LIBERTY INSURANCE UNDERWRITERS, INC. v. WOLFE et al

Filing 27

OPINION. Signed by Judge William H. Walls on 2/3/17. (cm )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

LIBERTY INSURANCE
UNDERWRITERS, INC., an Illinois
Corporation,
Plaintiff,

OPINION
Civ. No. 16-2353 (WHW)(CLW)

V.

JAMES H. WOLFE, III, EMILY
ROSEBORO, Administratix Ad
Prosequendum for the Estate of Wilbur Lee
Roseboro and Executrix of THE ESTATE OF
WILBUR LEE ROSEBORO, DECEASED,
EMILY ROSEBORO, individually,
COUNTY OF ESSEX, TILCON, NEW
YORK, NC., and THE CITY OF EAST
ORANGE,
Defendants.

Walls, Senior District Jud%e
Plaintiff Liberty Insurance Underwriters, Inc. moves under Fed. R. Civ. P. 55 for default
judgment against Defendant James H. Wolfe, III. Liberty asserts that Defendant made material
misrepresentations in initial and renewal applications for a Lawyers Professional Responsibility
Liability Insurance Policy with Liberty. Defendant has failed to plead or otherwise defend this
lawsuit. Decided without oral argument under Fed. R. Civ. P. 78, Plaintiffs motion is granted.
PROCEDURAL AND FACTUAL BACKGROUND
I.

The Parties and the Liberty Lawyers Liability Insurance Policies

Liberty Insurance Underwriters (“Liberty”) is an Illinois corporation with its principal
place of business in Boston, Massachusetts. Compl., ECF No. 1
III (“Wolfe”) is a citizen of New Jersey. Id.

¶ 3.

¶ 1. Defendant James H. Wolfe,

Liberty initially issued a Lawyers Professional
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Responsibility Liability Insurance Policy, No. LPA3O3 137-0111 to Wolfe for the policy period
November 10, 2011 to November 10, 2012 (“2011 Policy”). Id.

¶ 13. The 2011

Policy was a

claims made and reported policy with a limit of liability of $1,000,000 for each claim, and
$1,000,000 in the aggregate with claim expenses that reduce limits of liability. Id.

¶ 14.

Liberty

renewed Wolfe’s 2011 Policy for the period November 10, 2012 to November 10, 2013: Policy
No. LPA303137-01 12 (“2012 Policy”), Id.

¶ 17, and his 2012 Policy for the period November

10, 2013 to November 10, 2014 with Policy No. LPA303137-01 13 (“2013 Policy”). Id.

¶ 18.

Wolfe did not renew the 2013 Policy past the November 10, 2014 expiration date. The 2012 and
2013 policies were also claims made and reported policies. Id.
II.

¶J 17—18.

Wolfe’s Liberty Insurance Policy Application and Renewal Applications

The Liberty Lawyers Professional Liability Insurance Application asks applicants to
certify that they have no knowledge of any circumstance, act, error or omission that could result
in a professional liability claim under the policy. Id.

¶J 20—28.

In addition, each policy contains a

provision instructing insureds to give Liberty written notice of any claim against them. As
example, regarding notice of a potential claim, Wolfe’s 2011 Policy required:
Notice of Claims. You must give us written notice of any claim(s) or potential
claim(s) made against you as soon as practicable. In the event suit is brought
against you, you must immediately forward to us every demand, notice,
summons, complaint or other process received directly or by your representative.
Written notice of any claims against you, as well as of each demand on or action
against us must be delivered to us.
.

Id.

¶

16.

In his 2011 Policy application as well as each renewal application, Mr. Wolfe answered
“no” to the question asking whether he had knowledge of any circumstance, act, error or
omission that could result in a professional liability claim under the policy. Id.

¶J 21, 24, 27.

In

addition to the renewal application prepared by Mr. Wolfe for the 2013 Policy, Mr. Wolfe also
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submitted a Notice of Acceptance Letter to Liberty on November 5, 2013, in which he wrote, in
part: “this letter acknowledges that, after inquiry, I am not aware of any claims and! or

circumstances, acts, errors, or omissions that could result in a professional liability claim since
completion of my last application and supplements.” Id. ¶28. As a result of Mr. Wolfe’s
certification on each application that he had no knowledge of circumstances that could result in
potential claims against him, Liberty issued the 2011, 2012, and 2013 policies. Id.

¶ 22, 25, 29.

Liberty now contends that these certifications were material misrepresentations. Id.
III.

¶ 56—67.

Wolfe’s Representation of the City of East Orange and Emily Roseboro

Plaintiffs claim that Wolfe made misrepresentations on his insurance application and
renewal applications stems from his representation of the City of East Orange and Emily
Roseboro. From 2011 to 2013, Wolfe represented the City of East Orange regarding a workers’
compensation claim filed by Valerie Gadsden, a former employee of the City of East Orange. Id.

¶ 32. On July 26, 2011, Gadsden obtained a judgment for $208,825.45
Orange in her workers’ compensation action. Id.

against the City of East

¶ 33. The City of East Orange, through its third-

party administrator, advised Wolfe to appeal the Gadsden judgment on August 8, 2011, but he
failed to timely do so. Id.

¶J 34—35.

On November 28, 2012, the Gadsden judgment was entered,

and on October 24, 2013, a Writ of Execution was filed on behalf of Gadsden to enforce the
judgment. Id.

¶J 36—37. Wolfe advised Liberty of the Gadsden judgment and asked that a claim

be made under the 2013 Policy on December 31, 2013. Id.

¶ 3$. Liberty requested further

information about the Gadsden case on at least five occasions between January 13, 2014 and
January 30, 2014, but Wolfe did not respond to Liberty’s requests.
During approximately the same period of time, Wolfe also represented Emily Roseboro
in a lawsuit against her employer Ticlon, Inc., for damages sustained as a result of an accident

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that occurred on February 9, 2011. Id.

¶ 41.

On March 12, 2013, Wolfe filed Roseboro’s personal

injury and ultimately wrongful death action against Tilcon, but Wolfe had waited too long to

bring the suit. Id.

¶ 43.

Summary judgment was granted to Tilcon on October 15, 2013 because

the suit was time-barred. Id.
September 18, 2014. Id.

¶ 44. Roseboro’s estate filed a malpractice action against Wolfe on

¶ 45. Wolfe informed Liberty of the malpractice suit filed by Roseboro

on November 7, 2014. Id.

¶ 46. Between November 12, 2014 and November 19, 2014, Liberty

requested information about Wolfe’s representation of Roseboro on at least five occasions, but
he failed to respond. Id.

¶J 47-48.

On December 10, 2014, Liberty appointed defense counsel to

defend the interests of Wolfe against the claims raised on behalf of the Estate of Emily
Roseboro. Id.

¶ 55. At the same time, Liberty also advised Wolfe that it was “reserving its right

to contend that Wolfe failed to disclose material facts to Liberty in Wolfe’s Warranty Statement,
signed November 5, 2013 and policy Renewal Application, dated November 8, 2013. Id.
I.

¶ 54.

The Complaint and Wolfe’s Failure to Litigate

Liberty filed the complaint in this matter on April 26, 2016. Compl. ECF No.1. The
Complaint alleges that Wolfe made material misrepresentations in his 2011 Policy Application
and subsequent renewal applications. Id.

¶ 59. Because of the misrepresentations, Liberty argues

that the 2013 Policy is void ab initlo and of no force. Id.
to any party under the 2013 Policy. Id.

¶ 65.

¶ 64.

Liberty also disclaims any liability

Liberty seeks relief in the form of damages,

rescission of the 2013 Policy, and a declaration that upon return of Wolfe’s premiums, the 2013
Policy is void ab initio, is of no force and effect from inception, and that Wolfe has no interest
therein. Id.

¶ 71(a). The summons and complaint were served on Wolfe on May 16, 2016. ECF

No. 12. Wolfe failed to respond or otherwise defend this action despite being properly served.
On August 9, 2016, nearly three months after the Complaint was served on Wolfe, Liberty

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moved for default. ECF No. 24. Default was entered as to Wolfe on August 10, 2016. Id. On
December 15, 2016, Plaintiff moved this Court for a default judgment. ECF No. 26. Plaintiff has
not filed an opposition to Plaintiff’s motion or otherwise defended against default.
STANDARD FOR DEFAULT JUDGMENT

Three factors are considered when evaluating a motion for default judgment under Fed.
R. Civ. P. 55: (1) whether there is “prejudice to the plaintiff if default is denied,” (2) “whether
the defendant appears to have a litigable defense,” and (3) “whether defendant’s delay is due to
culpable conduct.” Chamberlain v. Giampapa, 210 F.3d 154, 164 (3d Cir. 2000). Factual
allegations in a complaint will be treated “as conceded by the defendant,” DIRECTV. Inc. v.
Fepe, 431 f.3d 162, 165 (3d Cir. 2005), but a court will inquire “into whether the unchallenged
facts constitute a legitimate cause of action.” Days Inns Worldwide, Inc. v. Mayu & Roshan,
L.L.C., 2007 WL 1674485, at *4 (D.N.J. June 8, 2007) (citations omitted). A court does not
accept the alleged amount of damages as true. Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149
(3d Cir. 1990). Rule 55(b)(2) of the Federal Rules of Civil Procedure provides that, in order to
determine the amount of damages in the context of a default judgment, “the court may conduct
[a] hearing[].” A court may determine damages without a hearing “as long as [it] ensure[s] that
there [is] a basis for the damages specified in the default judgment.” Transatlantic Marine
ClaimsAgency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997).
DISCUSSION
I.

Jurisdiction

Subject matter jurisdiction exists under 28 U.S.C.

§ 1332. Plaintiff is an Illinois

Corporation with its principal place of business in Massachusetts. Compl. ¶ 1. Defendant is a

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citizen of New Jersey. Id. ¶2. The amount in controversy at the time of filing exceeded $75,000.
Id.

¶ 10. Personal jurisdiction exists because Defendant is a citizen of New Jersey. Id. ¶ 2.
II.

Default Judgment is Appropriate
This action is based on material misrepresentations made by Wolfe in the initial

application and renewal applications of his Liberty Lawyers Professional Responsibility Liability
Insurance policies. Under New Jersey law, an insurance carrier can rescind an insurance policy
based on a material misrepresentation made by the insured. Liberty Surplus Ins. Corp., Inc., v.
Nowell Amoroso, et a!., 189 N.J. 436 (2006). In Amoroso, the New Jersey Supreme Court
affirmed a trial court’s grant of summary judgment to a legal malpractice insurer when the
insured law finn did not disclose on its insurance application that it had recently neglected to
timely file a client’s complaint. Id. 442—44. The Court concluded that the insured had no
coverage under the malpractice insurance policy based on its knowing misrepresentations. Id.
449—50. Additionally, the court in Scott Liebling v. Garden State Indemnity, 337 N.J. Super. 447
(2001) found rescission of a legal malpractice insurance policy based on equitable fraud
appropriate when the insured made a knowingly false denial of his awareness of a possible
malpractice claim on the insurance policy application. Id. 463—66.
Here Wolfe completed his initial Liberty policy application only three days after he had
filed a late appeal of the Gadsden judgment against the City of East Orange. ECF No. 1

¶ 20.

Even if Wolfe did not know at the time that he had filed a late appeal, and would therefore be
potentially subject to a malpractice claim, he was specifically admonished by the Gadsden trial
court in a July 27, 2012 order stating that Wolfe had filed “a notice of appeal some sixty days
late” and ignored “the Appellate Division’s request of December 27, 2011 for an appropriate
motion to permit the late filing.” ECF No. 26-2 at 11. This admonishment should have been

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referenced in Wolfe’s policy renewal application in 2012 or 2013 when he was asked about
potential claims, but it was not.
Wolfe also failed to make material representations related to the Roseboro case. After
Wolfe filed a claim for Roseboro outside the statute of limitations, Tilcon moved for summary
judgment. Wolfe did not object to, or oppose, Tilcon’s motion, which was granted October 15,
2013 and its order served on Wolfe on November 5, 2013. ECF No. 1

¶ 44.

Only three days later,

Wolfe completed his Liberty policy renewal for 2013, again stating “no” when asked if there a
claim could potentially be filed against him. Id.

¶J 26—27. Because Plaintiff has shown that

Wolfe knowingly made material misrepresentations in his 2011, 2012, and 2013 Liberty
insurance applications, Plaintiff has sufficiently pled a legitimate basis for the requested relief.
Not only has Liberty established a basis for relief, Liberty will also suffer prejudice if
default is denied because it will continue to be bound by the contract that Wolfe procured
through fraud. Moreover, Defendant has not advanced arguments and supporting facts to suggest
that he has a litigable defense in the more than nine months since this action was filed. He has
failed to retain counsel since the filing of the complaint or participate in the litigation in anyway.
Having considered the Chamberlain factors in light of these circumstances, default judgment is
granted.
III.

The Amount of Damages Is Satisfactorily Established

Liberty seeks to rescind Wolfe’s 2013 Policy’ and be reimbursed for all costs associated
with the underwriting, insurance and administration of the 2013 Policy. Liberty has not included
submissions detailing the amount it seeks in administration costs related to the 2013 Policy. The

Liberty represents that if granted rescission it would return the premium with interest. ECF No. 1
considers this mandated by Merchants Indem Corp. v. Eggleston, 37 N.J. 114, 130 (1962).

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¶ 67. The Court

NOT FOR PUBLICATION
Court will not award damages until further submissions sufficiently establish the damages
Liberty seeks.
CONCLUSION
Plaintiffs motion for default judgment is granted. Judgment is entered against
Defendants with a declaration providing for rescission of the 2013 malpractice insurance policy
between Liberty and Wolfe. An appropriate order follows.

DATE:

Senior United States District Court Judge

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