Varda, Inc. v. Insurance Co. of North America

• Decision Date: 13 January 1995
• Docket Number: No. 579,D,579
• Citation: 45 F.3d 634
• Parties: VARDA, INC., Plaintiff-Appellee, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellant. ocket 94-7405.
• Court: U.S. Court of Appeals — Second Circuit

Page 634

45 F.3d 634

31 Fed.R.Serv.3d 1105

VARDA, INC., Plaintiff-Appellee, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellant.

No. 579, Docket 94-7405.

United States Court of Appeals Second Circuit.

Argued Oct. 28, 1994.

Decided Jan. 13, 1995.

Robert M. Sullivan, New York City (Ira J. Greenhill, P.C., of counsel), for defendant-appellant.

Dennis T. D'Antonio, New York City (Debra Ruth Wolin, Weg & Meyers, P.C., of counsel), for plaintiff-appellee.

Before: VAN GRAAFEILAND, McLAUGHLIN, and LEVAL, Circuit Judges.

McLAUGHLIN, Circuit Judge:

The Insurance Company of North America ("INA") issued a casualty insurance policy to Varda, Inc. ("Varda"), a clothing and shoe store. The policy required Varda to submit sworn proofs of loss after filing a claim with INA. When one of its stores was burglarized, Varda filed a notice of claim, but no proof of loss. INA undertook an investigation.

Almost a year later, Varda sued INA in the United States District Court for the Southern District of New York (John E Sprizzo, Judge ) for failure to pay the insurance. INA, for the first time, requested proofs of loss, but Varda did not submit them. INA filed an answer, asserting a number of defenses, including Varda's failure to submit sworn proofs of loss. The case went to trial (after being reassigned to Lawrence M. McKenna, Judge ). The jury found for Varda, and awarded $110,833.03 in damages. The district court added $82,478.92 in pre-judgment interest.

INA now appeals, arguing that the district court erroneously charged the jury that if INA had repudiated the policy, this excused Varda's non-compliance with various provisions of the policy. INA's position is that, as a matter of law, there was no repudiation. INA also contends that the district court erroneously dismissed two of INA's affirmative defenses. Finally, INA claims that the insurance policy precludes the award of pre-judgment interest.

We hold that: (1) because INA did not renew its pre-verdict motion for judgment as a matter of law, we cannot now set aside the verdict; (2) the district court properly dismissed INA's affirmative defenses; and (3) the policy does not preclude pre-judgment interest. In addition, we deny Varda its costs on appeal, because its counsel blatantly evaded this Court's page limit on briefs by the massive abuse of textual footnotes.

BACKGROUND

INA insured Varda against losses from burglaries. The insurance policy required Varda to submit proofs of loss after filing a claim. (Under New York law, however, failure to submit proofs of loss is not a material breach unless and until the insured receives and ignores a written demand for the proofs of loss. N.Y.Ins.Law Sec. 3407(a) (McKinney 1985).) The policy also required Varda to sign the transcript of any examination under oath ("EUO") INA conducted.

One of Varda's stores was burglarized on October 23, 1984. Varda filed a notice of claim, but no proof of loss; and INA began an investigation. Cooperating with INA, Varda conducted an extensive post-loss inventory and compared that inventory with its pre-loss records.

Although it pored through Varda's books, INA made no independent effort to determine whether any of the supposedly stolen inventory remained in the store. Moreover, INA's claims adjuster, Robert Dwyer, informed Varda that it had no provable loss and told INA that Varda's claim was "ludicrous." Nevertheless, even after almost a year, INA still had not told Varda whether it would pay the claim.

Fearing that INA would deny the claim, and having been cautioned by its own adjuster that the policy's one-year period to sue INA was running out, Varda brought a diversity suit against INA for failing to pay the insurance. After being sued, INA then requested, for the first time, that Varda submit sworn proofs of loss. (Varda had sixty days to do so after INA's request. See N.Y.Ins.Law Sec. 3407(a).) INA also asked Varda's principal, Ezra Omri, to appear for an EUO. Omri appeared at the EUO, but failed to produce sworn proofs of loss. He later signed the transcript of the EUO, but did not return it to INA.

INA made no additional request for either the proofs of loss or the EUO transcript. Instead, it filed its answer several days after the statutory sixty-day period for submitting the proofs of loss expired. In the answer, INA admitted there was an insurance contract between the parties, but little else. It also asserted several affirmative defenses, including failure to file proofs of loss, fraud, and failure to sign and return EUO transcripts.

INA then moved for summary judgment on the proof of loss defense, arguing that Varda's failure to submit proofs of loss was a material breach of the insurance contract. Varda opposed the motion, arguing that: (1) INA had waived the proof of loss requirement because it never sent Varda the policy language that contained the proof of loss requirement; and, alternatively, (2) INA had already repudiated the insurance policy before it requested proofs of loss from Varda.

The district court denied INA's motion. It held that whether Varda received the proof of loss clause was a question of fact. Varda, Inc. v. Insurance Co. of North America, 701 F.Supp. 57, 60 (S.D.N.Y.1988). It also held that if Varda had not received the proof of loss provision, the jury could find that INA had waived (or was estopped from asserting) the proof of loss defense. Id. at 59. Finally, it held that neither INA's delay in investigating Varda's claim nor its adjuster's comment to INA that the claim was ludicrous amounted to a repudiation of the policy. Id. at 61.

The case was reassigned to Judge McKenna, and went to trial. Omri (Varda's principal) testified about the burglary, how he calculated Varda's loss, and his efforts to get INA to process Varda's claim. He also testified that INA's claims adjuster, Dwyer, never showed up to investigate the Varda store until January 16, 1985, almost three months after the loss.

Dwyer testified for INA. He admitted that there had indeed been a burglary, but he recalled little of his investigation (it took place over nine years before). Contrary to Omri, he claimed that he met with Varda's claims adjuster at the store on October 31, 1984. (On cross-examination, however, he admitted that his written report of that "meeting" contained no photographs of the store nor any statement from the insured, even though he agreed that adjusters usually obtain such information as soon as possible.) He referred to the January 16, 1985 meeting as his "second" visit to the site. His own records revealed, however, that he visited the site to take photographs on November 8, 1984, which would make the January meeting the third site visit--if Dwyer was telling the truth about the October 31, 1984 meeting.

At the close of the case, INA moved for judgment as a matter of law. Varda countered with a motion to dismiss INA's fraud and EUO transcript defenses. The district court denied INA's motion, and granted Varda's.

After reviewing a proposed jury charge on repudiation, INA renewed its motion for judgment as a matter of law. In addition to the grounds raised earlier, INA now argued that it had not repudiated the policy. The district court again denied the motion. It charged the jury, over INA's objection, that Varda was not obliged to comply with INA's request for proofs of loss if the jury found that INA had already formed a definitive intent to deny Varda's claim.

The jury returned a general verdict for Varda, awarding it $110,833.03 in damages. Varda moved for pre-judgment interest. The district court granted the motion, tacking on $82,478.92. INA neither renewed its motion for judgment as a matter of law, nor moved for a new trial.

INA now appeals. Both parties concede that New York law governs.

DISCUSSION

Notwithstanding the flurry of issues raised by INA on appeal, we need address only three questions: (1) whether the district court erred by instructing the jury that Varda would be excused from failing to comply with the proof of loss provision if the jury found that INA had repudiated the policy; (2) whether INA has any affirmative defenses to Varda's claim of breach of contract; and (3) whether the insurance contract bars the award of pre-judgment interest.

I. Repudiation

There is no question that Varda failed to file proofs of loss, even after INA's written request for them. Under New York law, this failure is a material breach of contract, and, if unexcused, precludes recovery under the contract. See N.Y.Ins.Law Sec. 3407(a) (McKinney 1985); Anthony Marino Constr. Corp. v. INA Underwriters Ins. Co., 69 N.Y.2d 798, 800, 513 N.Y.S.2d 379, 505 N.E.2d 944 (1987). If, however, INA had repudiated the claim before it demanded sworn proofs of loss, Varda's failure to submit the proofs is excused. See Igbara Realty Corp. v. New York Property Ins. Underwriting Ass'n, 63 N.Y.2d 201, 217, 481 N.Y.S.2d 60, 66, 470 N.E.2d 858, 864 (1984). INA argues that, because, as a matter of law, there was no repudiation, the district court should never have sent that issue to the jury. We cannot reach this issue, however, because INA failed to preserve it.

In retrospect, it has now become clear that the core issue both at trial and on this appeal is the repudiation question. If INA repudiated its liability under the insurance policy, it loses. If it did not repudiate, then Varda loses because it never filed the required proof of loss. Despite the centrality of this issue, it was treated cavalierly in the trial court and badly muddled in the appellate briefs.

At the charging conference, Judge McKenna informed the parties that he would charge the jury on the repudiation issue and indicated what he intended to say. INA objected to the charge, not because it was substantively incorrect, but because INA believed there was insufficient evidence to carry that issue to the jury. Lest the trial judge miss the point, INA coupled its objection with a ...