Opinion
No. CV 04-2997 (RJD) (VVP).
April 27, 2006
REPORT AND RECOMMENDATION
Judge Dearie has referred to me for a Report and Recommendation, pursuant to 28 U.S.C § 636(b)(1), separate motions for summary judgment filed by each defendant in this insurance contract dispute. Dr. Cunningham, the plaintiff, opposes both motions. For the reasons discussed below, the undersigned respectfully recommends that both summary judgment motions be GRANTED.
BACKGROUND
This action arises out of a March 11, 2004 incident in which the plaintiff's 50-foot fishing vessel (hereinafter the "Swamp Fox") was destroyed in a fire while docked at the Excelsior Yacht Club in Brooklyn, New York. (Pl.'s Aff. Opp'n INA Summ J. Mot. ¶ 2; INA Rule 56.1 Statement ¶ 24.) The fire apparently began on a neighboring boat but spread to the Swamp Fox and other nearby vessels. (Pl.'s Aff. Opp'n INA Summ J. Mot. ¶ 2.) Through the defendant Christi Insurance Group, Inc., an insurance broker, the plaintiff had procured a policy of insurance for the Swamp Fox. (Pl.'s Aff. Opp'n INA Summ J. Mot. ¶ 4; Christi Rule 56.1 Statement ¶ 4.) Insurance Company of North America ("INA"), the other defendant, had issued the policy. (Pl.'s Opp'n INA Rule 56.1 Statement ¶ 2; INA Rule 56.1 Statement ¶¶ 2-4.) As a result of the plaintiff's "catastrophic loss," he filed a claim seeking coverage for loss of the Swamp Fox and assistance in defending actions brought against the plaintiff by owners of adjoining vessels involved in the fire. (Pl.'s Aff. Opp'n INA Summ. J. Mot. ¶¶ 2-3.)
After an investigation, INA denied the plaintiff's claim because of what it found to be the plaintiff's breach of a "lay-up warranty" contained in his insurance policy. (Pl.'s Aff. Opp'n INA Summ. J. Mot. ¶¶ 3; INA Rule 56.1 Statement ¶ 27; INA Denial Letter, July 1, 2004, attached to Mercante Aff. as Ex. 12 [hereinafter Denial Letter].) The lay-up warranty required that, for the duration of the policy, the plaintiff have his boat "laid-up" from December 1st to April 1st of the following year. (INA Rule 56.1 Statement ¶¶ 5-6; Swamp Fox Policy Declaration Page, Period of April 17, 1998 to April 17, 1999, attached to Mercante Aff. as Ex. 3; Swamp Fox Renewal Certificate, Period of April 17, 2003 to April 17, 2004, attached to Mercante Aff. as Ex. 2 [hereinafter Renewal Certificate].) INA concluded that the plaintiff, having used the Swamp Fox for fishing trips and other purposes during the "lay — up period," had violated the "lay-up warranty," thus depriving him of coverage for the incident. (Denial Letter, supra, at 4-5.)
The plaintiff insists, however, that he is entitled to compensation under the policy and has instituted the present action as a result. He brings a total of ten claims against the defendants alleging essentially that (1) INA has breached its contract with the plaintiff by denying his insurance claim and refusing to provide coverage for damages incurred from the fire, and that (2) in the event the court determines the plaintiff is not entitled to coverage, Christi is liable for negligence, malpractice, and breach of contract for failing to procure adequate insurance on the plaintiff's behalf. ( See Am. Compl. ¶¶ 32-72.)
DISCUSSION
I. Choice of LawTo determine INA's motion, the court must first address the threshold issue of whether federal or state law applies. The plaintiff and INA do not dispute that in the event federal law does not apply, New York law governs.
While the plaintiff and Christi are in substantial disagreement as to whether New York or New Jersey law should apply to their dispute, the court need not address the issue since Christi's motion is ultimately decided on statute of limitations grounds for which choice of law is clear. See discussion infra Part II.C.2.
The claims asserted against INA rest on a breach of contract theory, addressing primarily the interpretation of the marine insurance contract at issue. "Absent a specific federal rule, federal courts look to state law for principles governing maritime insurance policies." Comm. Union Ins. Co. v. Flagship Marine Services, Inc., 190 F.3d 26, 30 (2d Cir. 1999) (citing Wilburn Boat Co. v. Fireman's Fund Ins., 348 U.S. 310, 319-21 (1955)). While INA cites to several cases from other circuits which it contends establish the existence of a federal rule governing the interpretation of warranties in marine insurance contracts, see, e.g., Lexington Ins. Co. v. Cooke's Seafood, 835 F.2d 1346 (11th Cir. 1988); Goodman v. Fireman's Fund Ins. Co., 600 F.2d 1040 (4th Cir. 1979), they do not change the clear law of this circuit as well as the Supreme Court, which have long-recognized that "[t]here is no specific federal rule governing construction of maritime insurance contracts," Flagship Marine, 190 F.3d at 30 (citing Wilburn Boat, 348 U.S. at 321). See also Miller Marine Services v. Travelers Prop. Cas. Ins. Co., No. 04-CV-5679, 2005 WL 2334385, at *6 (E.D.N.Y. Sept. 23, 2005) (applying New York state law to summary judgment motion regarding marine insurance contract); Americas Insurance Co. v. Stolt-Nielsen, Inc., No. 97-Civ-8018, 2004 WL 2199497, at *3 (S.D.N.Y. Sept. 30, 2004) ("Under federal maritime choice-of-law rules, the Court turns to state law for principles governing construction of the maritime contracts of affreightment and insurance at issue here.") (citations omitted); Hartford Fire Ins. Co. v. Mitlof, 208 F. Supp. 2d 407, 411 (S.D.N.Y. 2002) ("Because there is no specific federal rule governing the construction of marine insurance contracts, New York law applies.") (citations omitted).
Nor is there any basis for the court to fashion a federal rule in cases concerning warranties in marine insurance contracts. Cf. Wilburn Boat, 348 U.S. at 370-71 ("[C]rucial questions in this case narrow down to these: (1) Is there a judicially established federal admiralty rule governing [marine insurance] warranties? (2) If not, should we fashion one?"); Youvell v. Exxon Corp., 48 F.3d 105, 110 (2d Cir. 1995) ("[M]arine insurance policies are governed by state insurance regulations, unless federal courts have fashioned an admiralty rule on point, or unless the need for such rule exists."), judgment vacated on other grounds by Exxon Corp. v. Youvell, 516 U.S. 801 (1995). As the Supreme Court observed in Wilburn Boat,
Under our present system of diverse state regulations, which is as old as the Union, the insurance business has become one of the great enterprises of the Nation. Congress has been exceedingly cautious about disturbing this system, even as to marine insurance where congressional power is undoubted. We, like Congress, leave the regulation of marine insurance where it has been — with the States.348 U.S. at 374 (footnotes omitted). The court therefore concludes that New York law, not federal law, controls the dispute between the plaintiff and INA.
II. Summary Judgment
A. Standard
A motion for summary judgment will be granted when there is no material issue of fact to be decided and the undisputed facts warrant judgment for the moving party as a matter of law. See Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 780 (2d Cir. 1994). If a reasonable jury could return a verdict for the non-movant, then a material issue of fact remains in contention and the motion must be denied. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The materiality of the facts is determined by the substantive law governing the claims. Id.
Courts apply a burden-shifting approach in deciding summary judgment motions. The particular burden-shifting framework applied depends on "which party will bear the burden of persuasion on the challenged claim at trial." Celotex, 477 U.S. at 331 (Brennan, J., dissenting). In the present case, the non-moving party would bear the burden of persuasion at trial. Therefore, "the moving party must first make a prima facie case by either identifying portions of the record "which it believes demonstrate the absence of a genuine issue of material fact," or "pointing out . . . that there is an absence of evidence to support the nonmoving party's case." Golden Pacific Bancorp v. F.D.I.C., 375 F.3d 196, 200-01 (2d Cir. 2004) (quoting Celotex, 477 U.S. at 323, 325). After such a showing is made, the non-moving party must set forth specific factual allegations to avoid summary judgment. See Fed.R.Civ.P. 56(e); Golden Pacific, 375 F.3d at 200; Stony Brook Marine Trans. Corp. v. Wilton, No. 94-CV-5880, 1997 WL 538913, at *5 (E.D.N.Y. Apr. 21, 1997). "To this end, `[t]he non-moving party may not rely on mere conclusory allegations nor speculation, but instead must offer some hard evidence showing that its version of events is not wholly fanciful.'" Golden Pacific, 375 F.3d at 200 (quoting D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir. 1998)). Although the non-moving party need not produce evidence in a form that would be admissible at trial in order to avoid summary judgment, Rule 56(c) and 56(e) provide that the non-moving party cannot rest on the pleadings but must set forth specific facts in the affidavits, depositions, answers to interrogatories, or admissions on file showing there is a genuine issue for trial. See Celotex, 477 U.S. at 323-24. "Throughout this inquiry, the Court must credit the non-moving party's evidence and draw all justifiable inferences in favor of that party. Golden Pacific, 375 F.3d at 201 (citing Anderson, 477 U.S. at 255).
In dealing with breach of contract claims, when "contractual language is susceptible of at least two fairly reasonable interpretations, this presents a triable issue of fact, and summary judgment [is] improper." Rothenberg v. Lincoln Farm Camp, Inc., 755 F.2d 1017, 1019 (2d Cir. 1985) (citations and internal quotations omitted). Summary judgment is appropriate, however, "where the language of the contract is unambiguous, and reasonable persons could not differ as to its meaning. . . ." Id. (collecting New York state court cases); accord Fulton Cogeneration Associates v. Niagara Mohawk Power Corp., 84 F.3d 91, 98 (2d Cir. 1996).
B. INA's Motion for Summary Judgment
INA's primary argument for summary judgment centers on the plaintiff's purported breach of a "lay-up warranty" contained in his insurance policy. Under New York law, a "warranty" in an insurance contract "represent[s] a promise by the insured to do or not to do some thing that the insurer considers significant to its risk of liability under an insurance contract." Flagship Marine, 190 F.3d at 31. Generally, with respect to non-marine insurance contracts, an insured may still recover despite having breached a warranty, unless the breach "materially increase[s] the risk of loss, damage or injury within the coverage of the contract." Id. § 3106(b). Or, stated differently, "if an insured breaches a warranty that is collateral to the risk that is the primary concern of the contract, the insured will not be precluded from recovery." Flagship Marine, 190 F.3d at 31. With respect to marine insurance contracts like the one here, however, the materiality of the breach is irrelevant under New York law. N.Y. Ins. Law § 3106(c) ("This section [defining warranty and governing the effects of a breach] shall not affect the express or implied warranties under a contract of marine insurance in respect to, appertaining to or in connection with any and all risks or perils of navigation, transit, or transportation. . . ."); see also Mitlof, 208 F. Supp. 2d at 411-12 ("New York's Insurance Law specifically carves out a maritime exception from its general rule regarding breach of collateral warranties.") (citations omitted). As a result, New York state courts have long-recognized that "an express . . . warranty [in a marine insurance policy] must be literally complied with, and . . . noncompliance forbids recovery, regardless of whether the omission had causal relation to the loss." Jarvis Towing Transp. Corp. v. Aetna Ins. Co., 298 N.Y. 280, 282 (1948) (citations omitted). See also Flagship Marine, 190 F.3d at 31 ("[W]arranties in maritime insurance contracts must be strictly complied with, even if they are collateral to the primary risk that is the subject of the contract, if the insured is to recover.") (citations omitted); Cogswell v. Chubb, 36 N.Y.S. 1076, 1078 (App.Div. 1896) ("[T]he breach of an express warranty [in a marine insurance contract], whether material to the risk or not, whether a loss happens through the breach or not, absolutely determines the policy, and the assured forfeits his rights under it.") (citations omitted). The imposition of the "literal performance rule," as it is often referred to, see Kron v. Hanover Fire Ins. Co., 246 N.Y.S.2d 848, 849-50 (App.Div. 1964) (citations omitted), "stems from the . . . peculiarly difficult [task] for marine insurers [in] assess[ing] their risk, such that insurers must rely on the representations and warranties made by insureds regarding their vessels' condition and usage," Flagship Marine, 190 F.3d at 31-32 (citations omitted).
Specifically, section 3106 of New York's Insurance Law defines a "warranty" as,
Any provision . . . which has the effect of requiring . . . as a condition precedent of the insurer's liability thereunder, the existence of a fact which tends to diminish, or the non-existence of a fact which tends to increase, the risk of the occurrence of any loss, damage, or injury within the coverage of the contract.
N.Y. Ins. Law § 3106(a) (2006).
The parties do not dispute that the provision at issue is a warranty within the meaning of section 3106(c) of New York's Insurance Law. Thus, the literal performance rule applies and any breach, irrespective of materiality, precludes coverage. What the parties do disagree about are the terms and construction of the warranty, which, in turn, affects the breach of contract inquiry. This requires a review of the rules of construction for insurance contracts as employed by New York state courts.
In construing an insurance policy, the court must give effect to "the reasonable expectation and purpose of the ordinary business man when making an ordinary business contract. . . .'" Kimmins Indus. Serv. Corp. v. Reliance Ins. Co., 19 F.3d 78, 81 (2d Cir. 1994) (quoting Album Realty Corp. v. Am. Home Assurance Co., 574 N.Y.S.2d 704, 706 (App.Div. 1991)) (additional citation omitted). New York law requires that "[t]he parties' intent . . . be ascertained by examining the policy as a whole, and by giving effect and meaning to every term of the policy." Hartford Ins. Co. of Midwest v. Halt, 646 N.Y.S.2d 589, 594 (1996) (citing County of Columbia v. Continental Ins. Co., 83 N.Y.2d 618, 628 (1994)) (additional citations omitted). Unambiguous provisions of an insurance contract must be given their plain and ordinary meaning. Pepper v. Allstate Ins. Co., 799 N.Y.S.2d 292, 294 (App.Div. 2005) (citations omitted). Only when the terms of an insurance contract are found to be ambiguous will the court apply the rules of construction. Flagship Marine, 190 F.3d at 33 ("As a general rule, plain or unambiguous language will be given its ordinary meaning and effect, and the need to resort to rules of construction arises only when an ambiguity exists.") (citation omitted).
"[A]mbiguity exists where the term of a contract could suggest `more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.'" Alexander Alexander Services, Inc. v. These Certain Underwriters at Lloyd's, 136 F.3d 82, 86 (2d Cir. 1998) (quoting Lightfoot v. Union Carbide Corp., 110 F.3d 898, 906 (2d Cir. 1997)). Where a contractual term is found to be ambiguous, "the court may accept any available extrinsic evidence to ascertain the meaning intended by the parties during the formation of the contract." Alexander, 136 F.3d at 86 (citing Seiden Associates v. ANC Holdings, Inc., 959 F.2d 425, 428-29 (2d Cir. 1992)). In doing so, however, the court must acknowledge that "questions of material fact necessarily exist" thus precluding summary disposition of the claims at issue. Id. (citing Seiden, 959 F.2d at 428). Therefore, "only where the court finds that the terms are unambiguous, or where no extrinsic evidence exists, may it properly grant summary judgment to one of the parties." Id. (citing Seiden, 959 F.2d at 428 ("Where the language used is susceptible to differing interpretations . . . and where there is relevant extrinsic evidence of the parties' actual intent, the meaning of the words become[s] an issue of fact and summary judgment is inappropriate.")). Determining whether an insurance contract is ambiguous is an issue of law that is within the province of the court. Flagship Marine, 190 F.3d at 33 (citation omitted). All ambiguities must be resolved against the insurer and in favor of the insured. Pepper, 799 N.Y.S.2d at 294 (citations omitted).
Applying the above principles, the court examines the lay-up warranty to determine whether there is any ambiguity that prevents the court from determining that it was breached as a matter of law. The warranty at issue states that "It is warranted the vessel will be laid up for part of the year, the dates are: From noon: 12/01 To noon: 4/01." (Renewal Certificate, supra, at 1.) The term "laid up" is not defined in the policy. However, the evidence submitted on this motion establishes that the term means, at the very least, that the vessel be decommissioned and taken out of use during the specified period. The plaintiff admits as much. For example, when asked at his deposition to define a "lay-up period," the plaintiff described it as "a period of time when the boat is decommissioned and not used during any given season." (Cunningham Dep. 23.) Representatives of INA and Christi also conveyed similar understandings of the lay-up term. ( See, e.g., McDowell Dep. 17:15-18 ("[L]ay up means that the boat is completely out of commission, it's not being used for any reason whatsoever."); Brophey Dep. 95:11-15, Mar. 11, 2005 ("[Plaintiff's counsel:] How do you lay up a boat? [Brophey:] Well, you have to decommission it; you have to winterize the engine, shut down all systems, take off equipment, make the boat not operable.").) The argument advanced by the plaintiff that the lay-up term is ambiguous because the parties had differing opinions as to the "specific list of what an insured had to do to comply with the . . . lay-up [warranty]" is unavailing. (Pl.'s Opp'n INA Summ. J. Mot. 10.) Even assuming the existence of such a dispute, the fact remains that the parties uniformly agree that laying up a boat means that it not be used during the specified period. There is no evidence in the record to the contrary. As to that meaning then, the term is unambiguous, and the court may "`construe [the] contract as a matter of law and grant summary judgment accordingly.'" Alexander, 136 F.3d at 86 (quoting Cable Science Corp. v. Rochdale Village, Inc., 920 F.2d 147, 151 (2d Cir. 1990)).
It is also undisputed that the plaintiff used the Swamp Fox during the lay-up period. ( Compare INA Rule 56.1 Statement ¶¶ 20-22 with Pl.'s Opp'n INA Rule 56.1 Statement ¶ 19.) The plaintiff openly acknowledges that he used the Swamp Fox "twelve months a year" and had taken "approximately half a dozen" fishing trips during the lay-up period, including one 10-hour trip on the weekend of February 29 shortly before the fire. (Cunningham Examination Under Oath 30:19-22, 31:24-2513; Cunningham Dep. 40:10-22; see also INA Rule 56.1 Statement ¶ 21.) It is therefore clear that the plaintiff had breached the lay-up warranty. The court rejects the plaintiff's argument that these past events are immaterial because the Swamp Fox was not in operation and thus not in breach of the warranty at the time of the fire. The lay-up period, as set forth in the warranty, runs from December 1 to April 1 of the following year. Therefore, any use of the boat during that period results in a breach of the lay-up warranty. It matters not whether the purported breach occurred on the date of the accident for which the plaintiff seeks coverage or on some other date.
The plaintiff also testified that he "lived" on the Swamp Fox "every weekend," which he described as his "habit" and "routine." (Cunningham Examination Under Oath 34:24-25.)
In his affidavit in opposition, the plaintiff attempts to raise a factual dispute about what it means to "lay-up" a boat, stating that the meaning of a lay-up period he had conveyed at the deposition was based on his "understanding of that term as of March 25, 2005, the date of [the] deposition, not [on his] understanding in 1998 or any time before the Fire. . . ." (Cunningham Aff. Opp'n Christi Summ. J. Mot. ¶ 10.) This post-hoc explanation fails to create a material issue of fact for several reasons. First, the law is clear in this circuit that a party may not create a factual issue precluding summary judgment by offering an affidavit that contradicts previous sworn testimony. Langman Fabrics v. Graff Californiawear Inc., 160 F.3d 106, 112 (2d Cir. 1998) (citing Mack v. United States, 814 F.2d 120, 124-25 (2d Cir. 1987) and Trans-Orient Marine Corp. v. Star Trading Marine, Inc., 925 F.2d 566, 572 (2d Cir. 1991)). Second, and more importantly, the question whether the term "lay-up" is ambiguous depends, not on what the contracting parties thought "lay-up" meant when the policy was first issued, but on its meaning "when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business." Alexander, 136 F.3d at 86. In that sense, the undisputed statements in the record by all parties that the term means, at a minimum, "out of use" renders the term unambiguous on that point as a matter of law. Cf. Omni Quartz, Ltd. v. CVS Corp., 287 F.3d 61, 64 (2d Cir. 2002) ("It is well established that a court may not admit extrinsic evidence in order to determine the meaning of an unambiguous contract. As to such a contract, a party `is precluded from introducing extrinsic evidence of the contract's purpose in order to vary the plain meaning of the writing.'").
The plaintiff argues, however, that even if he had breached the lay-up warranty, any such breach was cured at the time of the fire because the Swamp Fox had been winterized and decommissioned at that point ( See Mazzara Aff. ¶ 14). This argument cannot be squared with the plain terms of the policy which contains a provision setting forth the procedure to be followed in the event the lay-up warranty is breached. Entitled "Extension of Coverage," the provision provides,
If the Navigational Limits or Lay-Up Warranty shown on the Declarations Page are breached due to matters beyond your control, the policy will remain in effect, but only if you give us written notice of the breach within 10 days after the breach and any additional premiums due us for this extension of coverage. If the Navigation Limits or Lay-Up Warranty are breached voluntary [sic] there shall be no coverage under this policy without both prior notice to us and approval by us.
(Yacthsmann/Windjammer Policy, General Conditions and Exclusions, attached to Mercante Aff. as Ex. 2.)
The plain language of the policy thus anticipates the possibility of a breach of the lay-up warranty and provides avenues by which such a breach can be remedied or cured. The plaintiff did not avail himself of these opportunities. Nor does he point the court to any authority which provides that an insured may cure a breach of warranty notwithstanding the existence of a governing contractual provision.
The plaintiff's reliance on Henjes v. Aetna Ins. Co., 132 F.2d 715, 719-20 (2d Cir. 1943), is misplaced. The Henjes court grappled with the issue of whether an insured's breach of a warranty in a marine insurance contract completely forfeited the insured's rights under the policy or whether it "merely suspended" coverage until the breach was cured. Id. at 718. While the Henjes court opted for the latter disposition, its decision was based primarily on the terms of the contract in that case which expressly addressed such a situation. As the Henjes court stated,
Some light as to what the parties intended is shed on this point by the provision in the original policy regarding the effect of deviation. That made the policy "null and void" for any "deviation beyond the limits named" but whenever the vessel returned within those limits the policy was to reattach if "the vessel shall then be in all respects seaworthy." [. . .] Accordingly, we believe the intention of the parties to this policy, as shown by the language of it and of the endorsement, must be taken to be that such a breach of the warranty as was here approved would suspend the insurance during the time the breach remained uncured and that the insurance would reattach when the breach was ended.Id. at 718-19 (emphasis added). Although the policy here also contains a provision addressing the possibility of a breach of warranty and its consequences, it does so in starkly different terms. In contrast to the contract in Henjes, the one here provides the specific steps to be taken in the event an insured breaches the lay-up warranty, steps which the plaintiff did not take. Henjes therefore does not assist the plaintiff.
For the reasons stated above, the court concludes that the undisputed facts demonstrate that the plaintiff breached the "lay-up warranty" and summary judgment should be granted for INA.
C. Christi's Summary Judgment Motion
The plaintiff asserts various state law claims against Christi including breach of contract, negligence, and malpractice. Christi contends summary disposition is warranted on various grounds including failure to state a claim and statute of limitations.
1. Failure to State a Claim of Professional Malpractice against Insurance Brokers
Christi's contention that New York law does not recognize "professional malpractice" claims against insurance brokers (Christi Summ. J. Mot. 8) rests on a fundamental misreading of the law. The cases cited by Christi in support of its proposition do not address the legal validity of insurance broker professional malpractice claims. See Telegdi v. A.M.R. Services Corp., No. 97-CV-1177, 2000 WL 264333, at *1 (E.D.N.Y. Jan. 21, 2000); Chase Scientific Research, Inc. v. NIA Group Inc., 96 N.Y.2d 20 (2001); Busker on the Roof Ltd. P'ship v. Warrington, 725 N.Y.S.2d 45 (App.Div. 2001). Rather, the questions presented in those cases dealt with whether insurance brokers were "professionals" for purposes of applying New York's three-year statute of limitations for non-medical malpractice claims. Telegdi, 2000 WL 264333, at *2 ("[T]he court finds that insurance agents and brokers are not professionals within the meaning of CPLR 214(6) and it will apply the six year statute of limitations for contract actions."); Chase Scientific, 725 N.Y.2d at 20 ("[G]iven that `malpractice' is professional misfeasance toward one's client, who is a `professional' within [CPLR 214(6)]? The question arises in the context of insurance agents and brokers."). Accordingly, the plaintiff's argument attacking the general soundness of insurance broker malpractice claims is meritless.
To the extent the Warrington decision, in finding that "defendant insurance brokers and agents are not professionals and, thus . . . claims against them do not sound in professional malpractice," lends support to the plaintiff's contention, it is wrongly decided. The only case cited by the Warrington court to support its finding was Chase Scientific, which, as explained above, dealt solely with insurance broker malpractice claims in relation to the statute of limitations. The plaintiff's citation to Warrington is therefore unavailing.
2. Timeliness of Claims Against Christi
On the other hand, Christi's contention that all of the plaintiff's claims against it are time barred has merit. For cases arising in diversity, federal courts apply the forum state's statute of limitations. Stuart v. Am. Cyanamid Co., 158 F.3d 622, 626-27 (2d Cir. 1998) ("Where the jurisdiction rests upon diversity of citizenship, a federal court sitting in New York must apply the New York . . . statutes of limitations.") (citing Guaranty Trust Co. v. York, 326 U.S. 99, 108-09 (1945)) (additional citations omitted); Iacobelli Const., Inc. v. County of Monroe, 32 F.3d 19, 27 (2d Cir. 1994) ("On this diversity claim, we must apply New York's statute-of-limitations rules.") (citations omitted). This is generally the case, "even when the injury giving rise to the action occurred outside New York." Stuart, 158 F.3d at 627 (citing Stafford v. Int'l Harvester Co., 668 F.2d 142, 147 (2d Cir. 1981)). Therefore, New York's statute of limitations applies. Pursuant to the landmark decision by the Court of Appeals in Chase Scientific Research v. NIA Group, Inc., insurance brokers are not considered "professionals" for purposes of the three-year statute of limitations for non-medical malpractice claims under N.Y.C.P.L.R. 214(6). 96 N.Y.2d at 30-31. As such, "actions against [insurance] agents and brokers are governed not by CPLR 214(6), but by the limitations periods applicable to negligence actions [CPLR 214(4)] and breach of contract actions [CPLR 213(2)]." 96 N.Y.2d at 31.
This result is not changed by New York's "borrowing statute" since the plaintiff is a New York resident. See N.Y.C.P.L.R. 202 (2006); see also McCarthy v. Bristol Laboratories, Div. of Bristol-Myers, Co., 449 N.Y.S.2d 280, 283 (App.Div. 1982) ("The timeliness of an action brought in New York by a resident of the State upon a cause of action accruing elsewhere is governed by the applicable New York Statute of Limitations and the New York `borrowing statute' is inapplicable.") (citations omitted).
Here, the plaintiff asserts breach of contract, negligence, and malpractice claims against Christi. Determining which limitation periods apply to the breach of contract and negligence claims is relatively straightforward. Under C.P.L.R. 213(2), a six-year limitation period is applied to breach of contract claims, see One Beacon Ins. v. Terra Firma Constr. Mgmt. Gen. Contracting, LLC, No. 02-Civ-7492, 2004 WL 369273, at *3 (S.D.N.Y. Feb. 26, 2004) (citing Nat'l Life Ins. Co. v. Frank B. Hall Co., 490 N.Y.S.2d 500 (App.Div. 1985)); Chase Scientific, 96 N.Y.2d at 30-31, and a three-year limitation period under C.P.L.R. 214(4) to negligence claims, see Chase Scientific, 96 N.Y.2d at 30-31; One Beacon, 2004 WL 369273, at *3 (citations omitted); Von Hoffman v. Prudential Ins. Co. of Am., 202 F. Supp. 2d 252, 264 (S.D.N.Y. 2002) (citations omitted).
Determining which limitation period applies to the malpractice claim is, however, a more difficult matter. Depending on how it is pleaded, a malpractice claim may "theoretically . . . rest on breach of contract to obtain a particular bargained-for result," Chase Scientific, 96 N.Y.2d at 25, in which case the longer six-year limitation period under C.P.L.R. 213(2) may apply as opposed to the shorter three-year period governing negligence claims under C.P.L.R. 214(4). Cf. Kliment Frances Halsband Architects v. McKinsey Co., Inc., 3 N.Y.3d 538, 542 (2004) (concluding that claim against architects was that of professional malpractice not breach of contract for purposes determining whether to apply statute of limitations under C.P.L.R. 213(2) or C.P.L.R. 214(6)). The malpractice claim here, however, is pleaded in the manner of a negligence claim:
If it is determined that defendant INA is not obligated to provide insurance coverage to Dr. Cunningham for the Direct Loss under the INA Policy, in whole or in part, the same shall have resulted from the negligence and/or malpractice of defendant Christi in negligently, recklessly, and carelessly performing its obligations to Dr. Cunningham, by failing to procure adequate, suitable, valid and binding insurance for Dr. Cunningham covering the Vessel.
(Am. Compl. ¶ 62 (emphasis added).) It is evident from this language that the plaintiff here alleges that Christi failed to comply with ordinary or professional standards of conduct in procuring the policy for the Swamp Fox. Moreover, there is no factual allegation of any "breach of a bargained-for contract provision," which is, after all, the essential element in a breach of contract claim. See Kliment Francis, 3 N.Y.3d at 542. The three-year limitation period under C.P.L.R. 214(4) should therefore be applied to the malpractice claim.
The court notes that the conclusion reached here seems to differ from that of Telegdi, cited by Christi in support of its failure to state a claim argument. While the Telegdi court concluded that, for purposes of timeliness, a claim for professional malpractice against an insurance broker was governed by the six year limitations period of C.P.L.R. 213(2), the case was decided before the Court of Appeals' decision in Chase Scientific which provided definitive guidance on the matter. Furthermore, the decision in Telegdi to apply C.P.L.R. 213(2) to malpractice claims against insurance brokers stemmed primarily from the Telegdi court's recognition — ultimately proved correct by Chase Scientific — that insurance brokers were not "professionals" within the meaning of C.P.L.R. 214(6). 2000 WL 264333, at *2.
Having established the applicable limitations periods, the timeliness of the claims now depend on when they accrued, and when the present suit was filed. Negligence and breach of contract claims against insurance brokers accrue "when the wrongdoing occurs and not when the wrongdoing is discovered." One Beacon, 2004 WL 369273, at *3 (citing Mauro v. Neimann Agency Inc., 756 N.Y.S.2d 611, 612 (App.Div. 2003)) (additional citations omitted). For breach of contract claims generally this means that the cause of action accrues at the time of breach. Ely-Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399, 402 (1993) (citations omitted). Applying this principle, the Appellate Division has found that such a claim accrued "upon the insured's receipt of the certificate of insurance," Santiago v. 1370 Broadway Associates, L.P., 695 N.Y.S.2d 326 (App.Div. 1999) (citation omitted), aff'd as modified 96 N.Y.2d 765 (2001), or when the insurance broker failed to undertake its obligations under the contract at issue, Mauro, 756 N.Y.S.2d 611, 612 (App.Div. 2003). As for claims of insurance broker negligence, including malpractice, such claims accrue when the policy is first issued. See One Beacon, 2004 WL 369273, at *3 (citing Mauro, 756 N.Y.S.2d at 612-13).
Applying the above principles, the breach of contract claim accrued, at the latest, when the plaintiff signed the application for insurance on or around April 18, 1998, which was subsequently sent to and received by Christi on or around May 19, 1998. ( See Christi Rule 56.1 Statement ¶¶ 7-8; Application for Yacht Insurance, April 18, 1998, attached to McDowell Aff. as Ex. C.) Thus, taking as an accrual date the end of May 1998, the action must have been filed by the end of May 2004 in order for the breach of contract claim to be considered timely. See N.Y.C.P.L.R. 213(2). However, the plaintiff did not bring this action until July 15, 2004. (Docket No. 1.) Therefore, the breach of contract claim is time barred.
The plaintiff contested these factual allegations in his opposing Rule 56.1 statement but did so in conclusory fashion and offered no affirmative proof to the contrary. ( See Pl.'s Rule 56.1 Statement Opp'n Christi Summ. J. Mot. ¶¶ 7-8.)
The plaintiff argues that because the insurance policy was renewed on an annual basis, each instance of renewal had, in essence, reset the statute of limitations clock, thus rendering the breach of contract claim timely. The court disagrees. The case law is clear in New York that "annual renewals, effected with no further discussions between plaintiff and the broker . . . constitute only new instances of damage, and are therefore irrelevant for limitations analysis." Hudson Envelope Corp. v. Klausner, 670 N.Y.S.2d 104 (App.Div. 1998) (citing Ely-Cruikshank, 81 N.Y.2d at 402). Furthermore, to the extent the plaintiff argues that some form of "continuous treatment" or "continuous representation" doctrine applies to toll the statute of limitations, this argument has been expressly rejected in past cases. See One Beacon, 2004 WL 369273, at *3 n. 3 ("Under New York law . . . the continuous treatment doctrine does not apply to insurance brokers and agents.") (citing Chase Scientific, 96 N.Y.2d at 31, and Video Corp. of Am. v. Frederick Flatto Associates, Inc., 448 N.Y.S.2d 498, 504 (App. Div. 1982)) (additional citation omitted).
The malpractice and negligence claims are similarly time barred. With a three-year statute of limitations period and the action having been brought on July 15, 2004, the claims must have accrued on or after July 15, 2001 to be considered timely. It is evident, however, that the claims accrued during the months of April to May 1998 when Christi first procured the insurance policy for the plaintiff. The negligence and malpractice claims are therefore untimely and summary judgment is warranted.
CONCLUSION
For the reasons stated above, the court respectfully recommends that INA's and Christi's motions for summary judgment be GRANTED.
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Any objections to the Report and Recommendation above must be filed with the Clerk of the Court with a copy to the undersigned within 10 days of receipt of this report. Failure to file objections within the specified time waives the right to appeal any judgment or order entered by the District Court in reliance on this Report and Recommendation. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir. 1993); Frank v. Johnson, 968 F.2d 298 (2d Cir. 1992), cert. denied, 113 S. Ct. 825 (1992); Small v. Secretary of Health and Human Serv., 892 F.2d 15, 16 (2d Cir. 1989) (per curiam).