U.S. Underwriters Ins. Co. v. Kum Gang, Inc., 04-CV-2671 (ILG).

• Decision Date: 28 July 2006
• Docket Number: No. 04-CV-2671 (ILG).,04-CV-2671 (ILG).
• Citation: 443 F.Supp.2d 348
• Parties: UNITED STATES UNDERWRITERS INS. CO., Plaintiff, v. KUM GANG INC., Jung Hwan Lee, Young Bok Park, Jun Zhi Yuan, Travelers Property Casualty Corp., The St. Paul Travelers Companies, Inc., Charter Oak Fire Insurance Company and Hyunboon Park, Defendants.
• Court: U.S. District Court — Eastern District of New York

Page 348

443 F.Supp.2d 348

UNITED STATES UNDERWRITERS INS. CO., Plaintiff, v. KUM GANG INC., Jung Hwan Lee, Young Bok Park, Jun Zhi Yuan, Travelers Property Casualty Corp., The St. Paul Travelers Companies, Inc., Charter Oak Fire Insurance Company and Hyunboon Park, Defendants.

No. 04-CV-2671 (ILG).

United States District Court, E.D. New York.

July 28, 2006.

COPYRIGHT MATERIAL OMITTED

Steven Verveniotis, Adam I. Kleinberg, Miranda & Sokoloff, LLP, Mineola, NY, for Plaintiff.

Thomas V. Incantalupo, Mitchell & Incantalupo, Forest Hills, NY, for Defendants St. Paul Travelers and Charter Oak.

MEMORANDUM AND ORDER

GLASSER, District Judge.

INTRODUCTION

This insurance coverage dispute arises from an accident in which an employee of the Kum Gang restaurant ("Kum Gang" or "Restaurant"), a Mr. Jung Hwan Lee ("Lee" or "Valet") was parking the car owned by a Restaurant patron Young Bok Park ("Park" or "Insured")¹ when it struck and caused serious injury to Jun Zhi Yuan ("Yuan," "Underlying Plaintiff," or "Injured"). The insurer of Young Bok Park is Charter Oak Fire Insurance Company ("Charter Oak").² Kum Gang's commercial insurer is United States Underwriters ("Underwriters" or "Plaintiff").

As of the date of the filing of this action in federal court, an underlying personal injury action in state court was ongoing (Index No. 9614/03, Jun Zhi Yuan v. Kum Gang Inc., Jung Hwan Lee and Young Bok Park). Underwriters now moves this Court to declare (a) that Underwriters is not obligated to defend Kum Gang in the underlying action because of "automobile exclusion" and "premises limitation endorsement" provisions in their policy; (b) that Charter Oak is the primary insurer of Lee and Kum Gang and has a duty to defend them in the underlying action; and (c) that in the event Underwriters does not obtain the aforementioned declarations, it is only obligated to pay for coverage in excess of the Charter Oak policy.

Defendant Charter Oak cross-moves for summary judgment. It seeks declarations (a) that Charter Oak's insurance policy does not afford coverage to defendants Kum Gang and Lee because of an "auto business exclusion" and a timely disclaimer; (b) that Underwriters is the primary insurer for Lee and Kum Gang; (c) that Underwriters is obligated to defend Kum Gang and Lee in the underlying personal injury action; and (d) that in the event coverage is concurrent, liability should be apportioned on a pro rata basis pursuant to the Charter Oak policy.

For the following reasons, Plaintiffs motion is denied and the defendants' crossmotion is granted in part and denied in part.

DISCUSSION

The relevant facts are essentially undisputed. On March 15, 2003, Park, the owner of a Toyota with license plate number AMG 2114, drove his car up the Kum Gang driveway and relinquished control of the vehicle to Lee, who was working at that time as a "valet parker" for the Kum Gang Restaurant, which offered valet service ancillary to its business. (Yoo Dep., 5:18-6:11, Oct. 07, 2004). (See also, Defs. 56.1 Stmt. 111); (Kleinberg Decl., Ex. 12 Young Bok Park Dep. "Park Dep." 6:6-16, Oct. 07, 2004).³

For the purpose of parking the car in a nearby parking lot (the "YMCA" lot) used by the Restaurant, Lee exited the Kum Gang driveway onto Northern Boulevard and, roughly two car lengths from the mouth of the driveway, struck pedestrian Yuan. (Ex. 14, Jun Hwan Lee Dep. "Lee Dep." 15:21-23, Oct. 07, 2004).

The Kum Gang Restaurant is located at 138-28 Northern Boulevard and the YMCA lot is located at 138-46 Northern Boulevard. In order to arrive at the YMCA lot from the Kum Gang driveway, a driver must exit the Restaurant driveway and go around the block to Bowne Street. (Yoo Dep., 114:10-16, Oct. 07, 2004).

Shortly after the accident, on March 18, 2003, a letter was sent by Yuan's counsel to the Parks. This letter requested that they notify their insurer of Yuan's claim and that it "forward an Application for No—Fault Form, forthwith." (Ex. 8). Charter Oak created a claim file for the incident. (Ex. 9). The file indicates that Charter Oak was aware that Lee was an employee of Kum Gang and was driving the insured vehicle when the accident occurred. (Plt. 56.1 Stmt. 1118) (Exs. 8, 9).

Subsequently, sometime between March 28 and 31 of 2003, Underwriters was notified of the accident by its agent, Morstan General Agency. (Defs. 56.1 Stmt. 1135; Plt. Rep. 56.1 Stmt. 117).⁴ On April 3, 2003, Underwriters began an investigation of the claim. While the investigation was ongoing, on April 11, 2003, Yuan brought suit in New York state court against the Parks, Lee, and Kum Gang. (Plt. 56.1 Stmt. 5); (Ex. 5). On May 14, 2003, Underwriters issued a written disclaimer of coverage to Kum Gang. (Defs. 56.1 Stmt. 117) (Ex. 6E). That letter disclaimed coverage based on policy exclusions discussed below. Although Underwriters declined coverage to Kum Gang in May, it did not send a letter to Charter Oak requesting it to provide coverage or a defense to Kum Gang and Lee until December 16, 2003. (Defs. 56.1 Stmt. ¶ 11). (Exs. 5, 10). There is no record, in fact, that either Lee or Kum Gang or anyone acting on their behalf requested Charter Oak to defend them prior to receiving the December 16 letter. In reply, Charter Oak determined that it was not obligated to insure Kum Gang, and notified Underwriters of its disclaimer on December 23, 2003. (Defs. 56.1 Stmt. ¶ 12). Coverage was disclaimed because it asserted that: 1) the "Auto business" exception precluded its obligation to defend; and 2) there was a breach of the requirements of timely notification of the claim by Kum Gang and Lee. (Ex. 11).

On June 24, 2004, Underwriters filed this summary judgment motion seeking declaratory relief. (Plt. 56.1 Stmt. 111). The present motion and cross-motion were fully briefed by August of 2005. The record does not reflect that the underlying action has been adjudicated, settled, or otherwise disposed of.

I. Declaratory Relief

A. 28 U.S.C. § 2201

In relevant part, the Declaratory Judgment Act (DJA) provides that "any court of the United States ... may declare the rights and other legal relations of any interested party seeking such a declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a).

Actions for declaratory judgment must meet "case or controversy" requirements. A court cannot adjudicate conjectural or hypothetical cases or controversies. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). A controversy cannot be a mere possibility or probability that a person may be adversely affected in the future. Dawson v. Dep't of Transp., 480 F.Supp. 351, 352 (W.D.Okla.1979). A controversy "must be sufficiently real and immediate, allowing specific and conclusive relief .. . it must also be ripe for adjudication." Dow Jones & Co., Inc. v. Harrods Ltd., 237 F.Supp.2d 394, 406 (citing Pub. Serv. Cmm'n v. Wycoff Co., Inc., 344 U.S. 237, 244, 73 S.Ct. 236, 97 L.Ed. 291 (1952)). Importantly, "[Ole disagreement ... must have taken a fixed and final shape so that a court can see what legal issues it is deciding, what effect its decision will have on its adversaries, and some useful purpose to be achieved in deciding them." Pub. Serv. Com'n of Utah v. Wycoff Co., Inc., 344 U.S. 237, 244, 73 S.Ct. 236, 97 L.Ed. 291 (1952).

To maintain jurisdiction for declaratory relief, plaintiffs must show that they meet the above prerequisites at the time the case is heard. Golden v. Zwickler, 394 U.S. 103, 108, 89 S.Ct. 956, 22 L.Ed.2d 113 (1969). See also Ford v. Reynolds, 326 F.Supp.2d 392, 404 (E.D.N.Y. July 23, 2004) (citing Cardinal Chem. Co. v. Morton Int'l, Inc., 508 U.S. 83, 95-96, 113 S.Ct. 1967, 124 L.Ed.2d 1 (1993)).

The DJA expressly confers discretion upon the district court to decide whether it will entertain jurisdiction over the action. Apotex Inc. v. Sanofi-Synthelabo et al., 386 F.Supp.2d 549, 551 (S.D.N.Y.2005) (citing Dow Jones & Co., Inc. v. Harrods Ltd., 346 F.3d 357, 359 (2d Cir.2003)). When exercising its discretion, the Court considers the litigation as a whole. Gianni Sport Ltd. v. Metallica, 2000 WL 1773511, *4 (S.D.N.Y.2000). In this consideration "practicality and wise judicial administration predominate." Wilton v. Seven Falls Co., 515 U.S. 277 288, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). The DJA does not expand the jurisdiction of the Court, it only provides an additional form of relief which the Court may provide if there is an independent basis for jurisdiction over the claim. Paulsen v. Lehman, 839 F.Supp. 147 (E.D.N.Y.1993).

Finally, courts should be wary of entering declaratory judgments when the suit interferes with an action already filed. Apotex, 386 F.Supp.2d at 551 (citing Farrell Lines Inc. v. Columbus Cello-Poly Corp., 32 F.Supp.2d 118, 124 (S.D.N.Y. 1997)). Declaratory relief should not be ordered if it will interfere with an orderly and comprehensive disposition of the litigation in state court. Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942). Courts should also be wary of requests for declaratory relief which involve either "procedural fencing" or a "race to res judicata." Dow Jones, 346 F.3d at 359-60. "The anticipation of defenses is not ordinarily a proper use of the declaratory judgment procedure." 28 U.S.C.A § 2201 n. 613, 182 (1994) (citing Hanes Corp. v. Millard, 531 F.2d 585 (D.C.Cir.1976) rev'd on other grounds, Shearson/American Exp., Inc. v. McMahon, 482 U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d 185, (1987)).

B. Application of 28 U.S.C. § 2201

The two insurers in this action, Underwriters and Charter Oak, both disclaim liability based on particular policy provisions and each asserts that the other is liable for the defense of Kum Gang and Lee. Both parties also seek determinations of contribution priorities should the underlying plaintiff obtain a favorable judgment against the underlying defendant-insureds.

Because neither...