Travelers Indem. Co. of Illinois v. Cdl Hotels Usa, 03 Civ. 0716(MBM).
| Citation | 322 F.Supp.2d 482 |
| Decision Date | 22 June 2004 |
| Docket Number | No. 03 Civ. 0716(MBM).,03 Civ. 0716(MBM). |
| Parties | TRAVELERS INDEMNITY COMPANY OF ILLINOIS, Plaintiff, v. CDL HOTELS USA, INC., and as representative for an unincorporated association of interested insured parties, identified as Millenium Hotels, Defendant. |
| Court | United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York |
Alan R. Miller, Robins Kaplan Miller & Ciresi, Boston, MA, Michael L. Foran, Robert T. Boylan, Katherine E. Beaumont, Foran Glennon Palandech & Ponzi, Chicago, IL, for Plaintiff.
Robert E. Juceam, Greg L. Weiner, Maria Moukides, Fried Frank Harris Shriver & Jacobson, New York City, Steven N. Goldberg, David B. Goodwin, Nancy Sher Cohen, Heller Ehrman White & McAuliffe, LLP, New York City, for Defendant.
Plaintiff Travelers Indemnity Company of Illinois ("Travelers") provided the second excess layer of property insurance coverage for the Millenium Hotels, including the Millenium Hilton in New York City owned and operated by defendant CDL Hotels USA, Inc. ("CDL"). After the hotel was damaged in the attack on the World Trade Center on September 11, 2001, CDL submitted a claim for, among other things, business interruption because the hotel temporarily ceased operations as a result of the damage. After paying CDL approximately $40 million under the insurance policy, Travelers is suing CDL for a judgment declaring the terms of Travelers' insurance policy and Travelers' rights and obligations thereunder — specifically, a declaration that Travelers is liable for no more than one year's worth of business interruption damages with a 180-day extended period of such damages, or a total of 18 months. Travelers also asserts claims for breach of contract and breach of implied duty of good faith and fair dealing. It seeks as well reformation or rescission based upon mutual mistake and reformation or rescission based upon unilateral mistake so as to conform the terms of its excess policy to the terms it wishes the court to find are controlling.
Travelers has moved to amend its complaint a second time to allege that CDL provided Travelers with estimates for business interruption damages for only one year, rather than three years, and that CDL knew that its premiums for Travelers' excess policy were based upon these one-year estimates rather than three-year estimates. For the reasons stated below, Travelers' motion to amend its complaint is granted upon the condition that Travelers pay CDL reasonable attorneys' fees, which will be determined at a later conference with the parties.
CDL has moved to dismiss Travelers' complaint. CDL's motion to dismiss is denied as to Travelers' first claim for a declaration of the terms of Travelers' coverage, and granted as to all other claims.
Travelers is an Illinois corporation with its principal place of business in Connecticut. (First Am. Compl. ("FAC") ¶ 2) CDL is a Delaware corporation with its principal place of business in Colorado. (Id. at ¶ 3) It owns and operates the Millenium Hilton in New York, New York. (Id. at ¶ 4) CDL is a United States subsidiary of Millenium & Copthorne Hotels, plc ("M & C"), a London based company. (Id. at ¶ 5) Diversity jurisdiction is present pursuant to 28 U.S.C. § 1332, and venue in this court is proper under 28 U.S.C. § 1391 because the property involved is located in this district and a substantial part of the events giving rise to the action occurred in this district. (Id. at ¶¶ 10, 11) New York law, upon which the parties have relied, controls. See Texaco A/S (Denmark) v. Commercial Ins. Co. of Newark, NJ, 160 F.3d 124, 128 (2d Cir.1998) (); American Fuel Corp. v. Utah Energy Development Co., 122 F.3d 130, 134 (2d Cir.1997) (same).
The following facts are drawn from Travelers' First Amended Complaint and related documents. All the documents considered in deciding Travelers' motion to dismiss are well within the scope of this court's review on a dismissal motion as they are incorporated into the complaint either by reference or through Travelers' reliance on them in making the allegations in the complaint. See Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir.2000). All Travelers' allegations have been accepted as true for the purpose of this motion, see Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U.S. 163, 164, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993), and all reasonable inferences have been drawn in Travelers' favor, see Thomas v. City of New York, 143 F.3d 31, 37 (2d Cir.1998) (internal quotation marks and citation omitted).
Around November of 2000, CDL's parent company M & C engaged Willis of New York, Inc. ("Willis") as its insurance broker to procure property insurance coverage for the Millenium Hotels in the United States. (FAC ¶ 12) M & C authorized Willis to act as agent and representative for CDL in securing insurance coverage from Travelers for the Millenium Hilton in New York. (Id.) Willis solicited several insurers to participate in a layered property insurance program, with the primary coverage of $5 million to be provided by Lexington Insurance Company ("Lexington"). (Id. at ¶ 13) The first excess layer of coverage, for $5 million, was to be provided by Essex Insurance Company ("Essex") and Commonwealth Insurance Company ("Commonwealth") in the amount of $2.5 million each. (Id.) Willis sought to place Travelers in the second excess layer and requested coverage from Travelers with limits of $400 million per occurrence. (Id. at ¶ 14)
On November 13, 2000, Willis provided Travelers a copy of its standard property insurance policy form, called "WilProp," to show the coverage that Lexington would provide as primary insurance. (Id. at ¶ 15) On December 11, 2000, Travelers proposed terms on which it would provide second excess layer coverage. (Id. at ¶ 16) Travelers' proposed terms included business interruption insurance with a one-year maximum limit on the period of indemnity and a 180-day maximum limit on the extended period of indemnity, or a total of 18 months. (Id. at ¶ 17) These terms differed from WilProp, which provided business interruption coverage for a three-year maximum period of indemnity and a one-year maximum period of extended indemnity. (Id. at ¶ 19) Travelers' proposal was to expire on January 1, 2001. (Id. at ¶ 18) On December 21, 2000, Travelers returned the Wilprop form, which CDL had provided to Travelers on November 13 as a draft of the primary policy, to CDL, with modifications to the wording, including changing the business interruption coverage terms to conform to Travelers' proposed terms — specifically, a one-year maximum limit on the period of indemnity and a 180-day maximum limit on the extended period of indemnity. (Id. at ¶¶ 15, 17, 23) In that same communication, Travelers requested a copy of the primary policy issued by Lexington once it was agreed upon. (Id.) On December 29, 2000, Travelers bound itself to provide coverage "per the terms and conditions" in Traveler's December 11 proposal, and a copy of the December 11 proposal was attached to Travelers' binder. (Id. at ¶ 25) Willis accepted the coverage terms proposed by Travelers without objection for the binder period, which would end upon issuance of the Travelers excess policy. (Id.)
Willis sent Travelers a second draft of the proposed Lexington primary policy on January 5, 2001. (Id. at ¶ 30) The business interruption provisions still differed from the terms proposed by Travelers, so Travelers returned the draft policy on January 12, 2001, after modifying the policy once again to conform to Travelers' proposed terms. (Id. at ¶¶ 31, 32) This was the last version of the primary policy language exchanged between Willis and Travelers until November 2001. (Id. at ¶ 32)
Willis representative Timothy Boyd met with Travelers representative James Coyle on January 26, 2001, and Boyd requested that Travelers extend its business interruption coverage from one year to three years for the period of indemnity and from 180 days to one year for the extended period of indemnity. (Id. at ¶ 34) Coyle refused, and later that day requested that Boyd notify him of additional "feedback" from Lexington so they could discuss the primary policy. (Id. at ¶¶ 34, 35) On February 1, 2001, Travelers agreed to leave the issue of lengths of time, including the period of indemnity and extended period of indemnity for business interruption coverage, to the primary policy language, but Travelers nevertheless expected Willis to seek to incorporate Travelers' changes to the business interruption coverage into the primary policy. (Id. at ¶ 38) At that time, Willis again requested an enlargement of the extended period of indemnity during policy negotiations and was again rebuffed by Travelers. (Id. at ¶ 39) In the same conversation, Travelers again requested a copy of the primary policy reflecting the changes Travelers had proposed relating to the business interruption coverage. (Id. at ¶ 38)
Travelers issued its excess insurance policy around February 7, 2001, in which it agreed to provide "Following Form coverage per the terms and conditions of the Primary Insurer(s) and/or Underlying Insurer(s) Insurance Policy(s)." (Id. at ¶ 40; Moukides Dec., Ex. E) On February 21, 2001, Travelers requested from Willis yet again what Travelers called the "final" primary policy, and asked whether that policy incorporated Travelers' proposed terms on the business interruption coverage. (FAC ¶ 42) Willis received from Lexington as early as March 9, 2001 a draft that would become the primary policy ultimately issued by Lexington, but did not send a copy of that primary policy to Travelers until after September 11, 2001. (Id. at ¶ 43) Around May 2001, Willis asked Lexington to agree to a three-year extended period of indemnity, rather than one year. (Id. at ¶...
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