Opinion
07 CV 881 (CBA).
September 9, 2008
MEMORANDUM ORDER
On March 2, 2007, plaintiff Liberty Mutual Insurance Company ("Liberty") filed this action against defendants Priceless Transportation, Inc. ("Priceless"), Big A Brokerage Corp. ("Big A"), and Aleksandr Savranskiy ("Savranskiy"). Liberty alleges that defendants made material misrepresentations in their application for insurance coverage, causing Liberty to charge lower premiums. Defendants failed to answer or otherwise move with respect to Liberty's complaint, and the time to do so has expired. The Clerk of the Court entered notations of default against each defendant on October 12, 2007. On November 2, 2007, Liberty filed motions against each defendant for default judgment.
These motions were referred to the Honorable Joan M. Azrack, United States Magistrate Judge, for a Report and Recommendation. On August 19, 2008, Magistrate Judge Azrack recommended that judgment be entered against each defendant in the amount of $102,072.00, plus pre-judgment interest. No party has filed objections. For the reasons set forth below, the Court adopts in part and modifies in part the Report and Recommendation.
I. Background
The following facts are drawn from Liberty's complaint and submissions in support of its motion for default judgment and damages.
Liberty is a Massachusetts insurance company authorized to issue insurance policies in New York State. Compl. ¶ 2. Defendant Priceless is a New York corporation engaged in the operation of for-hire motor vehicles in the New York metropolitan area. Id. ¶ 3. Defendants Big A and Savranskiy are New York insurance brokers who have represented Priceless and other commercial automobile companies. Id. ¶¶ 4-5.
In order to participate in the voluntary insurance market, Liberty, like other insurance companies, is required to insure a certain number of high-risk public transportation vehicles under the New York Automobile Insurance Plan (the "Plan"). Id. ¶¶ 9, 13. The Plan was established to ensure that high-risk public transportation vehicles, such as taxis, school buses, medical transports, and other such vehicles could obtain insurance coverage even though they were unable to obtain coverage in the voluntary insurance market. Id. ¶¶ 10-12. Under the Plan, a prospective insured submits an application for coverage directly to the Plan, which assigns the insured to an insurance company.Id. ¶¶ 14-15. The Plan calculates the applicable premiums based upon formulas established by New York law. Id. ¶ 19. Factors that affect the premium include the type of service offered and the territory in which driving occurs. Id. By signing the application, the broker and applicant attest that the information provided is true. Id. ¶ 30.
On September 12, 2003, Big A submitted an application to the Plan on behalf of Priceless. Id. ¶¶ 36-37. In the application, Big A and Priceless stated that Priceless operated a school bus in Monticello, New York. Id. ¶¶ 39-40; Aff. of Perola Andersson ("Andersson Aff.") ¶ 5. The Plan assigned the application to Liberty, which issued an insurance policy to Priceless at a premium calculated based upon the information in the application. Compl. ¶¶ 38, 43-44. Defendants later requested coverage for additional vehicles, which were added to the policy. Id. ¶ 47.
Following the issuance of the insurance policy, Liberty learned that, despite the information in Priceless's application, Priceless was in fact operating a for-hire car service in New York City, not a school bus in Monticello. Id. ¶ 48; Andersson Aff. ¶ 6. This information warranted a higher premium. Compl. ¶ 48. Based upon the new information, Liberty calculated additional premiums due of $102,454.00 and invoiced Priceless for that amount. Id. ¶¶ 49-50.
On March 2, 2007, Liberty commenced this action seeking the $102,454.00 underpayment on Priceless's insurance policy, along with interest, costs, and attorney's fees. Liberty's complaint alleges five causes of action: (1) breach of contract, (2) negligent misrepresentation, (3) intentional misrepresentation against all defendants and (4) against Big A in particular, and (5) unjust enrichment. Liberty alleges that defendants breached their contract with Liberty by failing to notify Liberty of the true nature of or changes to Priceless's business. Id. ¶¶ 55-56. Defendants' failure to pay Liberty additional premiums breached the policy contract and Plan provisions. Id. ¶¶ 58-61. Second, Liberty alleges that defendants negligently and materially misrepresented the true nature of Priceless's business when they knew, or should have known, that Liberty would rely upon those misrepresentations when issuing Priceless's insurance policy. Id. ¶¶ 70-72. Third, Liberty alleges that defendants intentionally misrepresented the true nature of Priceless's business operations, knowing their statements in the application to be false, with the intent to induce Liberty to issue an insurance policy at a substantially lower rate than would have been charged if truthful information had been provided. Id. ¶¶ 76-82. Fourth, Liberty brings an additional intentional misrepresentation claim against Big A, alleging that Big A created a false transportation services company and/or utilized company names without consent for the purpose of illegally obtaining coverage under the Plan, and that Big A submitted the application knowing it contained false information, with the intent to defraud Liberty. Id. ¶¶ 84-86. Finally, Liberty alleges that Priceless was unjustly enriched by avoiding higher, but appropriate insurance premiums.Id. ¶ 90.
After proper service, defendants failed to answer or move with respect to Liberty's complaint, and the time to do so has expired. The Clerk of the Court entered notations of default against each defendant on October 12, 2007. On November 2, 2007, Liberty filed motions against each defendant for default judgment. Liberty filed a corrected motion for default judgment on January 4, 2008.
On August 19, 2008, Magistrate Judge Azrack issued a Report and Recommendation, recommending that judgment be entered against each defendant in the amount of $102,072.00, plus pre-judgment interest measured at 9 percent per annum from January 1, 2004. No party has filed objections.
II. Discussion
Pursuant to Federal Rule of Civil Procedure 72(b), a district court "must determine de novo any part of the magistrate judge's disposition that has been properly objected to." Fed.R.Civ.P. 72(b)(3). "When no timely objection is filed, the court need only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation." Fed.R.Civ.P. 72 Advisory Committee's Notes on 1983 Addition; see also Nelson v. Smith, 618 F.Supp. 1186, 1189 (S.D.N.Y. 1985). Accordingly, this Court reviews Magistrate Judge Azrack's Report and Recommendation for clear error.
When a party is in default, the Court accepts as true all well pleaded facts in the complaint related to liability. Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992), cert. denied, 506 U.S. 1080 (1993); Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981). Entry of a default, however, does not automatically entitle a party to relief; whether to grant a motion for default judgment is committed to the Court's discretion. Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993). In considering whether a default judgment is appropriate, "a court has discretion to determine whether the facts alleged in a complaint state a valid cause of action." In re Crazy Eddie Sec. Litig., 948 F.Supp. 1154, 1160 (E.D.N.Y. 1996); see also Au Bon Pain, 653 F.2d at 65;Liberty Mut. Ins. Co. v. Palace Car Services Corp., No. 06 Civ. 4881, 2007 WL 2287902, *1 (E.D.N.Y. Aug. 8, 2007) (stating that, when a party is in default, the "district court must nevertheless determine whether the allegations state a claim upon which relief may be granted").
Liberty has not alleged any facts to supports its claims against defendant Savranskiy. Although one might infer from the complaint that Savranskiy is somehow associated with Big A, see Compl. ¶ 5, even this is not explicitly stated, and Liberty makes no allegation that Savranskiy himself was a party to a contract with Liberty. Nor does Liberty allege that Savranskiy was personally aware of or involved in the alleged fraud. Finally, Liberty does not allege that Savranskiy was in any way enriched by Priceless's avoiding higher premiums. Accordingly, Liberty's claims against Savranskiy are dismissed.
With regard to the claims against Priceless and Big A, this Court finds no clear error in the award of damages. No party having objected, and for the reasons stated in Magistrate Judge Azrack's Report and Recommendation, the Court directs that a judgment be entered against Priceless and Big A, jointly and severally, in the amount of $102,072.00, plus pre-judgment interest measured at 9 percent per annum from January 1, 2004.
III. Conclusion
For the foregoing reason, Liberty's motions for default judgment are granted with respect to defendants Priceless and Big A, and denied with respect to defendant Savranskiy. Liberty's claims against Savranskiy are dismissed without prejudice.
SO ORDERED.