AmGuard Insurance Company v. Country Plaza Associates Inc. et al
Filing
35
ORDER granting 26 Motion for Summary Judgment; denying 27 Motion for Partial Summary Judgment; denying 30 Motion for Partial Summary Judgment. For the reasons set forth herein, the Court grants AmGuards motion for summary judgment on its cla im for declaration of non-coverage, and denies defendants cross-motion for summary judgment. AmGuard has no duty to defend or indemnify in connection with the Underlying Action commenced by Scordo. The Clerk of the Court shall enter judgment accordingly and close this case. SO ORDERED. Ordered by Judge Joseph F. Bianco on 7/3/2014. (Chipev, George)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
_____________________
No 13-CV-5205 (JFB)(ARL)
_____________________
AMGUARD INSURANCE COMPANY,
Plaintiff,
VERSUS
COUNTRY PLAZA ASSOCIATES INC. D/B/A COOL FISH RESTAURANT, TOM SCHAUDEL,
COOL FISH COMPANY, INC., AND MARK SCORDO,
Defendants.
_______________________
MEMORANDUM AND ORDER
July 3, 2014
_______________________
JOSEPH F. BIANCO, District Judge:
Plaintiff AmGuard Insurance Company
(“AmGuard” or “plaintiff”) brings this
action against Defendants Country Plaza
Associates Inc. d/b/a Cool Fish Restaurant
(“Country Plaza”), Cool Fish Company, Inc.
(“Cool Fish”), and Tom Schaudel
(“Schaudel”) (collectively, “defendants”),
seeking a declaratory judgment that it has no
obligation to indemnify Country Plaza and
Schaudel in connection with the underlying
action commenced against them by their
former employee, defendant Mark Scordo
(“Scordo”).1 According to plaintiff, it has no
duty to defend because Scordo’s allegations
in the Underlying Action do not state a
claim for “bodily injury,” “property
damage,” or “personal and advertising
1
The underlying action is entitled Mark Scordo v.
Cool Fish, Country Plaza Associates, Inc., Tom
Schaudel, and Cool Fish Co., Inc., United States
District Court, Eastern District of New York, Docket
No. 13-CV-4264 (the “Underlying Action”).
injury” within AmGuard’s threshold
insurance provisions, and the coverage
otherwise is barred under the policy
exclusions for employment-related practices
and intentional conduct.
Plaintiff moves for summary judgment
on this issue. Defendants oppose and crossmove for partial summary judgment,
focusing on Scordo’s cause of action for
prima facie tort, which is based on an
alleged telephone call from Schaudel to
Scordo’s prospective employer during which
Schaudel allegedly told the employer not to
hire Scordo.2 Defendants contend that (1)
2
As discussed infra, during oral argument, defense
counsel conceded that the other causes of action in
the Underlying Action—namely, willful failure to
pay wages and overtime, retaliation (including
retaliatory termination) based upon plaintiff’s
assertion of the wage and hour claims, and fraudulent
concealment of wage and overtime violations in
company records—are employment-related claims. In
any event, even in the absence of such concession,
the Court concludes that such claims are clearly
this cause of action falls under the “bodily
injury” or “personal and advertising injury”
prong; and (2) the exclusions do not apply,
because the alleged tort does not “arise out
of” any employment-related practices, and
the evidence may show Schaudel did not act
intentionally.
AmGuard is entitled to a declaration that is
has no obligation to defend or indemnify
Country Plaza and Schaudel in connection
with the underlying action commenced by
former employee Scordo.
I.
A.
For the following reasons, the Court
concludes that AmGuard has no duty to
defend and, thus, grants AmGuard’s motion
for summary judgment and denies
defendants’ cross-motion for partial
summary judgment. Specifically, the Court
concludes that, even assuming arguendo that
the prima facie tort cause of action falls
within the “bodily injury” or “personal and
advertising” coverage, the exclusions for
employment-related
practices
and
intentional acts plainly are applicable based
on the allegations in Scordo’s underlying
complaint. Plaintiff has met its burden of
demonstrating, based upon the clear
allegations regarding the prima facie tort
claim (as well as the other claims) in the
underlying complaint, that (1) the claims are
wholly within the exclusions, (2) the
exclusions are subject to no other reasonable
interpretation, and (3) there is no possible
factual or legal basis upon which plaintiff
insurer may eventually be held obligated to
indemnify the insured under any policy
provision. Accordingly, summary judgment
is warranted in AmGuard’s favor, and
BACKGROUND
Factual Background
The Court takes the following facts from
the parties’ affidavits, exhibits, and Rule
56.1 Statements of Fact. The Court
construes the facts with respect to each
motion in the light most favorable to the
nonmoving party. See Capobianco v. City of
New York, 422 F.3d 47, 50 (2d Cir. 2005).
The parties’ Rule 56.1 statements contain
specific citations to the record, and the Court
generally cites to the statements rather than
to the underlying citations. Unless otherwise
noted, where a Rule 56.1 statement is cited,
that fact is undisputed or the opposing party
has not pointed to any contradictory
evidence in the record.
1.
The Insurance Policy
AmGuard issued insurance policies to
defendants, which collectively provided
coverage to defendants from September 25,
2011, to September 25, 2013 (“the
AmGuard Policies”).3 (Def. 56.1 ¶¶ 1–2; see
AmGuard Policies, Affirmation of Marci
Kokalas (“Kokalas Aff.”) Ex. A.)
The policies include a standard
commercial general liability form that
provides, in pertinent part, that AmGuard
“will pay those sums that the insured
becomes legally obligated to pay as damages
because of ‘bodily injury,’ ‘property
damage,’ or ‘personal and advertising
employment-related claims that are subject to the
Employment-Related Practices Exclusion, and
defendants have failed to articulate any argument to
the contrary. Thus, the Court’s analysis in this
Memorandum and Order focuses on the prima facie
tort claim, because, if AmGuard has a duty to defend
that claim, then it has a duty to defend the entire
action. See NWL Holdings, Inc. v. Discover Prop. &
Cas. Ins. Co., 480 F. Supp. 2d 655, 658 (E.D.N.Y.
2007) (“‘If any of the claims against the insured
arguably arise from the covered events, the insurer is
required to defend the entire action.’” (quoting
Frontier Insulation Contractors v. Merchants Mut.
Ins. Co., 91 N.Y.2d 169, 175 (1997))).
3
The policies contain substantially the same
language, provisions, exclusive, terms and
conditions; any amended or added forms did not
result in material changes. (Def. 56.1 ¶ 3.)
2
injury’ to which this insurance applies,” and
will have the duty to defend “even if the
allegations of the ‘suit’ are groundless, false,
or fraudulent.”4 (Def. 56.1 ¶ 4.) The
AmGuard Policies define “bodily injury” as
“bodily injury, sickness or disease sustained
by a person, including death resulting from
any of these at any time.” (Id. ¶ 5.) The
AmGuard Policies define “personal and
advertising injury” to include “injury,
including consequential ‘bodily injury’
arising out” offenses including, as relevant
here, “[o]ral or written publication, in any
manner, of material that slanders or libels a
person or organization or disparages a
person’s or organization’s goods, products
or services.” (Id. ¶ 6.)
the knowledge that the act would violate the
rights of another and would inflict ‘personal
and advertising injury.’” (Id.)
2.
In July 2013, Scordo sued defendants in
the United States District Court for the
Eastern District of New York, alleging
violations of the Fair Labor Standards Act
(“FLSA”) and the New York Labor Law for
willful failure to pay wages and overtime,
retaliatory termination, fraud, and prima
facie tort. (Def. 56.1 ¶ 10; see Underlying
Action Complaint, Kokalas Aff. Ex. C.)
Scordo was employed by Country Plaza
and Schaudel as a bartender from July 2000
until around July 2013, and he claims
defendants fraudulently concealed his
overtime hours to avoid paying overtime.
(See Underlying Action Complaint ¶¶ 10–
28.) Scordo also alleges that, after his
attorney wrote to defendants regarding the
wage and hour claims, defendants removed
plaintiff from the weekend shifts and
ultimately terminated him. (Id. ¶¶ 23–365.)
In addition, he claims that, “[a]fter [he was]
offered a comparable position at a
competing restaurant, Defendant Schaudel
telephoned
Plaintiff’s
[prospective]
employer and advised them not to hire
Plaintiff. As a direct result of this telephone
call, Plaintiff’s offer of employment was
rescinded.” (Id. ¶ 28.) Scordo alleges that
defendants are liable to him for prima facie
tort because their calling the prospective
employer to dissuade it from hiring Scordo
“constitutes the (a) intentional infliction of
harm, (b) resulting in special damages, (c)
without excuse or justification, (4) by an act
or series of acts which are otherwise
unlawful.” (Id. ¶ 35.) In addition to the
damages he seeks for the other claims,
The AmGuard Policies contain an
Employment-Related Practices Exclusion
(“ERPE”). It states, in pertinent part, that the
insurance does not apply to “bodily injury”
or “personal and advertising injury” to a
person “arising out of any” (1) refusal to
employ that person; (2) termination of that
person’s employment; or (3) employmentrelated practices, policies, acts or omissions,
such as coercion, demotion, evaluation,
reassignment,
discipline,
defamation,
harassment, humiliation, discrimination or
malicious prosecution directed at that
person. (Id. ¶ 7.) The exclusion applies
whether the insured may be liable as an
employer or in any other capacity. (Id.)
The AmGuard Policies also exclude
coverage for “Expected or Intended Injury”
(the
“Intentional
Act
Exclusions”).
Specifically, the insurance does not apply to
“bodily injury” if it “was expected or
intended from the standpoint of any
insured.” (Id. ¶ 8.) It also does not apply to
“personal and advertising injury” if it was
“caused by or at the direction of or with the
consent or acquiescence of any insured with
5
4
The Underlying Action
The Underlying Action Complaint is not numbered
correctly. These allegations appear on page 5.
Property damage is not at issue in this litigation.
3
plaintiff seeks at least $50,000 in damages
for the prima facie tort claim.
that he or she is entitled to summary
judgment. Huminski v. Corsones, 396 F.3d
53, 69 (2d Cir. 2005). “A party asserting that
a fact cannot be or is genuinely disputed
must support the assertion by: (A) citing to
particular parts of materials in the record,
including
depositions,
documents,
electronically stored information, affidavits
or declarations, stipulations (including those
made for purposes of the motion only),
admissions, interrogatory answers, or other
materials; or (B) showing that the materials
cited do not establish the absence or
presence of a genuine dispute, or that an
adverse party cannot produce admissible
evidence to support the fact.” Fed. R. Civ. P.
56(c)(1). The court “is not to weigh the
evidence but is instead required to view the
evidence in the light most favorable to the
party opposing summary judgment, to draw
all reasonable inferences in favor of that
party,
and
to
eschew
credibility
assessments.” Amnesty Am. v. Town of W.
Hartford, 361 F.3d 113, 122 (2d Cir. 2004)
(quoting Weyant v. Okst, 101 F.3d 845, 854
(2d Cir. 1996)); see Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986)
(summary judgment is unwarranted if “the
evidence is such that a reasonable jury could
return a verdict for the nonmoving party”).
On or about August 13, 2013, defendants
asked AmGuard to defend and indemnify
them in connection with the Underlying
Action. (Def. 56.1 ¶ 18.) By letter dated
September 5, 2013, AmGuard disclaimed
coverage because (1) the complaint did not
allege the requisite injury as defined by
AmGuard’s policy (id. ¶ 19); and (2) the
allegations arise out of the termination of
Scordo’s employment and/or defendants’
other
employment-related
practices
concerning Scordo, and also fall under the
intentional acts exclusion (id. ¶¶ 22–23). In
the disclaimer, AmGuard offered defendants
a courtesy defense pending judicial
confirmation of the propriety of AmGuard’s
declination of coverage. (Id. ¶ 25.)
B.
Procedural Background
Scordo filed the Underlying Action on
July 29, 2013. AmGuard filed this action on
September 18, 2013. Defendants answered
and asserted a counterclaim on December
20, 2013, which AmGuard answered on
January 9, 2014. AmGuard filed the instant
motion for summary judgment on March 5,
2014. Defendants opposed and cross-moved
for partial summary judgment on April 4,
2014. AmGuard replied on April 18, 2014.
The Court held oral argument on May 20,
2014. The Court has fully considered the
submissions of the parties.
II.
Once the moving party has met its
burden, the opposing party “‘must do more
than simply show that there is some
metaphysical doubt as to the material
facts . . . . [T]he nonmoving party must
come forward with specific facts showing
that there is a genuine issue for trial.’”
Caldarola v. Calabrese, 298 F.3d 156, 160
(2d Cir. 2002) (alteration and emphasis in
original) (quoting Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574,
586–87 (1986)). As the Supreme Court
stated in Anderson, “[i]f the evidence is
merely colorable, or is not significantly
probative, summary judgment may be
granted.” 477 U.S. at 249–50 (citations
STANDARD OF REVIEW
Pursuant to Federal Rule of Civil
Procedure 56(a), a court may grant a motion
for summary judgment only if “the movant
shows that there is no genuine dispute as to
any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ.
P. 56(a); Gonzalez v. City of Schenectady,
728 F.3d 149, 154 (2d Cir. 2013). The
moving party bears the burden of showing
4
omitted). Indeed, “the mere existence of
some alleged factual dispute between the
parties will not defeat an otherwise properly
supported motion for summary judgment.”
Id. at 247–48 (emphasis in original). Thus,
the nonmoving party may not rest upon
mere conclusory allegations or denials but
must set forth “‘concrete particulars’”
showing that a trial is needed. R.G. Grp.,
Inc. v. Horn & Hardart Co., 751 F.2d 69, 77
(2d Cir. 1984) (quoting SEC v. Research
Automation Corp., 585 F.2d 31, 33 (2d Cir.
1978)). Accordingly, it is insufficient for a
party opposing summary judgment “‘merely
to assert a conclusion without supplying
supporting arguments or facts.’” BellSouth
Telecomms., Inc. v. W.R. Grace & Co., 77
F.3d 603, 615 (2d Cir. 1996) (quoting
Research Automation Corp., 585 F.2d at
33).
III.
those causes of action relate to employmentrelated practices—wages and overtime
practices, retaliation (including retaliatory
termination
and
interference
with
prospective employment), and maintaining
false business records—for which the
Employment-Related Practices Exclusion
unambiguously bars coverage. Such causes
of action, both by their inherent nature as
well as by the allegations in the Underlying
Action
Complaint,
clearly
involve
intentional acts for which the Intentional
Acts Exclusion also unambiguously bar
coverage.
As set forth below in more detail, with
respect to the other cause of action for prima
facie tort, the Court also concludes that
AmGuard has no duty to defend because the
exclusions
unambiguously
bars
any
coverage for such claim.7
DISCUSSION
A.
AmGuard argues that it has no duty to
defend the Underlying Action because
Scordo’s complaint does not give rise to a
claim within the AmGuard Policies’
insurance provisions, and, even if the
Underlying Action triggers the insuring
provisions, the policy exclusions bar
defendants’ coverage claim. As noted supra,
the Court focuses on the prima facie tort
claim because defendants conceded, at oral
argument, that the other causes of action—
namely, willful failure to pay wages and
overtime, retaliation (including termination)
based upon plaintiff’s assertion of the wage
and hour claims, and fraudulent concealment
of wage and overtime violations in company
records—are employment-related claims.6 In
any event, even in the absence of that
concession, it is evident that the other causes
of action fall within both exclusions. Each of
Duty to Defend
Under New York law, an insurer has an
“exceedingly broad” duty to defend the
insured. Auto. Ins. Co. of Hartford v. Cook,
7 N.Y.3d 131, 137 (2006) (citation and
internal quotation marks omitted). The duty
7
With respect to whether Scordo has stated a claim
for “bodily injury” or “personal and advertising
harm,” defendants argue (1) although Scordo does
not allege emotional or psychological harm in the
Underlying Action, Scordo’s claim does not
explicitly exclude the possibility that the harm
alleged in the prima facie tort claim potentially
includes emotional or psychological harm suffered as
a result of defendants’ alleged conduct; and (2) the
telephone call-related claim could state a cause of
action for “slander” and “disparagement.” Plaintiff
counters that the prima facie tort label is given to an
action arising out of the intentional infliction of
economic harm without justification. The Court,
however, need not decide whether the Underlying
Action actually triggered the coverage provision on
the prima facie tort claim (or any other claim),
because, as explained in this Memorandum and
Order, the exclusions unambiguously apply in any
event to all the claims in the Underlying Action.
6
See Oral Arg. Recording (“COURT: Isn’t it beyond
dispute that those other claims are employmentrelated claims? DEFENDANTS’ COUNSEL: Yes.”).
5
the insured under any policy provision.”
Frontier Insulation Contractors, 91 N.Y.2d
at 175; see also Ment Bros. Iron Works Co.,
Inc. v. Interstate Fire & Cas. Co., 702 F.3d
118, 121 (2d Cir. 2012). Further, “[i]f any of
the claims against the insured arguably arise
from covered events, the insurer is required
to defend the entire action.” Frontier
Insulation Contractors, 91 N.Y.2d at 175.
to defend is broader than the duty to
indemnify. See Seaboard Surety Co. v.
Gillette Co., 64 N.Y.2d 304, 310 (1984)
(“Where an insurance policy includes the
insurer’s promise to defend the insured
against specified claims as well as to
indemnify for actual liability, the insurer’s
duty to furnish a defense is broader than its
obligation to indemnify.”); Fitzpatrick v.
Am. Honda Motor Co., 78 N.Y.2d 61, 65
(1991) (“[A]n insurer may be contractually
bound to defend even though it may not
ultimately be bound to pay, either because
its insured is not factually or legally liable or
because the occurrence is later proven to be
outside the policy’s coverage.”).
“Insurance policies are contracts to
which the ordinary rules of contractual
interpretation apply.” Accessories Biz, Inc.
v. Linda & Jay Keane, Inc., 533 F. Supp. 2d
381, 386 (S.D.N.Y. 2008). New York
insurance contracts are construed in light of
“common speech.” Ace Wire & Cable Co. v.
Aetna Cas. & Sur. Co., 60 N.Y.2d 390, 398
(1983); see also Ment Bros. Iron Works, 702
F.3d at 122 (“Terms in an insurance contract
must be given their plain and ordinary
meaning.” (citation and internal quotation
marks omitted)). Insurance contracts also
must be interpreted “according to the
reasonable expectations and purpose of the
ordinary businessman when making an
ordinary business contract.” Gen. Motors
Acceptance Corp. v. Nationwide Ins. Co., 4
N.Y.3d 451, 457 (2005) (internal citations
and quotation marks omitted). Ambiguous
terms in a policy “must be construed in
favor of the insured and against the insurer.”
White v. Cont’l Cas. Co., 9 N.Y.3d 264, 267
(2007).
“[A]n insurer will be called upon to
provide a defense whenever the allegations
of the complaint suggest a reasonable
possibility of coverage.” Auto. Ins. Co. of
Hartford, 7 N.Y.3d at 137 (alteration,
citation, and internal quotation marks
omitted); see also Fitzpatrick, 78 N.Y.2d at
65 (“This Court has repeatedly held that an
insurer’s duty to defend its insured arises
whenever the allegations in a complaint state
a cause of action that gives rise to the
reasonable possibility of recovery under the
policy.”). An insurer has a duty to defend a
claim against its policy holder unless it can
“establish, as a matter of law, that there is no
possible factual or legal basis on which the
insurer might eventually be obligated to
indemnify [the insured] under any provision
contained in the policy.” Villa Charlotte
Bronte, Inc. v. Commercial Union Ins. Co.,
64 N.Y.2d 846, 848 (1985). An insurer who
seeks to be relieved of the duty to defend
based on a policy exclusion “bears the heavy
burden of demonstrating that the allegations
of the complaint cast the pleadings wholly
within that exclusion, that the exclusion is
subject to no other reasonable interpretation,
and that there is no possible factual or
legal basis upon which the insurer may
eventually be held obligated to indemnify
B.
Application
AmGuard argues that both exclusions
apply because (1) Scordo’s allegation that
Schaudel
interfered
with
Scordo’s
prospective employment by telephoning his
new employer and advising it not to hire him
arises out of his termination and defendants’
employment-related practices; and (2) the
Underlying Action is based solely on claims
of intentional acts. Defendant counters that
(1) nothing in the prima facie tort allegation
6
Schaudel’s alleged conduct followed
plaintiff’s termination and the disputes over
unpaid wages. Scordo claims Schaudel, in
retaliation for Scordo’s attempt to protect his
employment rights, explicitly told the
prospective employer not to hire him. In
particular, Scordo alleges: “Following his
termination, Plaintiff sought employment at
other local restaurants as a bartender. After
being offered a comparable position at a
competing restaurant, Defendant Schaudel
telephoned Plaintiff’s prospective employer
and advised them not to hire Plaintiff. As a
direct result of this telephone call, Plaintiff’s
offer of employment was rescinded.”
(Underlying Action Complaint ¶¶ 27–29.)
That alleged conduct is the sole basis of the
prima facie tort claim. (See Underlying
Action Complaint ¶¶ 35–36 (“Defendants,
by calling Plaintiff’s prospective employer
to dissuade them from hiring plaintiff
constitutes the (a) intentional infliction of
harm, (b) resulting in special damages, (c)
without excuse or justification, (4) by an act
or series of acts which are otherwise lawful.
Accordingly, Defendants are liable to
Plaintiff for Prima Facie Tort.”).) Thus, the
Court concludes that the statements to the
prospective employer alleged as the sole
basis for the prima facie tort claim are
“incident to” and have “some causal
relationship” to defendants’ excluded
employment-related practices, such as
evaluations and defamation. In other words,
such alleged conduct arose directly from,
and could not have occurred but for,
Scordo’s employment. Thus, the claim
unambiguously
falls
within
the
Employment-Related Practices Exclusion.
“arises
out
of”
employment-related
practices, because Schaudel called the
employer after terminating Scordo and
“[t]here are no allegations that this telephone
call was in any way connected to Scordo’s
employment”; and (2) the evidence could
ultimately show that the rescinding of
Scordo’s offer of employment was
unexpected, unusual, or unforeseen, and
therefore not intentional on Schaudel’s part.
(Opp’n, at 6–9.) In essence, defendants
argue that plaintiff must wait until discovery
(and, potentially, through trial) before being
absolved, if at all, of its duty to defend. As
set forth below, none of defendants’
arguments has merit.
1.
ERPE
The AmGuard Policies exclude coverage
of “bodily injury” and “personal and
advertising injury” “arising out of” any
refusal to employ, termination, or
employment-related practices such as
defamation. Under New York law, the term
“arising out of” in general liability insurance
contracts is quite broad; courts in New York
generally understand the words “arising out
of” to mean “originating from, incident to,
or having connection with.” Liberty Mut.
Fire Ins. Co. v. E.E. Cruz & Co., Inc., 475 F.
Supp. 2d 400, 409 (S.D.N.Y. 2007) (citing
cases); see also Maroney v. N.Y. Cent. Mut.
Fire Ins. Co., 5 N.Y.3d 467, 472 (2005)
(“As used in a homeowners liability policy’s
automobile exclusion clause, the words
‘arising out of’ have broader significance
and are ordinarily understood to mean
originating from, incident to, or having
connection with. We conclude that, in the
uninsured premises realm, the phrase
‘arising out of’ similarly requires only that
there be some causal relationship between
the injury and the risk for which coverage is
provided.” (internal citations, quotation
marks, and alterations omitted)).
In Berman v. General Accident
Insurance Company of America, 671
N.Y.S.2d 619 (N.Y. Sup. Ct. 1998), the
court reached the exact same conclusion
under closely analogous circumstances. In
particular, the claim at issue in that case
involved alleged comments by an employer
7
communication,
spoken
or
written,
concerning an individual which tends to
expose him to public contempt, ridicule, or
disgrace, or injure him in his profession is
defamatory”; and concluding, among other
things, that defendant carrier had no duty to
defend lawsuit because plaintiff had failed to
state a claim for defamation, which was
harm covered by the policy but subject to
exclusions), aff’d, 849 F.2d 788 (2d Cir.
1988).
about an employee to a client and
defamatory statements made by the
employer at a staff meeting a day after the
employee was discharged. Id. at 622. The
plaintiffs asserted that the employmentrelated practices exclusion did not apply
because (1) the statements did not reflect a
genuine assessment of the employee’s
performance, but rather were an attempt to
disparage; and (2) the statements were made
after the employee had been discharged. Id.
at 622–23. The court rejected both
arguments and held that the exclusion
applied. In particular, the court explained:
In sum, because the claims in the
Underlying Action arise out of Scordo’s
employment and defendants’ employmentrelated practices, the ERPE applies and
AmGuard has no duty to defend.
Irrespective of [the employer’s]
motive for mildly criticizing [the
employee] in statements he made to
the staff and to a patient, those
statements constituted an assessment
of [the employee’s] performance as
an employee of the clinic and an
explanation of why she was
discharged.
As,
such,
these
statements fall squarely within the
policy exclusion for specified
employment-related practices such
as evaluation and defamation.
2.
Intentional Acts
At oral argument, counsel for defendants
conceded that the underlying causes of
action require intentional conduct,8 but
argued that the Intentional Acts Exclusion
does not apply with respect to the prima
facie tort claim because the evidence may
show that Schaudel did not intend to
interfere
with
Scordo’s
prospective
employment, or that the rescission of the
offer was an unexpected, unusual, or
unforeseen consequence.
Id. at 623. In reaching this decision, the
court rejected the argument that the
statements were not employment-related
because they occurred after termination:
The Intentional Acts Exclusion clearly
applies to Scordo’s allegations. In
determining whether the allegations fall
within such an exclusion, the Court must
look at the facts alleged. See, e.g.,
Fitzpatrick, 78 N.Y.2d at 65 (“This Court
has repeatedly held that an insurer’s duty to
defend its insured arises whenever the
allegations in a complaint state a cause of
action that gives rise to the reasonable
possibility of recovery under the policy.”);
Even though the statements were made
after [the employee] was discharged,
they
were
nonetheless
clearly
“employment-related.” The plaintiffs’
argument that the exclusionary language
in the policy must be read as limited to
injuries sustained while the employee is
still
employed
is
“semantically
unreasonable and unacceptable.”
Id. (citation omitted); see also Brooklyn Law
Sch. v. Aetna Cas. & Sur. Co., 661 F. Supp.
445, 452 (E.D.N.Y. 1987) (explaining that,
under
New
York
law,
“[a]ny
8
See Oral Arg. Recording (“COURT: Do any of
them [i.e., the causes of action in the underlying
complaint] not require intent? DEFENDANTS’
COUNSEL: None of which I am aware.”).
8
Brooklyn Law Sch., 849 F.2d at 789 (“A
complaint that the insured has conspired to
commit certain acts necessarily charges
intentional conduct on the part of the
defendant-insured. It is that conduct which
must be examined to determine whether the
plaintiff alleges that the insured intended to
cause damage or that the damage was
unexpected, unusual, and unforeseen.”
(internal citation and quotation marks
omitted)). Thus, an insurer cannot be
required to defend against an action that
otherwise falls under an intentional acts
exclusion simply because discovery might
uncover other causes or a rational jury might
find otherwise. See Willard v. Preferred
Mut. Ins. Co., 662 N.Y.S.2d 342, 343 (N.Y.
App. Div. 1997) (“In determining whether a
policy exclusion applies, the facts alleged in
the complaint, rather than the conclusory
assertions found therein, are controlling.”);
Atl. Mut. Ins. Co. v. Terk Techs. Corp., 763
N.Y.S.2d 56, 64 (N.Y. App. Div. 2003)
(noting that courts have found no duty to
defend in cases involving intentional
conduct even where complaint in underlying
action contained allegations of negligence,
and reasoning that, “notwithstanding the fact
that a violation of the [pleaded statute] can
be unintentional, and that the [underlying]
complaint . . . asserts that [the insured] acted
with ‘reckless disregard,’ we can discern no
justification from the factual allegations set
forth in the complaint . . . to impose a duty
to defend . . . [s]ince all of the factual
allegations of the complaint are premised on
intentional, ‘knowing’ conduct”).
employment-related claims. In fact, Scordo
cannot even establish a prima facie tort
unless he demonstrates that defendants acted
with malice.9 See Wiggins & Kopko, LLP v.
Masson, 983 N.Y.S.2d 665, 667 (N.Y. App.
Div. 2014) (citations omitted).
Scordo only alleges intentional conduct.
He specifically claims that Schaudel called
the prospective employer “to dissuade them
from hiring [Scordo],” which “constitutes . .
. intentional infliction of harm.” (Underlying
Action Complaint ¶ 35.) Nothing in his
complaint suggests that defendants acted in
anything less than an intentional manner
with respect to this call and the other
Accordingly, because the claims in the
Underlying Action clearly involve only
allegations of intentional conduct, the
The Court also is unpersuaded by the
argument that the duty to defend applies
because the consequence of Schaudel’s
action could have been unexpected, unusual
or unforeseen and, thus, unintended. As
plaintiff notes, the alleged injury—the offer
rescission—is one in the same with the
alleged conduct—the call advising the
employer not to hire Scordo. Thus, the
expected injury is inherent in the alleged
intentional act because it is its direct and
natural consequence. See Mary & Alice
Ford Nursing Home Co., Inc. v. Fireman’s
Ins. Co. of Newark, N.J., 446 N.Y.S.2d 599,
601 (N.Y. App. Div. 1982) (finding no duty
to defend wrongful termination suit because
damages alleged in complaint for mental and
emotional injuries as a result of discharge
from employment, because alleged injuries
were direct and natural consequence of
plaintiff’s intentional act, unlike case “where
the insured intentionally injected heroin into
his arm but the overdose and resulting death
were unintentional”). In fact, the Underlying
Action Complaint does not allege that the
rescission was unexpected; rather, it alleges
that the call was made to the prospective
employer specifically “to dissuade them
from hiring plaintiff.” (Underlying Action
Complaint ¶ 35.)
9
Defendants’ counsel conceded this point at oral
argument. See Oral Arg. Recording (“COURT: Prima
facie tort requires intent, require malice. Right?
DEFENDANTS’ COUNSEL: Correct. Yes, Your
Honor.”).
9
Intentional Acts Exclusion squarely applies,
and AmGuard has no duty to defend. See
First Fin. Ins. Co. v. XLNT Recovery
Specialist, Inc., 98 Civ. 5033(DAB)(JCF),
2000 WL 943499, at *4 (S.D.N.Y. July 7,
2000) (finding no duty to defend based on
exclusion for intentional acts because
plaintiffs in underlying case claimed that
defendant’s employees acted with intent to
injure and committed, among other things,
prima facie tort).
IV.
CONCLUSION
For the foregoing reasons, the Court
grants AmGuard’s motion for summary
judgment on its claim for declaration of noncoverage, and denies defendants’ crossmotion for summary judgment. AmGuard
has no duty to defend or indemnify in
connection with the Underlying Action
commenced by Scordo. The Clerk of the
Court shall enter judgment accordingly and
close this case.
SO ORDERED.
_____________________
JOSEPH F. BIANCO
United States District Judge
Dated:
July 3, 2014
Central Islip, NY
***
Plaintiff is represented by Marci Goldstein
Kokalas, Stephen M. Lazare, and Yale
Howard Glazer, of Lazare Potter &
Giacovas LLP, 875 Third Avenue, 28th
Floor, New York, NY 10022. Defendants
are represented by Matthew Francis Putorti
of Anderson Kill P.C., 1251 Avenue of the
Americas, New York, NY 10020.
10
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