Sea Trade Mar. Corp. v. Marsh USA Inc.
| Decision Date | 21 October 2013 |
| Docket Number | Motion Seq. No. 009,Index No. 602648/2002 |
| Citation | 2013 NY Slip Op 32588 |
| Parties | SEA TRADE MARITIME CORPORATION, Plaintiff, v. MARSH USA INC. as successor of JOHNSON & HIGGINS, Defendant. |
| Court | New York Supreme Court |
Plaintiff Sea Trade Maritime Corporation ("Sea Trade") brings this action for negligent procurement of insurance and negligent misrepresentation against Marsh USA Inc. ("Marsh") as the successor of its former insurance broker, Johnson & Higgins. In motion sequence 009, Defendant Marsh moves for dismissal of the Second Amended Complaint pursuant to CPLR 3211(a)(1), (a)(5) and (a)(7), based on documentary evidence, collateral estoppel and failure to state a cause of action. Sea Trade opposes. For the reasons stated below, the Complaint is dismissed in its entirety.
This case arises out of a terrorist attack by the Tamil Tigers against a maritime vessel anchored off the Sri Lankan coast in 1997, and the subsequent insurance dispute. (Cmpl. ¶39). According to the Complaint, Plaintiff Sea Trade owned a single maritime vessel, the M/V Athena. (Cmpl. ¶ 22). Sea Trade hired a management company, Trans-Ocean Steamship Agency, Inc. ("Trans-Ocean"), to manage the M/V Athena, including the M/V Athena's insurance requirements. (Cmpl. ¶ 9).
Since the 1980s, Trans-Ocean had been working with an insurance broker named Veit Metzroth. (Cmpl. ¶ 14). As of 1992, when Sea Trade began its relationship with Trans-Ocean, Metzroth was employed by Alexander and Alexander, Inc. ("A&A"). (Cmpl. ¶ 14). The Complaint alleges that in December 1992, Trans-Ocean asked A&A and Metzroth to procure "held-covered" insurance for the M/V Athena.2 (Cmpl. ¶¶ 22, 23). The Complaint further alleges that A&A and Metzroth did not acquire "held-covered" insurance, but rather obtained insurance that required advance notice of travel to a war zone. (Cmpl. ¶ 43)
A&A provided to Trans-Ocean two summaries, or cover notes, describing the insurance coverage it obtained, one for the 1993 policy and one of the renewed 1994 policy. (Cmpl. ¶¶ 25, 26). The 1993 Cover Note was issued by A&A on January 6, 1993 and wassigned by "William K. Carson, senior vice president." (Affirmation of Steven G. Storch ("Storch Affirm.") Ex. A at 1). The 1993 Cover Note provided to Trans-Ocean regarding the M/V Athena inaccurately stated that "[information of [a] voyage [into a war zone] shall be given . . . as soon as practicable, and the absence of prior advice shall not affect the cover hereon." (Cmpl. ¶ 25; Storch Affirm. Ex. A at 1, 4). In fact, the insurance policy was not "held-covered" and required advance notice of the M/V Athena's entry into a war zone in order to secure insurance coverage. (Cmpl. ¶ 43). The 1994 Cover Note from A&A was issued on January 5, 1994, was signed by "Stephen A. Gandilora, vice president," and contained identical language to the 1993 Cover Note. (Cmpl. ¶ 26; Storch Affirm. Ex. A at 5, 8).
In November 1992, Metzroth left A&A to become a representative of Johnson & Higgins (Marsh's predecessor in interest, hereinafter "Marsh"). (Affidavit of Jay Cho ("Cho Aff.") Ex. B). On July 11, 1994, Trans-Ocean issued a letter appointing Marsh as its exclusive insurance broker. (Cmpl. ¶ 30). In January 1995, Trans-Ocean requested that Marsh renew the maritime insurance policy for the M/V Athena on identical terms. See Cmpl. ¶ 33. Each year that Marsh renewed coverage, Marsh provided Trans-Ocean with a Confirmation of Insurance, analogous to a cover note. However, unlike A&A's cover notes, the various Confirmations of Insurance each correctly described the policy by stating that "[t]he Rules [of the insurance company] provide that [Trans-Ocean] . . . shall give writtennotice . . . before the [M/V Athena] enters an Additional Premium Area, and specifies the consequences that follow if this condition is not complied with." (Cho Aff. Ex. D).
Sea Trade avers, and Marsh disputes, that despite repeated requests, neither Sea Trade nor Trans-Ocean ever received the insurance company's "Rule Book" that fully described the policy. (Cmpl. ¶ 35). The Rule Book described the "consequences" of a failure to provide advance notice of a vessel's travel to a war zone-a denial of coverage. (Cmpl. ¶ 35). Sea Trade alleges that it would only have allowed Trans-Ocean to purchase the insurance if the insurance was "held-covered" and that it did not require arbitration in London. (Cmpl. ¶ 38).
In May 1997, the M/V Athena was chartered by a third-party, which took the vessel to Sri Lanka. (Cmpl. ¶ 41). As stated in Marsh's January 1997 Confirmation of Insurance provided to Trans-Ocean, Sri Lanka had been designated a war zone, requiring advance notice before entry. (Cmpl. ¶ 32; Affidavit of Jonathan Wolfert ("Wolfert Aff.") Ex. D at 3). Trans-Ocean failed to provide advance notice of the Sri Lankan voyage. (Cmpl. ¶ 40). On May 29, 1997, while the M/V Athena was floating in the waters near the Sri Lankan port town of Trincomalee, the Tamil Tigers terrorist group detonated an explosive device that ripped through the M/V Athena's hull, causing $6.8 million in damage. (Cmpl. ¶¶ 39, 44).
Trans-Ocean notified the insurance company of the incident, but the insurance company asserted that it had no obligation to remit due to Trans-Ocean's failure to provide advance notice. (Cmpl. ¶ 43). Nevertheless, the insurance company paid half, or $3.4 million, of the claim. (Cmpl. ¶ 45).
On July 18, 2002, Sea Trade filed the instant action against the insurance company, Marsh and others seeking to recover the remainder of the claim. (Cmpl. ¶ 61). This Court granted a stay pending the outcome of contractually-mandated arbitration in London, which was affirmed by the First Department. Sea Trade Maritime Corp. v. Hellenic Mut. WarRisks Ass'n (Bermuda) Ltd., 7 A.D.3d 289 (1st Dep't 2004), lv. dismissed 3 N.Y.3d 766 (2004). Sea Trade lost its arbitration bid against the insurance company after an extensive evidentiary hearing. See Wolfert Aff. Ex. F. The arbitration award was affirmed by this Court, the First Department and the New York Court of Appeals. (Wolfert Aff. Exs. P, Q, R).
Sea Trade resumed the instant action by serving the Second Amended Complaint on October 23, 2012. The Second Amended Complaint asserts (i) that Marsh negligently failed to obtain appropriate "held-covered" insurance coverage, and (ii) that Marsh negligently misrepresented the details of the procured coverage.I. Marsh's Motion to Dismiss
Defendant Marsh moves for dismissal of the Second Amended Complaint pursuant to CPLR 3211(a)(1), (a)(5) and (a)(7), based on documentary evidence, collateral estoppel and failure to state a cause of action. Plaintiff Sea Trade opposes.
On a motion to dismiss a complaint for failure to state a cause of action, all factual allegations must be accepted as truthful, the complaint must be construed in a light most favorable to the plaintiffs and the plaintiffs must be given the benefit of all reasonable inferences. Allianz Underwriters Ins. Co. v. Landmark Ins. Co., 13 A.D.3d 172, 174 (1st Dep't 2004). "We . . . determine only whether the facts as alleged fit within any cognizable legal theory." Leon v. Martinez, 84 N.Y.2d 83, 87-88 (1994). This Court must deny a motion to dismiss, "if from the pleadings' four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law." 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 152 (2002) (internal quotation marks and citations omitted). On a CPLR 3211(a)(1) motion, "[i]t is well settled that bare legal conclusions and factual claims, which are either inherently incredible or flatly contradicted by documentary evidence . . . are not presumed to be true on a motion to dismiss for legal insufficiency." O'Donnell, Fox & Gartner v. R-2000 Corp., 198 A.D.2d 154, 154 (1st Dep't1993). Under CPLR 3211(a)(1), "dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law." Leon, 84 N.Y.2d at 88.
As an initial matter, Marsh owed a duty only to Trans-Ocean, not Sea Trade. "[A]bsent privity of contract or a relationship approaching privity," a claim against an insurance broker by the insured cannot survive. See, e.g., Levi v. Utica First Ins. Co., 12 A.D.3d 256, 257 (1st Dep't 2004) (citations omitted); Glynn v. United House of Prayer, 292 A.D.2d 319, 323 (1st Dep't 2002) (). In Levi, the court dismissed a negligent misrepresentation claim against a wholesale insurance broker because the insured dealt strictly with a retail broker. Levi, 12 A.D.3d at 257. The First Department found that the cause of action was properly dismissed because the complaint did not allege any contact between the insured and the broker, or that the broker made any representation to the insured. Levi, 12 A.D.3d at 257.
Here, the Complaint asserts that all interactions were between Marsh and Trans-Ocean. See Cmpl. ¶ 9 (); Cmpl. ¶ 10 (); Cmpl. ¶ 14 (); Cmpl. ¶ 16 (). Further, the cover notes, confirmations of insurance, and the letter appointing Marsh as Trans-Ocean's exclusive broker were all sent either by or to Trans-Ocean. . Akin to Levi,...
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