U.S. Underwriters Ins. Co. v. Itg Dev. Grp., LLC

Decision Date28 March 2018
Docket Number16–CV–1724 (MKB) (RER)
Citation294 F.Supp.3d 18
Parties UNITED STATES UNDERWRITERS INSURANCE COMPANY, Plaintiff, v. ITG DEVELOPMENT GROUP, LLC and Fredrick Rath, Defendants.
CourtU.S. District Court — Eastern District of New York

Frank Robert Malpigli, Steven Verveniotis, Miranda Sambursky Slone Sklarin Verveniotis LLP, Mineola, NY, for Plaintiff.

Steven G. Legum, Mineola, NY, for Defendants.

MEMORANDUM & ORDER

MARGO K. BRODIE, United States District Judge:

Plaintiff United States Underwriters Insurance Company ("U.S. Underwriters") commenced the above-captioned action against Defendants ITG Development Group, LLC ("ITG"), and Fredrick Rath on April 8, 2016, seeking a declaratory judgment that it has no duty to defend or indemnify ITG, or compensate Rath for claims asserted in the state court action, Rath v. ITG Development Group, LLC , Index No. 22144/2011 (Sup. Ct.) (the "Rath Action"), pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201.1 (Compl., Docket Entry No. 1; Am. Compl., Docket Entry No. 16.) On May 30, 2017, Plaintiff moved for summary judgment against Rath pursuant to Rule 56 of the Federal Rules of Civil Procedure.2 (Pl. Mot. for Summ J. ("Pl. Mot."), Docket Entry No. 30; Pl. Mem. in Supp. of Pl. Mot. ("Pl. Mem."), Docket Entry No. 30–28.)

On August 1, 2017, the Court referred Plaintiff's motion to Judge Reyes for a report and recommendation. (Order dated Aug. 1, 2017.) By report and recommendation dated February 20, 2018, Judge Reyes recommended that the Court grant Plaintiff's motion for summary judgment ("R&R"). (R&R, Docket Entry No. 33.) On March 5, 2018, Rath filed a timely objection to the R&R. (Def. Rath Obj. to R&R ("Rath Obj."), Docket Entry No. 34.) On March 6, 2018, Plaintiff filed timely objections to the R&R, asserting that the Court should grant summary judgment on additional grounds rejected by Judge Reyes.

(Pl. Letter Obj. to R&R ("Pl. Obj."), Docket Entry No. 35.)

I. Background
a. Factual background

Plaintiff U.S. Underwriters is an insurance company that offers commercial liability and property insurance policies. Defendant ITG is a New York corporation doing business in New York. (Compl. ¶ 2.)3 For the period spanning August 18, 2010 through February 18, 2011, U.S. Underwriters issued ITG an insurance policy numbered CP 3552516 (the "Policy"), covering 2107 5th Avenue New York, New York 10035 (the "Premises"). (Pl. Statement of Material Facts Pursuant to Local R. 56.1 ("Pl. 56.1") ¶¶ 14, 17, Docket Entry No. 30–26.)

On October 7, 2010, Rath, while working as an independent contractor for Bellmarc Realty LLC ("Bellmarc"), fell and sustained injuries at the Premises. (Id. ¶¶ 2–3; Def. Rath Resp. to Pl. 56.1 ("Rath 56.1") ¶ 34, Docket Entry No. 32–4.) Subsequently, on September 30, 2011, Rath filed the Rath Action against ITG, alleging that ITG's "negligence in ownership, operation, maintenance, repair and control of the premises" caused his injuries. (Pl. 56.1 ¶¶ 2–3.)

Rath served ITG with the summons and complaint of the Rath Action by personal delivery at the Office of the Secretary of the State of New York on November 4, 2011.4 (Id. ¶ 10.) On January 28, 2013, the Honorable Peter Sweeney issued an order granting Rath's motion for default judgment against ITG in the Rath Action. (Id. ¶ 11.) Consequently, on August 23, 2013, the Kings County clerk of court had entered judgment against ITG in the Rath Action in the amount of $2,674,800.90. (Id. ¶ 13.) ITG notified U.S. Underwriters of Rath's injury and the Rath Action on March 11, 2014, over six months after the Kings County clerk of court had entered a default judgment against ITG. (Id. ¶ 24.) As a condition precedent to coverage, the Policy required ITG to notify U.S. Underwriters "as soon as practicable" of any " ‘occurrence’ or an offense which may result in a claim" and any "claim" or " ‘suit’ ... brought against [the] insured." (Id. ¶ 15.)

b. The R&R

Judge Reyes recommended that the Court grant Plaintiff's motion for summary judgment because ITG's delay in providing Plaintiff notice of Rath's injury violated the terms of the Policy and prejudiced Plaintiff. (R&R 4–8.) He found the service on ITG through the Secretary of State to be sufficient notice, requiring ITG to have timely notified Plaintiff about the Rath Action. (Id. at 4–6.) In addition, Judge Reyes found the delayed notice to be prejudicial because of the length of the delay, and the resulting inability "to acquire any documentation related to the incident, or to speak with potential witnesses contemporaneous with the incident." (Id. at 7.) In granting summary judgement to Plaintiff on the basis of delay in notification and resulting prejudice, Judge Reyes also considered but dismissed Plaintiff's additional arguments based on the following four limitations of coverage in the Policy: (1) Vacancy of the Premises; (2) Construction Operations Exclusion; (3) Independent Contractor Exclusion; and (4) Bodily Injury Exclusion. (Id. at 8–11.)

In addressing the "Vacancy of the Premises" and "Construction Operations Exclusion" limitations, Judge Reyes found there remained a material dispute of fact as to whether "there was construction, remodeling or renovation at the time Rath was injured," precluding summary judgment on those bases. (Id. at 9, 11.) As to the "Independent Contractor Exclusion" and "Bodily Injury Exclusion" limitations, Judge Reyes found a material dispute of fact as to whether Bellmarc and ITG formed a contractor/subcontractor relationship, precluding summary judgment on those bases. (Id. at 9–10.)

II. Discussion
a. Standards of reviews

i. Report and recommendation

A district court reviewing a magistrate judge's recommended ruling "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1)(C). When a party submits a timely objection to a report and recommendation, the district court reviews de novo the parts of the report and recommendation to which the party objected. Id. ; see also United States v. Romano , 794 F.3d 317, 340 (2d Cir. 2015). The district court may adopt those portions of the recommended ruling to which no timely objections have been made, provided no clear error is apparent from the face of the record. John Hancock Life Ins. Co. v. Neuman , No. 15-CV-1358, 2015 WL 7459920, at *1 (E.D.N.Y. Nov. 24, 2015). The clear error standard also applies when a party makes only conclusory or general objections. Benitez v. Parmer , 654 Fed.Appx. 502, 503–04 (2d Cir. 2016) (holding "general objection[s] [to be] insufficient to obtain de novo review by [a] district court" (citations omitted) ); Fed. R. Civ. P. 72(b)(2) ("[A] party may serve and file specific written objections to the [magistrate judge's] proposed findings and recommendations." (emphasis added) ); see also Mario v. P & C Food Mkts., Inc. , 313 F.3d 758, 766 (2d Cir. 2002) ("Merely referring the court to previously filed papers or arguments does not constitute an adequate objection under ... Fed. R. Civ. P. 72(b)").

ii. Summary judgment

Summary judgment is proper only when, construing the evidence in the light most favorable to the non-movant, "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; Wandering Dago, Inc. v. Destito , 879 F.3d 20, 30 (2d Cir. 2018) ; see also Cortes v. MTA NYC Transit , 802 F.3d 226, 230 (2d Cir. 2015). The role of the court "is not to resolve disputed questions of fact but only to determine whether, as to any material issue, a genuine factual dispute exists." Rogoz v. City of Hartford , 796 F.3d 236, 245 (2d Cir. 2015) (first quoting Kaytor v. Elec. Boat Corp. , 609 F.3d 537, 545 (2d Cir. 2010) ; and then citing Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249–50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). A genuine issue of fact exists when there is sufficient "evidence on which the jury could reasonably find for the plaintiff." Anderson , 477 U.S. at 252, 106 S.Ct. 2505. The "mere existence of a scintilla of evidence" is not sufficient to defeat summary judgment. Id. The court's function is to decide "whether, after resolving all ambiguities and drawing all inferences in favor of the nonmoving party, a rational juror could find in favor of that party." Pinto v. Allstate Ins. Co. , 221 F.3d 394, 398 (2d Cir. 2000).

iii. Declaratory judgment

The Declaratory Judgment Act provides, in pertinent part, that "[i]n a case of actual controversy within its jurisdiction ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a). For the purposes of the Declaratory Judgment Act, "actual controversy" means "whether the facts alleged, under all the circumstances, show that there is a substantial controversy between parties having adverse legal interests, or sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Golden v. Zwickler , 394 U.S. 103, 108, 89 S.Ct. 956, 22 L.Ed.2d 113 (1969) (quoting Maryland Casualty Co. v. Pac. Coal & Oil Co. , 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941) ); see also Nike, Inc. v. Already, LLC , 663 F.3d 89, 95 (2d Cir. 2011). " [A] mere demand for declaratory relief does not by itself establish a case or controversy necessary to confer subject matter jurisdiction ....’ [Rather,] [w]here the remedy sought is a mere declaration of law without implications for practical enforcement upon the parties, the case is properly dismissed.’ " Mitskovski v. Buffalo & Fort Erie Pub. Bridge Auth. , 415 Fed.Appx. 264, 267 (2d Cir. 2011) (quoting S. Jackson & Son, Inc. v. Coffee, Sugar & Cocoa Exch. Inc. , 24 F.3d 427, 431 (2d Cir. 1994) ).

Federal courts have "unique and substantial discretion in deciding whether to declare the rights of litigants" under the Declaratory Judgment Act...

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