Anderson Zurmuehlen & Company, P.C. v. New York Marine and General Insurance Company
Filing
152
ORDER granting 132 Motion for Summary Judgment; denying 137 Motion for Summary Judgment. 1. Plaintiff's Motion for Summary Judgment is DENIED 2. Defendant's Motion for Summary Judgment is GRANTED. 3. The Clerk is directed to enter judgment accordingly. Signed by Judge Sam E Haddon on 6/27/2016. (ELL, )
FILED
IN THE UNITED STATES DISTRICT COURT
JUN 2 7 2016
FOR THE DISTRICT OF MONTANA
Clerk, U.S. District Court
District Of Montana
Helena
BUTTE DIVISION
ANDERSON ZURMUEHLEN & CO,
P.C.,
Plaintiff,
No. CV-14-33-BU-SEH
v.
NEW YORK MARINE AND
GENERAL INSURANCE
COMPANY,
ORDER
Defendant.
NEW YORK MARINE AND
GENERAL INSURANCE
COMPANY,
Counterclaimant,
v.
ANDERSON ZURMUEHLEN & CO,
P.C.,
Counterdefendant.
1
INTRODUCTION
Plaintiff, Anderson ZurMuehlen & Co, P.C. ("AZ"), brought this action for
declaratory judgment that it had no obligation to Defendant, New York Marine
and General Insurance Company ("NYM"), under the Confidential Settlement and
Release Agreement of August 6, 2012 ("Agreement"), for claims made against
NYM by Billie L. Redding ("Redding") in Billie L. Redding v. ProSight Specialty
Management Company, Inc., et al, Case No. CV 12-98-H-CCL (D. Mont. 2012)
("Redding"). NYM by counterclaim sought a declaratory judgment that AZ had a
duty under the Agreement to hold harmless, defend, and indemnify NYM for the
costs it incurred in defending claims brought against it by Redding. Issues of
material fact are resolved.
The parties cross-motions for summary judgment were heard on June 24,
2016. No issues of material fact remain for resolution. The matter is ripe for
decision on the merits.
BACKGROUND
This controversy has a long and complex history spanning several years.
The relevant events were played out in four distinct litigation phases.
The first phase, the "Underlying Action," began in 2009. Redding and other
2
claimants brought separate actions against AZ alleging that AZ "improperly
advised them to invest in certain tenant-in-common property exchanges." 1 AZ
tendered the claims to its insurer, NYM, which defended the claims under a
reservation of rights. Ultimately, all the claimants agreed to a global settlement of
$4.65 million. NYM contributed $4 million to the settlement, the limit of its
coverage to AZ. AZ contributed $650,000. As part of the global settlement, AZ
and NYM negotiated and executed the Agreement. Interpretation of this
Agreement is the matter at issue in this case.
The second phase, the "Coverage Action," began in 2009 shortly after the
Underlying Action was commenced.
2
In that case, AZ sought declaratory
judgment on its rights under the insurance contracts issued by NYM. It was,
however, never fully adjudicated and was dismissed with prejudice as a
component of the global settlement.
The "Redding Action," the third phase, was commenced by Redding against
NYM in 2012. There, Redding alleged, inter alia, that NYM acted in bad faith in
settling her claims in the Underlying Action contrary to Montana's Unfair Trade
1
Doc. 143 at 2.
2
Anderson ZurMuehlen & Co., P.C. v. New York Marine & General Insurance Company,
et al., DDV 2011-942 (First Judicial Dist., Dist. Ct. Mont. 2011).
3
Practices Act ("UTPA"). 3 Judge Lovell of this Court, in an exhaustive 104-page
opinion: (1) granted NYM's motion for summary judgment; (2) found no evidence
of wrongdoing on the part ofNYM; and (3) dismissed Redding's claims. 4
This case, the "Fourth Phase," was originally filed on April 17, 2014, in the
Montana Second Judicial District Court, Silver Bow County. 5 It was removed to
this Court on May 20, 2014. 6
ISSUE
The issue before the Court is whether the indemnity provision of the
Agreement requires AZ to indemnify NYM for costs incurred in defending the
Redding Action. The answer is "yes."
DISCUSSION
Relevant Contractual Provisions
4.
RELEASE
4.1
Definitions
(a) "Released Claims" means any and all actual or
3
4
Redding; Mont. Code Ann. §§ 33-18-101 to -1006 (2015).
Doc. 144-7.
5
Anderson ZurMuehlen & Co., P.C. v. New York Marine & General Insurance Company,
CDV 2014-153 (Second Judicial Dist., Dist. Ct. Mont. 2014).
6
Doc. 1.
4
potential liabilities, demands, causes of action, costs,
expenses, attorneys' fees, damages, indemnities and
obligations of every kind at law and equity or otherwise,
whether known or unknown, suspected or unsuspected,
disclosed or undisclosed, that arise out of, relate to, result
from or are in any way connected to (i) the Underlying
Actions or any set of facts that is the same as, materially
similar to or related to the facts alleged in the Underlying
Actions, (ii) the Coverage Action or (iii) with the limited
exception of the Tvetene Claim, the New York Marine
Policies. "Released Claims" specifically include, but are
not limited to, all claims that were alleged or could have
been alleged in the Coverage Action, including claims for
breach of contract, bad faith, and indemnity. 7
5.
INDEMNIFICATION
If any entity or person asserts a claim or claims
against any of the New York Marine Releasees seeking
damages, declaratory relief or other relief arising out of or
related to the Coverage Action, the Underlying Actions or
any set of facts that is the same as, materially similar to or
related to the facts alleged in the Underlying Actions, the
Insureds agree to indemnify and hold such New York
Marine Releasee harmless for and from, and to defend such
New York Marine Releasee, using counsel acceptable
thereto, against any and all claims, actions, causes of
action, demands, rights, liabilities, damages, losses, costs
or expenses, including all reasonable attorneys fees,
expenses and liability incurred as a result of any such claim
or any action or proceeding brought thereon. 8
7
8
Doc. 27-1 at 3.
Doc. 27-1 at 4.
5
15.
JOINT DRAFTING
Each of the Parties acknowledges that it has participated in
the drafting and negotiation of this Agreement. For purposes of
interpreting this Agreement, each provision, paragraph, sentence
and word herein shall be deemed to have been jointly drafted by
the Parties. The Parties intend for this Agreement to be construed
and interpreted neutrally in accordance with the plain meaning of
the language contained herein and not presumptively construed
against any actual or purported drafter of any specific language
contained herein. 9
19.
GOVERNING LAW/FORUM AND
ATTORNEYS' FEES
19 .1 This Agreement shall be governed by the laws
of the State of New York and shall be construed and
enforced in accordance with the laws of the State of New
York as applied to contracts made and to be performed
entirely in New York. 10
Choice of Law
The parties agreed to construe and enforce the Agreement in accordance with
New York law. The choice-of-law provision is clear.
9
Doc. 27-1 at 6.
10
Doc. 27-1 at 6.
6
AZ concedes that "New York and Montana law is [sic] similar with respect to
the pertinent contract issues." 11 It maintains, however, that "[t]he choice of law
provision should not be enforced in the event that applying New York law would be
contrary to Montana public policy." 12 NYM's position, on the other hand, focuses
solely on what it asserts to be applicable and controlling New York law.
A federal court sitting in diversity is to apply the choice-of-law rules of
Montana - the forum state. 13 In Montana, the Restatement (Second) of Conflict of
Laws§ 187 is followed. "[W]e ... apply the 'law of the state chosen by the parties
to govern their contractual rights."' 14 However, a choice-of-law provision is not to
be applied:
(1) if, but for the choice-of-law provision, Montana law
would apply under § 188 of the Restatement; (2) if
Montana has a materially greater interest in the particular
issue than the state chosen by the parties; and (3) if
applying the state law chosen by the parties would
contravene a fundamental policy ofMontana. 15
11
Doc. 139 at 7.
12
Doc. 139 at 7 (citing Modroo v. Nationwide Mut. Fire Ins. Co., 191 P.3d 389, 400
(Mont. 2008)).
13
Mason and Dixon Intermodal, Inc. v. Lapmaster Int'/, LLC, 632 F.3d 1056, 1060 (9th
Cir. 2011); Johnson v. Wells Fargo Home Mortg., Inc., 635 F.3d 401, 420 n. 16 (9th Cir. 2011).
14
Modroo, 191 p .3d at 400 (quoting RESTATEMENT (SECOND) OF CONFLICT OF LA ws §
187) (AM.LAWINST.1971 )).
15
Modroo, 191 P.3d at 400.
7
AZ argues that the indemnification provision in the Agreement purports to
indemnify NYM "for damages flowing from intentional wrongdoing," specifically,
intentional conduct in violation of the UTPA alleged in the Redding action. 16 And,
it argues, the Montana Supreme Court has recognized that "[p]ublic policy forbids
indemnifying willful wrongdoing" in the context of insurance coverage. 17
AZ's argument, however, ignores a critical component of Judge Lovell's
basis for dismissing the Redding Action.
Because under Montana law insurers are not found to be in
bad faith if they have a reasonable basis for contesting a
claim, NYM did not commit bad faith by declining to settle
with Redding in February and March, 2011. NYM
conducted a reasonable investigation into Redding' s claim
and had a reasonable basis in law for declining to settle
Redding's claim in February and March, 2011. Redding's
leveraging claim that NYM unreasonably refused to settle
with her in order to force a global settlement is not
supported by this record .... NYM did pay $4 million to
Deola, and there is no evidence in the record to support
Redding's claim that NYM delayed paying policy limits
($4 million). This case turned out to be a fishing
expedition that yielded no catch. NYM is therefore
entitled to summary judgment on Redding' s common law
and statutory bad faith claims. 18
16
Doc. 139 at 26-27.
17
Smith v. State Farm Ins. Companies, 870 P.2d 74, 76 (Mont. 1994).
18
Doc. 144-1 at 103.
8
Judge Lovell found no wrongdoing on the part of NYM in settling the Underlying
Action. AZ's argument simply misses the mark.
This Court finds no showing that enforcing the indemnity provision under
New York law would be contrary to public policy of Montana. NYM does not
seek indemnity for damages caused by "intentional wrongdoing." Rather, it seeks
indemnity under a contractual provision for costs incurred in defending itself
against claims which were dismissed in its favor. Application of New York law
did not contravene a fundamental policy ofMontana. 19 The choice ofNew York
law in the contract is valid and enforceable and to be applied.
Contract Interpretation - New York Law
New York courts "have long adhered to the 'sound rule in the construction
of contracts, that where the language is clear, unequivocal and unambiguous, the
contract is to be interpreted by its own language. "' 20 New York's highest court
has recognized, "when parties set down their agreement in a clear, complete
document, their writing should as a rule be enforced according to its terms.
19
Smith,, 870 P.2d at 76 ("Public policy forbids indemnifying willful wrongdoing .... ").
20
R/S Associates v. New York Job Dev. Auth., 771 N.E.2d 240 (2002) (quoting
Springsteen v. Samson, 32 N.Y. 703, 706 (N.Y. 1865) [citing Rogers v. Kneeland, IO Wend. 218
(N.Y. 1833)]).
9
Evidence outside the four comers of the document as to what was really intended
but was unstated or misstated is generally inadmissible to add to or vary the
writing." 21
The indemnity provision of the Agreement states in pertinent part,
If any entity or person asserts a claim or claims
against any of the New York Marine Releasees seeking
damages ... arising out of or related to the Coverage
Action, [or] the Underlying Action ... the Insureds agree
to indemnify ... and to defend ... any and all claims ...
22
The contract language is clear.
The fees sought by NYM here were incurred in defending against Redding' s
UTPA claims which alleged, inter alia, that NYM failed to promptly and equitably
settle, and failed to adequately investigate, the Underlying Claims. Redding's
claims unequivocally arose out of and related to the alleged misconduct of NYM
in settling the Underlying Claims. By the plain language of the indemnity
provision, NYM was entitled to indemnity from AZ for the costs it incurred in
defending against Redding' s UTPA claim.
21
WWW Associates v. Giancontieri, 566 N.E.2d 639, 642 (1990).
22
Doc. 27-1 at 4.
10
Both parties to the Agreement were sophisticated corporate entities
represented by experienced and competent counsel. The plain language of the
provision requiring indemnification for any and all such claims which arise out of
or relate to the Underlying Action included third-party bad faith claims. Had AZ
elected to carve out an exception to that provision, it had the capacity to negotiate
such an exception and include it in the Agreement. It did not do so. It is bound by
the contract it signed. The indemnity provision is to be enforced as written.
Extrinsic Evidence
New York law follows the general rule of contract interpretation that
"extrinsic evidence of the parties' intent may be considered only ifthe agreement
is ambiguous." 23 The contract here is unambiguous. Consideration of extrinsic
evidence is neither necessary nor appropriate.
Indemnity for Negligent or Intentional Acts
AZ contends that indemnification for fees incurred in defending against
Redding's UTPA claims would constitute indemnity for negligent and intentional
wrongful acts which would be contrary to New York law. This contention is
unsupported in fact.
23
Riverside S. Planning Corp. v. CRP/Extell Riverside, L.P., 869 N.Y.S.2d 511, 516
(N.Y. 2008).
11
Redding' s UTPA claims against NYM were dismissed on summary
judgment. Judge Lovell specifically held NYM acted in accordance with law in
negotiating and settling the Underlying Action. Neither negligent nor intentional
wrongdoing was established. In the end, the Redding Action appropriately was
characterized as "a fishing expedition that yielded no catch. " 24
Enforcement of the indemnity provision as written did not require AZ,
under the facts and circumstances of the case, to indemnify NYM for intentional
wrongful acts or negligent wrongdoing. Enforcement of the indemnity provision
conforms to New York law.
CONCLUSION
The Agreement included a valid and enforceable choice-of-law provision.
The indemnity provision in the contract applied to "any and all claims" "arising
out of or related to," inter alia, the Underlying Action. Redding' s UTPA claims
were covered by the provision. NYM is entitled to indemnity by AZ for the costs
incurred in defending the Redding Action.
24
Doc. 144-7 at 103.
12
ORDERED:
1.
Plaintiffs Motion for Summary Judgment25 is DENIED.
2.
Defendant's Motion for Summary Judgment26 is GRANTED.
3.
The clerk is directed to enter judgment accordingly .
../-~
DATED this ~1 clay of June, 2016.
~£#~el~
United States District Judge
25
Doc. 137.
26
Doc. 132.
13
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