Estee Lauder Inc., Respondent,v.OneBeacon Insurance Group, LLC, et al., Appellants.

Brief

N.Y.September 8, 2016

BEIJING BRUSSELS CENTURY CITY HONG KONG JAKARTA! LONDON LOS ANGELES NEWPORT BEACH June 3, 2016 John P. Asiello Clerk of the Court 0 O'MELVENY & MYERS LLP 1625 Eye Street, NW Washington, D.C. 2ooo6-4001 TELEPHONE (202) 383-5300 FACSIMILE (202) 383-5414 www.omm.com New York State Court of Appeals 20 Eagle Street Albany, New York 12207 NEW YORK SAN FRANCISCO SEOUL SHANGHAI SILICON VALLEY SINGAPORE TOKYO WRITER'S DIRECT DIAL (2o2) 383-5285 WRITER'S E-MAIL ADDRESS jhacker@omm.com Re: Estee Lauder, Inc. v. OneBeacon Insurance Group, LLC, APL-2016-00048 Dear Mr. Asiello: I represent Century Indemnity Company ("Century") as amicus curiae in the above-referenced matter. Century respectfully submits this amicus curiae letter brief in support of Appellant OneBeacon under 22 NYCRR § 500.11Q). The Appellate Division held in this case that an insurer can be deemed to have waived a late-notice defense to coverage when it expressly disclaims coverage on a different ground, even though it also expressly reserved the right to disclaim coverage on any other grounds. See Estee Lauder v. OneBeacon Ins. Group, LLC, 62 A.D.3d 33, 35-36 (1st Dep't 2009). Century believes that holding is incorrect, and assumes that OneBeacon's brief-currently under seal- adequately demonstrates the errors in the Appellate Division's ruling. Century respectfully submits this letter to address the more fundamental background principle that when an insurer explicitly reserves rights to assert specific coverage defenses, it cannot later be held to have waived its right to assert those defenses, absent some affirmative, unequivocal act explicitly manifesting an intent to abandon the defense. That rule has been settled New York law for decades. As this Court observed in Allstate Ins. Co. v. Gross, 27 N.Y.2d 263 (1970), "[ r ]eservations of right ... are effective ... against the defense of waiver." t In association with Tumbuan & Partners 0' MELVENY & MYERS LLP June 3, 2016 - Page 2 /d. at 269. Precedents from the Second and Fourth Departments, as well as the federal courts applying New York law, uniformly agree that "[w]hen an insurer reserves its right to deny coverage ... waiver may not be inferred." Steadfast Ins. Co. v. Stroock&Stroock&LavanLLP, 277 F. Supp. 2d 245,254 (S.D.N.Y. 2003) (emphasis added) aff'd 108 F. Appx. 663 (2d Cir. 2004); see, e.g., Raniolo v. Travelers Indem. Co., 279 A.D.2d 514, 515 (2d Dep't 2001) (reservation of rights defeats waiver argument); Compis Servs., Inc. v. Hartford Steam Boiler Inspection & Ins. Co., 272 A.D.2d 886, 887 (4th Dep't 2000) (same); Globecon Grp., LLC v. Hartford Fire Ins. Co., 434 F.3d 165, 176 (2d Cir. 2006) (same ).1 The leading treatises recognize the same rule: "By apprising the insured of the rights being reserved, the insurer should be able to avoid the risk that a court may preclude the insurer from asserting those rights to disclaim at a later date." 1- 16 New Appleman New York Insurance Law§ 16.06[2] (2015); see 17 Couch on Insurance 3d § 239:100 (2016) ("An insurer's reservation of rights ... is generally effective to avoid a waiver .... "). So does the relevant New York Pattern Jury Instruction: "Reservation by the insurer of the right to assert a defense protects its right to do so and prevents a waiver[.]" N.Y. Pattern Jury Instr. § 4:79 (2016), at 567 (comments). This Court's recent decision in KeySpan Gas E. Corp. v. Munich Reinsurance Am., Inc., 23 N.Y.3d 583 (2014)-in which Century was a party- reaffirms the correctness of this unbroken line of precedent and commentary. KeySpan held that an "insurer will not be barred from disclaiming coverage simply as a result of the passage of time," because an insurer has no "duty" under the common law "to disclaim coverage 'as soon as reasonably possible' after" becoming aware of the grounds for disclaimer. /d. at 590-91 (quotation omitted). Rather, the relevant question is whether, "under common-law principles, triable issues of fact exist whether defendants clearly manifested an intent to abandon their late-notice defense." /d. at 591 (emphasis added). And an insurer cannot have manifested an intent to abandon a contract right-let alone clearly so-when 1 See also MCI LLC v. Rutgers Cas. Ins. Co., 2007 WL 2325867, at *14 (S.D.N.Y. Aug. 13, 2007) ("an express reservation of rights precludes consideration of waiver"); accord Hutton Constr. Co. v. Cty. of Rockland, 52 F.3d 1191, 1193 (2d Cir. 1995); Home Decor Furniture & Lighting, Inc. v. United Nat'l Grp., 2006 WL 3694554, at *6-7 (E.D.N.Y. Dec. 14, 2006); Lugo v. AIG Life Ins. Co., 852 F. Supp. 187, 192 (S.D.N.Y. 1994). 0' MELVENY & MYERS LLP June 3, 2016 - Page 3 it specifically reserved the relevant right and never withdrew that reservation. To the contrary, a reservation of rights manifests precisely the opposite intent.2 Thus, in analyzing the effect of the disclaimer in this case, this Court should start from and reiterate the fundamental principle that an insurer's express reservation of coverage defenses logically and legally precludes any finding that the insurer waived the reserved defenses unless and until they are explicitly waived.3 Respectfully, d~ /kkr Jonathan D. Hacker Pro Hac Vice Pending Counsel for Century Indemnity Company 2 The only exception to this unbroken line of precedent is Long Island Lighting Co. v. Am. Re-Ins. Co., 123 A.D.3d 402 (1st Dep't 2014), a case on remittitur from KeySpan. The Court there held that a jury could find that Century waived its right to assert a late-notice defense even though Century's "reservation of rights letters specifically reserv[ ed] the defense of late notice, but did not disclaim on any grounds." /d. at 403 (emphasis added). That decision was inconsistent with the otherwise settled understanding discussed above. 3 It is a separate question whether, and under what circumstances, an insurer may be estopped from asserting a reserved defense because of prejudice to the insured. See, e.g., Ashland Window & Housecleaning Co. v. Metropolitan Cas. Ins. Co. of N. Y., 269 A.D. 31, 33-34, 36 (1st Dep't 1945) (finding plaintiff insured established a factual issue regarding estoppel when, after defending insured for months, insurer disclaimed coverage and stopped providing defense two weeks before trial commencement). The sole question at issue here is whether an express reservation precludes a finding of implied waiver. 0' MELVENY & MYERS LLP June 3, 2016 - Page 4 cc: John W. Schryber Reed Smith, LLP 1301 K Street, N.W. Washington, D.C. 20005 Tel: (202) 414-9277 Attorneys for Plaintiff-Respondent Harry Lee Steptoe & Johnson, LLP 1330 Connecticut Avenue, N.W. Washington D.C. 20036 Tel: (202) 429-8112 Attorneys for Defendant-Appellant APL-2016-00048 New York County Clerk's Index No. 602379/05 ~ourt of ~ppeals of the ~tate of .1!etu !lork ESTEE LAUDER INC. Plaintiff-Respondent, -against- ONEBEACON INSURANCE GROUP, LLC, et al. Defendants-Appellants. DISCLOSURE STATEMENT PURSUANT TO NYCRR § SOO.l(f) Pursuant to Section 500.1(f) of the Rules of Practice for this Court, amicus curiae Century Indemnity Company states as follows: Century Indemnity Company is a wholly owned subsidiary of Brandywine Holdings Corp., which is a wholly owned subsidiary of INA Financial Corp. INA Financial Corp. is a wholly owned subsidiary of INA Corporation, which is a wholly owned subsidiary of ACE INA Holdings, Inc. ACE INA Holdings, Inc. is 80% owned by ACE Group Holdings Inc. and 20% owned by Chubb Limited. ACE Group Holdings, Inc. is a wholly owned subsidiary of Chubb Limited. 1 Chubb Limited, the ultimate parent corporation, is publicly traded (NYSE: CB). A list of Chubb Limited affiliated entities is set forth below. Affiliates of Chubb Limited 1250 Diehl Corp. ABA Garantias S.A. de C.V. ABA Mexico Holdings LLC ABA Seguros, S.A. de C.V. ABA Servicios Corporativos, S.A. de C.V. ABR Reinsurance Capital Holdings Ltd. ACE (CIDR) Limited ACE (CR) Holdings ACE (RGB) Holdings Limited ACE Alternative Risk Ltd. ACE American Insurance Company ACE Arabia Cooperative Insurance Company ACE Arabia Insurance Company Limited B.S.C.(C) ACE Asia Pacific Services Pte. Ltd. ACE Asia Pacific Services Sdn. Bhd. ACE Asset Management Inc. ACE Australia Holdings Pty Limited ACE Bermuda Insurance Ltd. ACE Bermuda International Insurance Limited ACE Brazil Holdin_gs, Ltd. ACE Canada Holdings, Inc. ACE Capital II Limited ACE Capital III Limited ACE Capital IV Ltd. ACE Capital Limited ACE Capital Title Reinsurance Company ACE Capital V Ltd. ACE Capital VI Limited ACE Capital VII Limited ACE Chintai SSI ACE Corretora de Seguros Ltda. ACE Direct Marketing Company, Ltd. ACE Environmental Health And Safety Consulting {Shanghai) Company Limited 2 ~ACE Europe Life Limited ACE European Group Limited ACE European Holdings Limited ACE European Holdings No.2 Limited ACE Fianzas Monterrey, S.A. ACE Financial Solutions International, Ltd. ACE Financial Solutions, Inc. ACE Fire Underwriters Insurance Company ACE Global Markets Limited ACE Group Holdings Ltd. ACE Group Holdings, Inc. ACE Group Management and Holdings Ltd. ACE Holdings Limited ACE INA Berhad ACE INA Excess and Surplus Insurance Services, Inc. (CA) ACE INA Excess and Surplus Insurance Services, Inc. (PA) ACE INA Financial Institution Solutions, Inc. ACE INA G. B. Holdings, Ltd ACE INA Holdings Inc. ACE INA Insurance ACE INA International Holdings Ltd., Agencia En Chile ACE INA International Holdings, Ltd. ACE INA Life Insurance ACE INA Overseas Holdings, Inc. ACE INA Overseas Insurance Company Ltd. ACE INA Properties, Inc. ACE INA Services U.K. Limited ACE Insurance (Japan) ACE Insurance (Switzerland) Limited ACE Insurance Agency, Inc. ACE Insurance Company ACE Insurance Company Egypt S.A.E. ACE Insurance Company Limited ACE Insurance Company of the Midwest ACE Insurance Limited ACE Insurance Limited ACE Insurance Limited ACE Insurance Limited ACE Insurance Limited 3 ACE Insurance Limited ACE Insurance Management (DIFC) Limited ACE Insurance S.A.-N.V. ACE Intermediaries (Bermuda) Ltd. ACE International Management Corporation ACE Jerneh Insurance Berhad ACE Leadenhall Limited ACE Life Assurance Public Company Limited ACE Life Fund Management Company Limited ACE Life Insurance Company ACE Life Insurance Company Egypt S.A.E. ACE Life Insurance Company Limited ACE Life Insurance Company Ltd. ACE Life Insurance Company Ltd. ACE London Aviation Limited ACE London Group Ltd. ACE London Holdings Limited ACE London Investments Limited ACE London Services Limited ACE London Underwriting Limited ACE Marketing Group C.A. ACE Pension Trustee Limited ACE Property and Casualty Insurance Company ACE Realty Holdings Limited ACE Reinsurance (Switzerland) Limited ACE Resseguradora S.A. ACE Risk Solutions, Inc. ACE Russia Investments Limited ACE Seguradora S.A. ACE Seguradora S.A. (Brazil) ACE Seguros De Vida S.A. ACE Seguros S.A. ACE Seguros S.A. ACE Seguros S.A. ACE Seguros S.A. ACE Seguros S.A. ACE Seguros S.A. ACE Seguros Solu~oes Corporativas S.A. ACE Seguros, S.A. 4 ACE Services Limited ACE Servicios Regionales Limitada ACE Servicios S.A. ACE Servicios S.A. ACE Servicios, S.A. ACE Servi<_;os para Seguradoras e Resseguradoras Ltda. ACE Structured Products, Inc. ACE Tarquin ACE Tempest Life Reinsurance Ltd. ACE Tempest Re Canada Inc. ACE Tempest Re Escritorio De Representacao No Brasil Ltda. ACE Tempest Re USA, LLC ACE Tempest Reinsurance Ltd. ACE Underwriting Agencies Limited ACE Underwriting Services Limited ACE US Holdings, Inc. APIA APIA (ACE) Corporation, Limited AFIA (INA) Corporation, Limited AFIA Finance Corp. Chile Limitada AFIA Finance Corporation AFIA Finance Corporation Agencia En Chile AFIA Venezolana, C.A. Agri General Insurance Company Agri General Insurance Service, Inc. Ally Insurance Holdings LLC American Lenders Facilities, Inc. Atlantic Employers Insurance Company Bankers Standard Fire and Marine Company Bankers Standard Insurance Company Bellemead Development Corporation Brandywine Holdings Corporation CC Canada Holdings Ltd. Century Indemnity Company Century International Reinsurance Company Ltd. Century Inversiones, S.A. Chiewchanwit Company Limited Chubb & Son Inc. Chubb Argentina de Seguros S.A. 5 Chubb Atlantic Indemnity Ltd. Chubb Capital Ltd. Chubb Computer Services, Inc. Chubb Custom Insurance Company Chubb Custom Market Inc. Chubb de Chile Compania de Seguros Generales S.A. Chubb de Mexico Compania Mianzadora, S.A. de C.V. Seguros S.A. Chubb de Mexico Compania de Seguros, S.A. C.V. Chubb de Seguros, S.A. Chubb do Brasil Comphanhia de Seguros Chubb Europe Services Ltd. Chubb European Finance Ltd. Chubb European Investment Holdings, SLP. Chubb Executive Risk Inc. Chubb Financial Solutions (Bermuda) Ltd. CHUBB FINANCIAL SOLUTIONS, INC. Chubb Global Services Corporation Chubb Indemnity Insurance Company Chubb Insurance (China) Company Limited Chubb Insurance Company of Australia Chubb Insurance Company of Canada Chubb Insurance Company of Europe SE Chubb Insurance Company of New Jersey Chubb Insurance Investment Holdings Ltd. Chubb Insurance Service Company, Ltd. Chubb Insurance Solutions Agency, Inc. Chubb Investment Holdings (Hong Kong) Ltd. Chubb Investment Holdings Inc. Chubb Investment Services Limited Chubb Limited Chubb Lloyds Insurance Company of Texas Chubb Managing Agent Ltd. Chubb Multinational Manager Inc. Chubb National Insurance Company Chubb Pacific Underwriting Management Services PTE, Ltd. Chubb Re, Inc. Chubb Services Corporation Chubb Syndicate 1882 Combined Insurance Company of America 6 Combined Insurance Company of Europe Limited Combined Life Insurance Company of Australia Limited Combined Life Insurance Company Of New York Conference Facilities, Inc. Corporate Officers & Directors Assurance Ltd. Cover Direct, Inc. Cover-All Technologies Inc. CoverHound, Inc. Cravens, Dargan & Company, Pacific Coast Delpanama S.A. DHC Corporation Eksupsiri Company Limited ESIS Academy PTE. Ltd. ESIS Asia Pacific PTE. Ltd. ESIS Canada Inc. ESIS, Inc. Executive Risk Capital Trust Executive Risk Indemnity Company Executive Risk Management Associate Executive Risk Specialty Insurance Company Federal Insurance Company Federal Insurance Company Escritorio de Representacao No Brasil Ltd. FM Holdco LLC Freisenbruch-Meyer Insurance Limited Freisenbruch-Meyer Insurance Services Ltd. Great Northern Insurance Company H.S. Life Small Amount & Short Term Insurance Co., Ltd. Halifax Plantation Golf Management, Inc. Halifax Plantation Golf, Inc. Halifax Plantation Realty, Inc. Halifax Plantation, Inc. Harbor Island Indemnity Ltd. Huatai Insurance Group Co., Ltd. Huatai Life Insurance Company, Limited Huatai Property & Casualty Insurance Co., Ltd. Illinois Union Insurance Company INA Corporation INA Financial Corporation INA Holdings Corporation 7 INA International Holdings, LLC INA Tax Benefits Reporting, Inc. INACAN Holdings Ltd. INACOMB S.A. De C.V. INAMAR Insurance Underwriting Agency, Inc. INAMAR Insurance Underwriting Agenc_y, Inc. Of Texas INAMEXS.A. INAVEN, C.A. Indemnity Insurance Company of North America Insurance Company of North America Inversiones Continental, S.A. de C.V. LLC ACE Insurance Company LLC ACE Life Insurance Marina Bellemead Del Rey Corp. -~~'"-------------· Masterpiece Netherlands B.V. MI Insurance Brokers Ltd. Nam Ek Company Limited Naperville Corp. NewMarkets Insurance Agency, Inc. Oasis Insurance Services Ltd. Oasis Investments 2 Ltd. Oasis Investments Limited Oasis Real Estate Company, Ltd. Operadora FMA, S.A. de C.V. Oriental Equity Holdings Limited Pacific Employers Insurance Company Pacific Indemnity Company Paget Reinsurance Ltd. Pembroke Reinsurance, Inc. Penn Millers Agency, Inc. Penn Millers Holding Corporation Penn Millers Insurance Company PMMHC Corp. Proclaim America, Inc. PT ACE Jaya Proteksi PT Asuransi Chubb Indonesia PT J aya Prima Auto Center PT Jaya Proteksi Takaful PT. ACE Life Assurance 8 PT. ADI Citra Mandiri Rain and Hail Financial, Inc. Rain and Hail Insurance Service de Mexico, S.A. de C.V. Rain and Hail Insurance Service International, Inc. Rain and Hail Insurance Service, Inc. Rain and Hail Insurance Service, Ltd. Rain and Hail L.L.C. Recovery Services International, Inc. Rhea International Marketing (L) Inc. Ridge Underwriting Agencies Limited RIYAD Insurance Company Ltd. Russian Reinsurance Company S.E.O.S. Limited Samaggi Insurance PCL ~-~---- Scarborough Property Holdings Ltd. Servicios ACE INA, S.A. de C.V. Siam Liberty Insurance Broker Co., Ltd. Siam Marketing & Analytics Company Limited Sovereign Risk Insurance (Dubai) Limited Sovereign Risk Insurance Ltd. Sullivan Kelly of Arizona, Inc. Sullivan Kellv, Inc. Texas Pacific Indemnity Company Transit Air Services, Inc. Ventas Personales Limitada Vigilant Insurance Company Westchester Fire Insurance Company Westchester Specialty Insurance Services, Inc. Westchester Surplus Lines Insurance Company 9 Dated: New York, New York June 3, 2016 Respectfully submitted, Anton Metlitsky O'Melveny & Myers LLP Times Square Tower 7 Times Square New York, New York 10036 (212) 326-2000 ametlitsky@omm.com Counsel for Century Indemnity Company 10