The City of New York et al v. Western Heritage Insurance Company

Filing 51

MEMORANDUM & ORDER: The parties' 44 and 46 motions for reconsideration are denied. Ordered by Judge Raymond J. Dearie on 4/20/2015. (Chee, Alvin)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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THE CITY OF NEW YORK, SCOTT V.
PAULINO, and DRAGONETTI
BROTHERS LANDSCAPING NURSERY
AND TREE CARE, INC.,
Plaintiffs,

MEMORANDUM & ORDER

- against -

13 CV 4693 (RJD) (JO)

WESTERN HERITAGE INSURANCE
COMPANY,
Defendant.
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DEARIE, District Judge
On August 20, 2013, the City of New York, Dragonetti Brothers Landscaping Nursery
and Tree Care, Inc. (“Dragonetti”), and Scott V. Paolino (“Paolino”) commenced the instant
action seeking a declaratory judgment that they are entitled to a defense and indemnity under a
commercial general liability policy insured by Western Heritage Insurance Company (“Western
Heritage”). In a Memorandum and Order dated March 6, 2015 (the “Order”), the Court granted
in part and denied in part the parties’ motions for summary judgment. The parties now move for
reconsideration of the Order under Rule 60 of the Federal Rules of Civil Procedure. The motions
are denied.
DISCUSSION
A. The Relevant Legal Standard
As an initial matter, both parties move for reconsideration under an inapplicable rule.
Rule 60 contains two provisions under which a party may move for relief from a judgment or
order. Rule 60(a) provides that a court “may correct a clerical mistake or a mistake arising from
oversight or omission whenever one is found in a judgment, order or other part of the record.”

Rule 60(b) provides several reasons for which a court “may relieve a party or its legal
representative from a final judgment, order, or proceeding.” Neither of these grounds for relief is
applicable under the present circumstances.
A motion under Rule 60(a) is available only to clarify a decision to reflect the intent of
the judgment of the court, but not to change the substance of the ruling. “To be correctable
under Rule 60(a), the [alleged error] in a judgment must fail to reflect the actual intent of the
court.” Hodge ex rel. Skiff v. Hodge, 269 F.3d 155, 158 (2d Cir. 2001) (quoting Paddington
Partners v. Bouchard, 34 F.3d 1132, 1140 (2d Cir. 1994)). Rule 60(a) cannot be used “to alter
the substantive right of the parties.” Dudley ex rel Estate of Patton v. Penn–America Ins. Co.,
313 F.3d 662, 671 (2d Cir. 2002). Western Heritage makes its motion pursuant to Rule 60(a),
but does not direct the Court to any clerical error in the Order. Instead, Western Heritage argues
that the Court should have held that a 32-day delay in disclaiming coverage is reasonable as a
matter of law. Thus, the motion falls outside the purview of Rule 60(a).
In addition, by its terms, Rule 60(b) only affords relief from final judgments, meaning
those judgments that are sufficiently final that they may be appealed. See Transaero, Inc. v. La
Fuerza Aerea Boliviana, 99 F.3d 538, 541 (2d Cir. 1996) (“By its own terms, Rule 60(b) applies
only to judgments that are final.”). Rule 60(b) does not apply to an “[o]rder denying in part and
granting in part [a party’s] motion for summary judgment, which is non-final, interlocutory, and
non-appealable.” Williams v. Cnty. of Nassau, 779 F. Supp. 2d 276, 280 n.2 (E.D.N.Y. 2011),
aff’d, 581 F. App'x 56 (2d Cir. 2014); see also United States v. 228 Acres of Land & Dwelling,
916 F.2d 808, 811 (2d Cir. 1990) (citation omitted) (“An order that denies summary judgment or
grants partial summary judgment cannot by itself be the basis for an appeal, since it is
nonfinal.”). Therefore, the parties’ motions are also outside the scope of Rule 60(b).

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While the parties move for reconsideration under the wrong rule, their requests would be
procedurally proper under Local Rule 6.3, which allows a party to move for reconsideration of a
court order in view of “matters or controlling decisions which counsel believes the court has
overlooked.” “The standard for granting such a motion is strict, and reconsideration will
generally be denied unless the moving party can point to controlling decisions or data that the
court overlooked . . . that might reasonably be expected to alter the conclusion reached by the
court.” Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995). “The major grounds
justifying reconsideration are an intervening change in controlling law, the availability of new
evidence, or the need to correct a clear error or prevent manifest injustice.” Hinds County, Miss.
v. Wachovia Bank N.A., 708 F. Supp. 2d 348, 369 (S.D.N.Y.2010) (citation and internal
quotation marks omitted). However, “[t]he moving party . . . may not repeat ‘arguments already
briefed, considered and decided.’” Thieriot v. Jaspan Schlesinger Hoffman, LLP, No. 07-CV5315 (DRH), 2015 WL 507223, at *1 (E.D.N.Y. Feb. 6, 2015) (quoting Schonberger v. Serchuk,
742 F. Supp. 108, 119 (S.D.N.Y. 1990)). Therefore, a motion must be “narrowly construed and
strictly applied in order to discourage litigants from making repetitive arguments on issues that
have been thoroughly considered by the court.” Range Rd. Music, Inc., v. Music Sales Corp., 90
F. Supp. 2d 390, 391-92 (S.D.N.Y. 2000).
B. Western Heritage’s Motion for Reconsideration
In arguing for reconsideration, Western Heritage claims that since the Order found that a
32-day delay in disclaiming coverage was not unreasonable as a matter of law, the time it took to
issue a disclaimer was reasonable. Two negatives do not always create a positive. Under New
York Insurance Law § 3420(d), a “delay in disclaiming [can be] not unreasonable as a matter of
law” and “by the same token, not . . . considered reasonable as a matter of law,” as “there is an

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issue of fact in this respect.” Murphy v. Hanover Ins. Co., 239 A.D.2d 323, 325, 657 N.Y.S.2d
740, 742 (2d Dep’t 1997). Here, while the Court held that on the present factual record a 32-day
delay is not unreasonable as a matter of law, for the same reasons this Court cannot conclude
that a 32-day delay is reasonable as a matter of law. Simply, there are disputes of material facts.
Those include whether it was readily apparent to Western Heritage that there was a basis for
denying coverage, and whether Western Heritage needed to investigate the claim. As the Order
states, these are all questions for the jury. As Western Heritage has failed to identify a basis for
this Court to depart from its prior decision, its motion is denied.
C. Plaintiffs’ Motion for Reconsideration
Plaintiffs have also failed to satisfy the strict standard for reconsideration under Local
Rule 6.3. In fact, plaintiffs do not even attempt to anchor their arguments to the legal standard
for reconsideration (of which they make no mention in their brief). They fail to point to any
intervening change in controlling law, any new evidence, or any other basis that justifies relief.
Instead, their motion raises substantially the same arguments they originally presented in
opposition to Western Heritage’s motion for summary judgment and in their own summary
judgment motion.
First, plaintiffs argue that the Court erred by not holding that a 32-day delay in
disclaiming coverage is unreasonable as a matter of law. “Normally the question whether a
notice of disclaimer . . . has been sent ‘as soon as is reasonably possible’ is a question of fact
which depends on all the facts and circumstances, especially the length of and the reason for the
delay.” Hartford Ins. Co. v. Nassau Cnty., 46 N.Y.2d 1028, 1030, 389 N.E.2d 1061, 1062-63
(1979); U.S. Underwriters Ins. Co. v. City Club Hotel, LLC, 369 F.3d 102, 107 (2d Cir. 2004)
(quoting Hartford Ins. Co. approvingly). Thus, “[t]he reasonableness of any delay . . . generally

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is a question of fact for a jury to resolve.” State Farm Mut. Auto. Ins. Co. v. Clift, 249 A.D.2d
800, 801, 671 N.Y.S.2d 843, 844 (3d Dep’t 1998). The Order identifies a number of disputed
material facts, including disputes about the length of and reasons for Western Heritage’s delay in
disclaiming coverage. See Order at 6. Plaintiffs gloss over these disputed facts and argue that it
should have been readily apparent to Western Heritage that plaintiffs’ claim was excluded by the
policy. This very argument was presented at length by plaintiffs previously. In fact, large
portions of plaintiffs’ motion for reconsideration are lifted verbatim from plaintiffs’ prior
briefing. Compare ECF No. 28 at 15-16 with ECF No. 48 at 6-7. The Court previously found
that there is a material dispute as to whether a basis for disclaiming coverage was readily
apparent, and the Court sees no reason to depart from its prior holding now.
Second, plaintiffs argue that the Court erred in holding that Western Heritage was not
required to provide Paolino with separate notice of its denial of coverage since he is united in
interest with Dragonetti. Plaintiffs’ arguments are not persuasive. Paolino did not provide his
own notice of claim to Western Heritage, and therefore generally would be denied coverage on
that basis. Nonetheless, the Court held that Paolino was not required to provide separate notice
because he is “united in interest” with Dragonetti: there is no adversity between them, they have
the same attorney, Dragonetti is vicariously liable for the torts of Paolino, and their interests
stand or fall together. Plaintiffs try to take advantage of this unity of interest for the provision of
notice, while denying the defense the benefit of this unity for the disclaimer, arguing that since
Western Heritage did not send a separate disclaimer to Paolino, it is estopped from denying him
coverage. The Court cannot see how such a result is equitable and comports with the purpose of
section 3420(d).

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Section 3420(d) is not intended to be a “technical trap.” Tower Ins. Co. of New York v.
United Founders Ltd., No. 14455, 2015 WL 1013816, at *1 (1st Dep’t Mar. 10, 2015) (quoting
Excelsior Ins. Co. v. Antretter Contracting Corp., 262 A.D.2d 124, 127, 693 N.Y.S.2d 100, 104
(1st Dep’t 1999)). The New York Court of Appeals has cautioned that section 3420(d) should
not be construed in such a way that it will “produce inequality, injustice or absurdity.” Zappone
v. Home Ins. Co., 55 N.Y.2d 131, 137, 432 N.E.2d 783, 786 (1982). In Excelsior Ins. Co., the
First Department considered whether an insurer’s “noncompliance with the literal terms of §
3420(d) was severe enough that it should be required to pay $1 million on a claim otherwise not
covered by the policy—particularly where the real parties in interest who [would] receive that
payment . . . did receive a proper notice of disclaimer under § 3420(d).” 262 A.D.2d at 127, 693
N.Y.S.2d at 104 (emphasis in original). Applying the principle articulated in Zappone, the court
determined that since the claimant’s liability carriers were “the real parties in interest” and were
the claimant’s “agent for all purposes,” the insurer’s “[f]ailure to serve a formal notice [the
claimant did] not render ineffective the denial of coverage where, under the circumstances, the
party who received the notice was expected to forward it to the nominal party and had
undertaken to protect the nominal party’s rights.” Id. at 128 (citing Losi by Losi v. Hanover Ins.
Co., 139 A.D.2d 702, 703, 527 N.Y.S.2d 458, 459 (2d Dep’t 1988)).
This Court held, citing Zappone and Excelsior Ins. Co., that Western Heritage’s failure to
serve formal notice on Paolino does not violate section 3420(d) in this case. The Court held that
Paolino and Dragonetti were united in interest (and therefore Paolino did not have to send
separate notice) because (1) Dragonetti is vicariously liable for the torts of Paolino, (2) they have
the same interests in the outcome of the litigation, (3) there is no adversity between them, and
(4) they are represented by the same counsel. Based on those same facts, the Court concluded

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that Dragonetti was the real party in interest and effectively Paolino’s agent for all purposes, and
therefore Western Heritage’s failure to serve a formal disclaimer on Paolino did not render the
denial of coverage ineffective. Notably, this is not to say that insurers can escape the
requirement of sending a separate disclaimer to each insured whenever the insureds are united in
interest. Rather, the Court’s decision also rests on equitable principles of reciprocity: if Paolino
is not required to provide separate notice to Western Heritage because he is united in interest
with Dragonetti, Western Heritage should not be required to send a separate disclaimer to
Paolino.
Plaintiffs argue that Excelsior Ins. Co. has been distinguished and criticized by the New
York Court of Appeals in Sierra v. 4401 Sunset Park, LLC, 24 N.Y.3d 514, 519 (2014). If
anything, Sierra confirms the conclusion reached in the Order. In Sierra, the court held that
notice to an additional insured’s liability carrier cannot serve as notice to the additional insured
under section 3420(d). In so holding, the court distinguished Excelsior on the grounds that the
additional insured’s liability carrier “interests were not necessarily the same as its insureds’” and
“the insured had their own interests at stake, separate from that of [the carrier].” Id. at 518.
Moreover, the additional insured’s liability carrier was not its “agent for all purposes, or for the
specific purpose that is relevant here: receipt of a notice of disclaimer,” and the additional
insured was therefore “entitled to notice delivered . . . at least to an agent . . . who owed a duty of
loyalty in this matter to them only.” Id. But here, as already noted, Dragonetti and Paolino’s
interests are necessarily the same. If they were not, then they would not be united in interest
(and Dragonetti’s notice on behalf of Paolino would be ineffective). Sierra left open the
possibility that “notice to an agent . . . who owed a duty of loyalty,” and did not have adverse

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interests, could be effective. The Order is consistent with that holding.1 Additionally, none of
the other cases cited by plaintiffs hold that an additional insured that did not send separate notice
of claim is nonetheless entitled to coverage because his insurer did not send him a separate denial
of coverage. Reconsideration on this ground is therefore unwarranted.
Lastly, plaintiffs argue that the Order should be modified to hold that Western Heritage
failed to satisfy the specificity requirements of section 3420(d). A large majority of plaintiffs’
brief is taken verbatim from plaintiffs’ motion for summary judgment and reply brief in support
of their motion. Compare ECF Nos. 28 at 17-19 and 33 at 4-5 with ECF No. 48 at 14-17. The
Court considered plaintiffs’ arguments and read plaintiffs’ cited cases previously. Regurgitating
this section of plaintiffs’ summary judgment brief into a new motion will not change the
outcome of this issue. Western Heritage’s disclaimer to the City provides the basis for excluding
coverage (the “policy excludes accidents involving motor vehicles”), indicates that coverage has
been declined to the named insured, and states that coverage is being denied to the City (“We . . .
reject your tender of defense in this case.”). As this Court held previously, the disclaimer
complies with the requirements of section 3420(d).
For the reasons stated above, the parties’ motions are denied.
SO ORDERED.
Dated: Brooklyn, New York
April 20, 2015
/s/ Judge Raymond J. Dearie
__________________________
RAYMOND J. DEARIE
United States District Judge
1

Additionally, Sierra rejected Excelsior to the extent it stands “for the general
proposition that notice to an additional insured’s liability carrier serves as notice to the additional
insured under section 3420(d)(2).” Sierra, 24 N.Y.3d at 519. The Order did not rely on
Excelsior for such a proposition, and therefore that dictum is plainly inapplicable here.
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