained a default judgment against Panestone on July 29, 2005. (Def. R. 56.1 Stmt. ¶ 10(b);Jack Decl. ¶ 5, Ex. K) The court scheduled an inquest on damages for November 9, 2005. (Jack Decl., Ex. K) On May 3, 2010, the court entered a final judgment against Panestone in the amount of $192,145.³ (Def. R. 56.1 Stmt. ¶ 11; Keizer Decl., Ex. F at TBIC000002) On May 5, 2010, Lin's counsel sent a letter to Burlington demanding that it pay the final judgment amount entered against Panestone in the Underlying Action. (Def. R. 56.1 Stmt. ¶ 12; Keizer Decl., Ex. F at TBIC000001)

VI. BURLINGTON'S DISCLAIMERS

On April 13, 2006, Burlington sent a letter to Andy Wang at Panestone giving the Company "one last opportunity" to assist Burlington in conducting its investigation of Lin's insurance claim. (Def. R. 56.1 Stmt. ¶ 9(a); Keizer Decl., Ex. D) The letter made reference to Burlington's repeated and unsuccessful efforts to speak with Wang, and quoted Policy language requiring Panestone to "'cooperate with [Burlington] in the investigation or settlement of [a] claim.'" (Keizer Decl., Ex. D) The letter warned Wang that his failure to contact Burlington within thirty days would "result in a denial of Defense and Indemnity to you, Panestone Contracting." (Id.; Def. R. 56.1 Stmt. ¶ 9(a)) (emphasis in original). Wang and Panestone did not respond to Burlington's April 13, 2006 letter. Accordingly, on June 12, 2006, Burlington sent another letter to Wang and Panestone advising them that "[d]ue to your failure to cooperate with our investigation of this matter, we are denying coverage to you for [Lin's claim]." (Keizer Decl., Ex. E; Def. R. 56.1 Stmt. ¶ 10(a)) Lin's then counsel - Carmine Musumeci - and the broker - Morstan General Agency - were copied on Burlington's June 12, 2006 letter to Wang and Panestone denying coverage. (Keizer Decl., Ex. E)

Lin asserts that in response to Burlington's June 12, 2006 letter denying coverage, her counsel - Carmine Musumeci - "forwarded" a letter to Burlington on June 22, 2006 stating that "this matter is in fact, in suit, and your insured has defaulted; a default judgment on liability has been entered and we are proceeding to [an] inquest on damages...