MCMULLIN et al v. HARLEYSVILLE INSURANCE COMPANY, INC. et al
Filing
102
OPINION. Signed by Chief Judge Jerome B. Simandle on 8/2/2016. (tf, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
BRIAN MCMULLIN, MICHELLE
MCMULLIN, GBW REALTY, INC., and
GRACE & THE DUDES, LLC,
Plaintiffs,
HONORABLE JEROME B. SIMANDLE
Civil Action No.
14-7537 (JBS/KMW)
v.
HARLEYSVILLE INSURANCE COMPANY,
INC., THE HARTFORD INSURANCE
COMPANY OF THE MIDWEST, CERTAIN
UNDERWRITERS AT LLOYD’S LONDON
SUBSCRIBING TO POLICY NUMBER
CSWBIFIC0782, BROOKS INSURANCE
AGENCY, and THE DEMONACO AGENCY,
INC.,
OPINION
Defendants.
APPEARANCES:
Keith C. Northridge, Esq.
BOROWSKY & BOROWSKY, LLC
59 Avenue at the Commons
Shrewsbury, NJ 07702
Counsel for Plaintiffs
Jay Barry Harris, Esq.
FINEMAN KREKSTEIN & HARRIS, P.C.
1801 Market Street, Suite 1100
Philadelphia, PA 19103
Counsel for Defendant Brooks Insurance Agency
Alyse Berger Heilpern, Esq.
L’ABBATE, BALKAN, COLAVITA, & CONTINI, L.L.P.
100 Eagle Rock Avenue, Suite 220
East Hanover, NJ 07936
Counsel for Defendant the DeMonaco Agency, Inc.
SIMANDLE, Chief Judge:
INTRODUCTION
In this insurance coverage, professional negligence, and
indemnification action, the parties assert three distinct series
of claims.
In the coverage aspects of this litigation,
Plaintiffs Brian McMullin, GBW Realty, Inc., and Grace & The
Dudes, LLC (collectively, “Plaintiffs”) allege that Defendants
Harleysville Insurance Company, Inc. (hereinafter,
“Harleysville”), the Hartford Insurance Company of the Midwest
(hereinafter, “Hartford”), and Certain Underwriters at Lloyd’s
of London (hereinafter, “Lloyds”) breached Plaintiffs’ flood
insurance, businessowners, and property insurance policies by
partially declining or outright denying their claims for damages
to their commercial (rental) property during Hurricane Sandy.1
With respect to the professional negligence component of this
litigation, Plaintiffs allege that their insurance broker, the
DeMonaco Agency, Inc. (hereinafter, “DeMonaco”), and its
wholesaler, Brooks Insurance Agency (hereinafter, “Brooks”),
breached their fiduciary obligations and committed professional
negligence, by recommending the disputed policies and failing to
1
Although the Complaint lists Michelle McMullin as a named
Plaintiff, the Complaint itself includes no allegations
involving Ms. McMullin, and otherwise identifies Brian McMullin
as the only individually named insured on the various insurance
policies. (See, e.g., Compl. at ¶¶ 3, 8.)
2
process Plaintiffs’ premium payments.
Finally, in the
indemnification aspect of this action, Brooks and DeMonaco claim
entitlement to contractual indemnification vis-à-vis each other
under the provisions of their Broker-Wholesaler Agreement.
In the midst of pre-trial discovery,2 the Court now
confronts two distinct series of dispositive motions.
First,
Brooks and DeMonaco separately move for summary judgment on the
grounds that Plaintiffs’ failure to produce affidavits of merit
within the 120-day period provided by the New Jersey Affidavit
of Merit statute, N.J.S.A. §§ 2A:53A-26, -29, requires that the
claims against them be dismissed with prejudice.3
Items 60 & 62.]
[See Docket
Plaintiffs, by contrast, take the view that the
nature of their allegations render the affidavit of merit
requirement inapplicable, and alternatively, that the Districtwide stay of “further litigation” in all Hurricane Sandy actions
tolled (explicitly and/or equitable principles) the statutory
time limitations.4
2
The most-recent Scheduling Order set a September 16, 2016
deadline for the conclusion of pretrial factual discovery, and
directed that dispositive motions be filed by no later than
January 20, 2017. [See Docket Item 101 at ¶¶ 1 & 5.]
3 Plaintiffs, in turn, cross-move for summary judgment, claiming
their own entitlement to a declaration deeming the now-served
affidavit of merit timely, or deeming their untimely filing
excused by equitable considerations. [See Docket Items 76 &
78.]
4 In the wake of a Federal Emergency Management Agency
(hereinafter, “FEMA”) policy “of intensive negotiation and
settlement efforts in [Hurricane] Sandy flood cases,” on March
3
Second, Brooks seeks summary judgment on its claims for
contractual indemnification against DeMonaco, and on DeMonaco’s
cross-claim for contractual indemnification against Brooks.
[See Docket Item 69.]
More specifically, Brooks argues that the
“any and all claims” indemnification provision plainly captures
Plaintiffs’ single professional negligence claim against it, and
submits that the one-way indemnification provision provides “no
basis” for DeMonaco to claim indemnification.
(Brooks’
Indemnification Br. at 3-9; see also Brooks’ Indemnification
Reply at 3-8.)
DeMonaco, by contrast, argues for a narrower
interpretation of the indemnification clause, and specifically
claims that the provision only indemnifies Brooks from the harm
associated with, or caused by, DeMonaco’s actions, and not the
independent acts of negligence alleged against Brooks here.
(See DeMonaco’s Indemnification Opp’n at 3-8.)
As a result,
Brooks takes the view that any resolution of the indemnification
issues would at this time be premature, because “no
determination” has been made concerning Brooks’ own negligence
(if any).
(Id. at 2.)
13, 2015, this District temporarily stayed “further litigation”
of flood cases, in an effort “to conserve time and resources of
the litigants, the Court, the arbitrators and mediators.”
[Docket Item 1 in Miscellaneous Action No. 15-700; see also
Docket Items 1, 2, & 3 in Miscellaneous Action No. 15-800.]
4
Against that backdrop, in resolving the parties’ summary
judgment motions, the Court must address two unconnected
inquiries.
First, the Court must, in light of the District-wide
stay, consider the effect of Plaintiffs’ untimely compliance
with the affidavit of merit requirements.
Second, the Court
must consider the scope, meaning, and effect of the
indemnification provision between Brooks and DeMonaco.
For the reasons that follow, the affidavit of merit summary
judgment motions by Brooks and DeMonaco will be denied, and
Plaintiffs’ related cross-motions relative to the affidavit of
merit will be granted.
Finally, Brooks’ separate motion for
summary judgment on the contractual indemnification claims will
be granted in part and denied without prejudice in part.
FACTUAL AND PROCEDURAL BACKGROUND5
A.
Broker-Wholesaler Agreement and Indemnification
5
The Court distills this undisputed version of events from the
parties’ statements of material facts, affidavits, and exhibits,
and recounts them in the manner most favorable to Plaintiff, as
the party opposing summary judgment. The Court disregards, as
it must, those portions of the parties’ statements of material
facts that lack citation to relevant record evidence (unless
admitted by the opponent), recites factual irrelevancies, and/or
recounts information that the Court struck from the summary
judgment record. See generally L. CIV. R. 56.1(a); see also
Kemly v. Werner Co., ___ F. Supp. 3d ____, 2015 WL 8335030
(D.N.J. Dec. 8, 2015) (disregarding portions of the parties’
statements of material facts on these grounds); Jones v. Sanko
Steamship Co., Ltd., ___ F. Supp. 3d ____, 2015 WL 8361745
(D.N.J. Dec. 8, 2015) (same). In light of the narrowness (and
largely procedural nature) of the issues raised in the various
summary judgment motions, the material factual record here
proves remarkably brief.
5
Provision
On November 17, 2009, Brooks and DeMonaco entered into a
Broker-Wholesaler Agreement, which authorized Brooks (as the
“Wholesaler”) “to obtain quotes and/or place a policy of
insurance” on behalf of DeMonaco (as the “Broker”).
(Brooks’
Indemnification SMF at ¶ 1; DeMonaco’s RSMF at ¶ 1; see also Ex.
A. to Brooks’ Indemnification SMF at ¶ 2.)
In exchange for
access to Brooks’ wholesale insurance rates, DeMonaco agreed,
among other things, [1] to solicit and receive insurance
proposals, and to inform Brooks “as to the type and amount of
insurance coverage to be considered for quotation,” [2] to
review the “terms, conditions and coverages of a quote and
subsequent policy obtained” by Brooks for consistency with the
insureds’ expectations, and [3] to remit to Brooks “no less than
twenty-five percent (25%) of the total premium due.”
Brooks’ Indemnification SMF at ¶¶ 3(c), 3(d), 5.)
(Ex. A to
In addition
to these obligations, DeMonaco agreed to
indemnify and hold harmless [Brooks], its affiliates,
officers, directors, employees and/or agents, from and
against any and all claims, actions, suits,
proceedings, demands, assessments, judgments,
liabilities, losses, damages, fines, penalties, fees,
costs and expenses, including reasonable attorneys’
fees, incurred by [Brooks] arising directly or
indirectly from any acts, omissions or breach of [the
Broker-Wholesale] Agreement by [DeMonaco].
(Id. at ¶ 10.)
The indemnification provision then explained
that DeMonaco’s “indemnification obligations ... extend to any
6
claims by an insured, purported insured, or purported additional
insured or third party claiming to be a beneficiary under an
insurance contract, arising out of the procurement or lack of
procurement of coverage, or otherwise related to [DeMonaco’s]
services” under the Broker-Wholesaler Agreement.
(Id.)
In
other words, the indemnification provision generally captures
(or, indemnifies Brooks against) “any and all claims” related to
the insurance services provided by DeMonaco under the BrokerWholesaler Agreement.
B.
(Id.)
Plaintiffs’ Insurance Purchase with DeMonaco
In early May of 2012, Plaintiffs requested that DeMonaco
“assist them in placing [various] insurance policies to cover
risks associated” with their commercial property in Sea Bright,
New Jersey.6
(Pls.’ Supp. DeMonaco SMF at ¶ 1; DeMonaco’s RSMF
at ¶ 1; Pls.’ Supp. Brooks SMF at ¶ 1; Brooks’ AOM RSMF at ¶ 1.)
As specifically relevant here, on May 28, 2012, DeMonaco
facilitated, with the assistance of Brooks,7 Plaintiffs’ purchase
of commercial property insurance from Lloyds.
6
(Pls.’ Supp.
Plaintiffs purchased their commercial property in May 2008.
(See Brooks’ AOM SMF at ¶ 1; Pls.’ Brooks AOM RSMF at ¶ 1; see
also DeMonaco’s SMF at ¶ 1; Pls.’ DeMonaco RSMF at ¶ 1.)
7 The parties’ limited record creates the impression that
Plaintiffs had no knowledge of Brooks’ involvement in the
procurement of their insurance policies. (See, e.g., Pls.’
Supp. Brooks SMF at ¶ 3; Brooks’ RSMF at ¶ 3.) Plaintiffs’
knowledge, however, has no impact on the disposition of the
pending motion.
7
DeMonaco SMF at ¶ 2; see also Exs. H & J to Northridge Cert.;
DeMonaco’s RSMF at ¶ 2; Pls.’ Supp. Brooks SMF at ¶ 2; Brooks’
RSMF at ¶ 2.)
C.
Hurricane Sandy, Litigation in this District, and the
Temporary Stay
On and around October 29, 2012, Hurricane Sandy struck the
Northeastern coast of the United States, causing widespread
damage and flooding to shore communities, like Sea Bright.
Brooks’ AOM RSMF at ¶ 5; Pls.’ RSMF at ¶ 5.)
(See
Indeed,
Plaintiff’s property suffered severe flood and other damage.
(See Brooks’ AOM RSMF at ¶ 5; Pls.’ RSMF at ¶ 5; see also Compl.
at ¶ 20.)
As a result, Plaintiffs filed insurance claims with
their various carriers, including Lloyd’s.
¶ 5; Pls.’ DeMonaco RSMF at ¶ 5.)
(See DeMonaco SMF at
Nevertheless, and seemingly
unbeknownst to Plaintiffs, on October 16, 2012, Lloyd’s had
cancelled Plaintiffs’ insurance policy for premium nonpayment,
and denied Plaintiffs’ claim for Hurricane Sandy damages.
(See
Compl. at ¶ 23; Brooks’ AOM SMF at ¶¶ 4, 6; Pls.’ Brooks RSMF at
¶¶ 4, 6.8)
8
Although Plaintiffs “[d]en[y]” the reasons underpinning Lloyd’s
policy cancellation, they offer no evidence to suggest that the
cancellation decision rested upon any other proffered factors.
(Pl.’s Brooks RSMF at ¶¶ 4, 6.) Rather, their claimed
disagreement with the basis for Lloyd’s cancellation appears
tethered to their broader position concerning whose conduct
caused the nonpayment. As a result, the Court finds no genuine
and/or material dispute on the proffered basis for Lloyd’s noaccommodation decision.
8
Following the denial, Plaintiff filed this action on
October 23, 2014, alleging that the various insurance Defendants
breached the insurance agreements, and claiming that DeMonaco
and Brooks breached their fiduciary duties to Plaintiffs, and
committed fraud and/or professional negligence. (See Compl. at
1-17.)
Shortly thereafter, FEMA “announced a new policy of
intensive negotiation and settlements efforts in Sandy flood
cases...”
[See, e.g., Docket Item 1 in 15-mc-7000.]
As a
result, on March 13, 2015, the Court, on its own initiative,
created a “Master Docket” and entered an “ORDER FOR TEMPORARY
STAY,” which stayed “further litigation” of Sandy flood cases,
and cancelled and postponed “all scheduled conferences,
hearings, arbitrations, mediations, and trials,” so that the
parties could devote their time and attention to “settlement
efforts.”9
[Id. (emphasis in original).]
Despite placing Sandy-
related litigation in a state of suspension, the “ORDER FOR
TEMPORARY STAY” encouraged the parties to exchange “documents or
other evidence in aid of settlement negotiation and
consummation,” and specified a procedure for parties seeking
relief from the stay (i.e., parties who wished to remain in
9
In the meantime, and despite the stay, DeMonaco, Hartford,
Harleysville, and Lloyd’s filed Answers to the claims and/or
crossclaims asserted in this action. [See Docket Items 32, 33,
34, 35, & 38.]
9
active litigation).
[Id. (emphasis in original).]
During the
course of the stay, the parties here exchanged settlementrelated discovery, but sought no relief from the stay, nor
otherwise pressed the affidavit of merit issue.
(See Pls.’
Supp. DeMonaco SMF at ¶¶ 19-20; DeMonaco’s RSMF at ¶¶ 19-20;
Pls.’ Supp. Brooks SMF at ¶¶ 20-21; Brooks’ RSMF at ¶¶ 20-21.)10
After the global settlement effort proved unsuccessful in
resolving this particular litigation, the Court lifted the
temporary stay on January 21, 2016 [see Docket Item 55], and the
pending summary judgment motions followed.
60, 62, 69, 76, & 78.]
[See Docket Items
In the aftermath of Brooks’ and
DeMonaco’s opening briefs, Plaintiffs produced affidavits of
merit on February 22, 2016.
(See Exs. F & G to Northridge
Cert.)
STANDARD OF REVIEW APPLICABLE TO DEFENDANTS’ SUMMARY
JUDGMENT MOTION
Summary judgment is appropriate if “there is no genuine
issue as to any material fact and the moving party is entitled
to judgment as a matter of law.”
Alabama v. North Carolina, 560
U.S. 330, 344 (2010) (citations and internal quotation marks
omitted); see also FED. R. CIV. P. 56(a).
10
Stated differently,
Meanwhile, the Court extended the temporary stay on several
occasions, without objection, by Orders entered May 14, 2015
[Docket Item 44]; July 10, 2015 [Docket item 45]; September 18,
2015 [Docket Item 52]; and November 16, 2015 [Docket Item 53].
10
“[w]here the record taken as a whole could not lead a rational
trier of fact to find for the non-moving party,” the Court may
grant summary judgment.
Matsushita Elec. Indus. Co., Ltd. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986).
In evaluating a motion for summary judgment, the Court must
view the material facts in the light most favorable to the nonmoving party, and make every reasonable inference in that
party’s favor.
See Scott v. Harris, 550 U.S. 372, 378 (2007);
Halsey v. Pfeiffer, 750 F.3d 273, 287 (3d Cir. 2014).
An
inference based upon “‘speculation or conjecture,’” however,
“‘does not create a material factual dispute sufficient to
defeat summary judgment.’”
omitted).
Halsey, 750 F.3d at 287 (citations
Rather, the non-moving party must support each
essential element with concrete record evidence.
See Celotex
Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
Moreover, “[t]he standard by which the court decides a
summary judgment motion does not change when the parties file
cross-motions,” as here.
United States v. Kramer, 644 F. Supp.
2d 479, 488 (D.N.J. 2008).
In other words, “the court must
consider the motions independently and view the evidence on each
motion in the light most favorable to the party opposing the
motion.”
Id. (citation omitted).
11
DISCUSSION
The pending motions present, as explained above, two
distinct issues related to Plaintiffs’ compliance with the
affidavit of merit requirement, and the contours of the
indemnification provision between Brooks and DeMonaco.
The
Court will address each issue in turn.
A.
Extraordinary Circumstances Excuse Plaintiffs’
Untimely Filing of Affidavits of Merit
In Count V, Plaintiffs allege that Brooks and DeMonaco—two
licensed insurance service providers—placed themselves in a
fiduciary relationship with Plaintiffs by providing “special
[insurance] services and expertise,” and then “negligently
breached and violated their fiduciary duties and obligations,”
by “[f]ailing to identify and correct reimbursement and/or
payment discrepancies” and “[f]ailing to resolve payment
issues,” among other issues.
(Compl. at 3, 7-10.)
In Counts
VIII and IX, Plaintiffs then assert professional negligence and
fraud claims against DeMonaco, on the grounds that DeMonaco [1]
“negligently failed to process premium payments,” [2]
“negligently failed to provide information and/or documentation
to assure that [the insurance] coverage would be maintained,”
and [3] fraudulently failed to make timely “premium installment”
payments, despite representing to Plaintiffs that all premiums
had been paid.
(Id. at 15-17.)
12
Against that backdrop, Brooks and DeMonaco advance the view
that Plaintiffs’ claims fall within the ambit of the affidavit
of merit statute, and that Plaintiffs’ failure to file timely
affidavits of merit require dismissal of the claims against
them.
(Brooks’ AOM Br. at 3-10; Brooks’ AOM Reply at 3-11;
DeMonaco Br. at 3-7; DeMonaco Reply at 3-12.)
For the reasons
that follow, the Court finds that extraordinary circumstances
excuse Plaintiffs’ noncompliance with the Affidavit of Merit
statute.
In any action for property damage resulting “from an
alleged act of malpractice or negligence by a licensed person in
his profession or occupation,” as here, the New Jersey Affidavit
of Merit statute requires the plaintiff to provide “an affidavit
of an appropriate licensed person” concerning whether the
disputed practice or work “fell [below] acceptable professional
or occupational standards.11”
N.J.S.A. § 2A:53A-27.
In that
way, the affidavit of merit statute requires “‘plaintiffs to
make a threshold showing’ of merit,” Fontanez v. United States,
24 F. Supp. 3d 408, 411 (D.N.J. 2014) (quoting Vitale v. Carrier
Clinic, Inc., 409 F. App’x 532, 533 (3d Cir. 2010) (citation
11
In diversity actions, as here, the Court must apply
substantive state law, including New Jersey’s Affidavit of Merit
statute. See Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d
Cir. 2000) (explaining that the affidavit of merit statute must
be applied by federal courts sitting in diversity).
13
omitted)), in order “‘to dispose of meritless malpractice claims
early in the litigation’” and “‘to allow meritorious claims to
move forward unhindered.’”
Snyder v. Pascack Valley Hosp., 303
F.3d 271, 274 (3d Cir. 2002) (quoting Burns v. Belafsky, 766
A.2d 1095, 1099 (N.J. 2001)).
The statute, in turn, requires the plaintiff to furnish the
affidavit within no more than 120 days of the answer (following
one extension for good cause),12 and deems the failure to provide
the affidavit grounds for dismissal for “failure to state a
cause of action.”
N.J.S.A. § 2A:53A-29 (setting forth the
consequence for a plaintiff’s failure to provide an affidavit of
merit); see also Nuveen Mun. Trust ex rel. Nuveen High Yield
Mun. Bond Fund v. WithumSmith Brown, P.C., 692 F.3d 283, 305 (3d
Cir. 2012).
The record developed here contains no dispute that
Plaintiffs failed to provide an affidavit of merit within the
120-day window.
Brooks filed its Answer to the Complaint on February 20,
2015 [Docket Item 27] and DeMonaco filed its Answer to the
Complaint on March 24, 2015 [Docket Item 32].
Thus, in the
absence of a stay, Plaintiffs’ 120-day period for filing the
Affidavits of Merit would have expired on or about June 20, 2015
and July 22, 2015, respectively.
12
Here, the District-wide temporary stay certainly provides good
cause for this initial extension.
14
Indeed, Plaintiffs admit that they served their Affidavits
of Merit on February 22, 2016 [Docket Items 63 & 64] shortly
after the opening summary judgment briefing, and nearly eight
months after the technical expiration of the 120-day period
provided by the Affidavit of Merit Statute.
(See, e.g., Pls.’
Supp. Brooks SMF at ¶¶ 22-23; Pls.’ Supp. DeMonaco SMF at ¶ 22;
Exs. F & G to Northridge Cert. (reproducing affidavits of merit
by Armando M. Castellini).)
As a result, the issue becomes whether any one of the “four
limited exceptions” excuse Plaintiffs’ failure to comply with
the requirements of the Affidavit of Merit Statute.
F.3d at 305.
Nuveen, 692
These exceptions include “(i) a statutory
exception regarding lack of information; (ii) a ‘common
knowledge’ exception; (iii)” an exception predicated upon
“substantial compliance with the affidavit of merit
requirement;” and (iv) “‘extraordinary circumstances’ that
warrant equitable relief.”
Id. (citations omitted); see also
Fontanez, 24 F. Supp. 3d at 413-415 (detailing the relevant
exceptions).
In this case, Plaintiffs tethers their noncompliance with
the statutory requirements to the pendency of the District-wide
temporary stay of “further litigation” in this and all Hurricane
Sandy actions.
More specifically, Plaintiffs argue that the
stay tolled the 120-day period and/or gives rise to
15
extraordinary circumstances that excuse Plaintiffs’ failure to
comply with the statute.13
(See Pls.’ Brooks Opp’n at 12-35;
Pls.’ DeMonaco Opp’n at 12-35.)
In considering these positions,
the Court finds Plaintiffs’ position on tolling initially
appealing, because the District-wide stay halted “further
litigation” and dispensed with filing deadlines (among other
things), so the parties could devote their attention to
intensive settlement efforts.
Action No. 15-700.]
[Docket Item 1 in Miscellaneous
In that way, the District-wide stay left
Plaintiffs (as argued by counsel) with the understandable
impression that they had been relieved from an array of filing
obligations–including, potentially, the statutory affidavit of
merit requirement.
On that issue, though, the Court finds
equally plausible the notion that the District-wide stay could
not, as a matter of law, have allowed litigants to sidestep the
13
In addition, Plaintiffs argue that the nature of their claims
fall within the “common knowledge” exception to the Affidavit of
Merit statute. (See Pls.’ Brooks Opp’n at 12-16; Pls.’ DeMonaco
Opp’n at 12-16.) The “common knowledge” exception only applies
“where ‘jurors’ common knowledge’” suffices “‘to enable [the
jurors], using ordinary understanding and experience, to
determine a defendant’s [malpractice or] negligence without the
benefit of the specialized knowledge of experts.’” Hubbard v.
Reed, 774 A.2d 495, 499 (N.J. 2001) (quoting Estate of Chin v.
Saint Barnabas Med. Ctr., 734 A.2d 778 (1999)). The malfeasance
alleged here, however, falls short of being mundane or
commonplace, particularly to the extent Plaintiffs’ claims will
require an inquiry into the relevant standard of care for
insurance professionals. The Court therefore rejects
Plaintiffs’ position on the application of the common knowledge
exception.
16
statutory filing requirements of the Affidavit of Merit statute–
an issue well highlighted by Brooks and DeMonaco in their
briefing.
(See, e.g., Brooks’ AOM Reply at 2-4; DeMonaco’s AOM
Reply at 9-10.)
Nevertheless, the Court need not definitively decide the
question of tolling, because the pendency of the stay of
“further litigation” plainly constitutes an “extraordinary
circumstance.”
Chamberlain, 210 F.3d at 162 (citation omitted)
(explaining that “extraordinary circumstances” may justify
noncompliance, provided that the circumstances do not evince
“‘mere carelessness or lack of proper diligence’”).
Indeed, in
Hyman Zamft & Manard, L.L.C. v. Cornell, 707 A.2d 1068 (N.J.
Super. Ct. App. Div. 1998), the New Jersey Appellate Division
found, under procedural circumstances that closely resemble
those presented here, that a “stay on all proceedings” for
mediation “excused the untimely filing of the affidavits of
merit in response to the original pleadings,” because the
“mediation stay” imposed a “time-out” on further litigation.
Id. at 1072.
Here too, the District-wide stay temporarily
froze-in-time this action, and all Hurricane Sandy actions, to
allow the parties to engage in settlement efforts, and no party
ever sought relief from the stay.
Aside from that circumstance,
Plaintiffs served their affidavits on February 22, 2016, thirtytwo days after the Court lifted the stay.
17
(See Exs. C, F, & G
to Northridge Cert.)14
These interlocking factors, in turn and
taken together, demonstrate extraordinary circumstances to
excuse Plaintiffs’ untimely filing of their affidavits of merit.
See Hyman Zamft & Manard, L.L.C., 707 A.2d at 1072 (finding a
stay sufficient to constitute extraordinary circumstances);
Seery v. United States, No. 98-671, 2001 WL 34368387, at *2 (D.
Del. May 1, 2001) (citations omitted) (explaining that New
Jersey courts have found “‘extraordinary circumstances’” in
connection with a stay “on all proceedings during mediation”).
For all of these reasons, the Court holds that the time
during which this case was temporarily stayed for purposes of
intensive settlement efforts is excluded as an extraordinary
circumstance from the 120-day period for serving the Affidavits
of Merit, rendering Plaintiffs’ Affidavits herein timely.
The
summary judgment motions by Brooks and DeMonaco will be denied,
and Plaintiffs’ cross-motions will be granted to the extent the
Court finds that extraordinary circumstances excuse Plaintiffs’
14
The Affidavit of Merit clock started ticking as to Brooks on
February 20, 2015 and was temporarily stayed on March 13, 2015
upon entry of the Order for Temporary Stay; the clock resumed
when the stay was lifted on January 21, 2016 and it ran for 32
days until the affidavit was filed on February 22, 2016; thus,
extending the stay period, Plaintiffs’ affidavit as to Brooks
was served within 21 days plus 32 days, or a total of 53 days,
well within the 120-day period. As to DeMonaco, the case was
stayed when DeMonaco filed its answer, and a period of only 32
days elapsed from when the stay was lifted until Plaintiffs’
affidavit was served.
18
untimely filing of affidavits of merit.
The Court next
addresses the separate contractual indemnification claims of
Brooks and DeMonaco
B.
Cross-Claims for Contractual Indemnification
In Count II of its cross-claims against DeMonaco, Brooks
points to the indemnification provision of the Broker-Wholesaler
Agreement, and asserts that the provision entitles it to
“defense and indemnification from DeMonaco” against Plaintiffs’
claims.
(Brooks’ cross-claim at 15.)
DeMonaco asserts in its
own cross-claim, by contrast, that “Brooks agreed to hold
harmless and indemnify DeMonaco” against any recovery by
Plaintiffs.
(DeMonaco’s cross-claim at 15.)
In other words,
these parties advance diametrically opposed views on the scope
of the indemnification provision, and Brooks now seeks summary
judgment in its favor on DeMonaco’s cross-claim, as well as its
own affirmative claim for contractual indemnification.
In resolving these competing positions, the Court begins,
as it must, with the terms of the indemnification provision:
Indemnification. [DeMonaco] shall indemnify and hold
harmless [Brooks], its affiliates, officers,
directors, employees and/or agents, from and against
any and all claims, actions, suits, proceedings,
demands, assessments, judgments, liabilities, losses,
damages, fines, penalties, fees, costs and expenses,
including reasonable attorneys’ fees, incurred by
[Brooks] arising directly or indirectly from any acts,
omissions or breach of [the Broker-Wholesale]
Agreement by [DeMonaco]. [DeMonaco’s] indemnification
obligations under this [provision], extend to any
19
claims by an insured, purported insured, or purported
additional insured or third party claiming to be a
beneficiary under an insurance contract, arising out
of the procurement or lack of procurement of coverage,
or otherwise related to [DeMonaco’s] services
hereunder.
(Ex. A to Brooks’ Indemnification SMF at ¶ 11 (emphasis added).)
In other words, the indemnification provision speaks,
exclusively, in terms of DeMonaco’s indemnification obligations.
Stated differently, the terms of the provision make plain that
the right to indemnification runs only to Brooks, and the
unequivocal language offers no basis, as a matter of law, to
find DeMonaco entitled to contractual indemnification in its own
right.
For that reason alone, Brooks’ summary judgment motion
will be granted to the extent it concerns DeMonaco’s claim for
contractual indemnification, because no reasonable factfinder
could find DeMonaco entitled to contractual indemnification in
any form.15
Brooks’ entitlement to summary judgment on its own
contractual indemnification claim, however, presents a more
nuanced and ultimately premature question at this stage of the
proceedings.
Critically, under New York law,16 the right to
15
In its briefing, DeMonaco offered no substantive response to
Brooks’ position on its cross-claim for contractual
indemnification, and turned its attention instead only to
Brooks’ claim for contractual indemnification.
16 Because the Broker-Wholesale Agreement contains a choice-oflaw provision, the parties appear to substantively agree that
New York law governs the question of contractual interpretation.
20
contractual indemnification depends upon the specific language
of the contract, and “‘contracts will not be construed to
indemnify a person against [its] own negligence’” absent an
“‘unequivocal’” expression of such intention.
Sovereign Bank v.
Biagioni, 982 N.Y.S.2d 322, 322 (N.Y. App. Div. 2014).
In this case, Brooks claims entitlement to indemnification
on Plaintiffs’ claim for breach of fiduciary duty, based upon
the provision’s inclusion of sweeping language like “arising out
of” and “any and all claims.”
(Brooks’ Indemnification Br. at
7-9; Brooks’ Indemnification Reply at 3-8.)
In advancing that
position, however, Brooks ignores the fact that the
indemnification provision speaks only of acts and/or omissions
by DeMonaco.
11.)
(See Ex. A to Brooks’ Indemnification SMF at ¶
More specifically, the indemnification explains, on its
face, that DeMonaco shall indemnify Brooks “from and against any
and all claims ... arising directly or indirectly from acts [or]
omissions” by DeMonaco, and for claims “arising out of the
procurement or lack of procurement of coverage, or otherwise
related to [DeMonaco’s] services” under the Broker-Wholesaler
Agreement.
(Id. (emphasis added).)
In that way, the provision
appears to capture primarily, if not exclusively, claims related
to DeMonaco’s conduct, and not any independent (or, potentially
negligent) acts by Brooks.
(See id.)
In their fiduciary duty
claim, however, Plaintiffs allege that Brooks owed Plaintiffs
21
fiduciary obligations independent from DeMonaco, and breached
those obligations through acts unconnected to and separate from
DeMonaco.
(See Compl. at 7-10.)
In other words, Plaintiffs’
allegations extend far beyond the narrow contours of the
indemnification provision.
Nevertheless, because discovery remains in its early
phases, it remains unclear if Brooks owed Plaintiffs a fiduciary
duty, and if so, whether Brooks breached that duty from its own
acts (in which case its right to indemnification might be
questioned), rather than solely through those of DeMonaco (in
which case the claims would fall within the ambit of the
unambiguous indemnification provision).
Indeed, as is evident
from the parties’ submissions, the precise contours of Brooks’
alleged conduct remains a matter of ongoing discovery.
As a
result, the Court cannot at this time find Brooks entitled to
judgment as a matter of law on its claim for contractual
indemnification.17
Brooks may, however, renew its
indemnification position at the conclusion of pre-trial factual
discovery and in connection with the parties’ dispositive motion
17
Beyond that, “a claim for contractual indemnification only
accrues once the indemnitee has suffered a loss, i.e., made a
payment, Sompo Japan Ins. Co. of Am. v. Norfolk S. Ry. Co., 762
F.3d 165, 188 (2d Cir. 2014), and no such payment has been made
here. Nor has Brooks argued that the indemnification provision
entitles it to payment of ongoing defense costs. See id.
22
practice, or following a judgment or verdict in favor of
Plaintiffs.
CONCLUSION
For the reasons explained above, Brooks’ motion for summary
judgment on Plaintiffs’ claim for breach of fiduciary duty and
DeMonaco’s motion for summary judgment on Plaintiffs’ claims for
breach of fiduciary duty, professional negligence, and fraud
will be denied, and Plaintiffs’ related cross-motions for
summary judgment will be granted.
Brooks’ motion for summary
judgment on the contractual indemnity claims and cross-claims
will, in turn, be granted in part and denied without prejudice.
An accompanying Order will be entered.
August 2, 2016
Date
s/ Jerome B. Simandle
JEROME B. SIMANDLE
Chief U.S. District Judge
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