Certain Underwriters at Lloyds of London v. Illinois National Insurance Company of the State of Pennsylvania et al

Filing 260

ORDER: Accordingly, defendants' motion for certification pursuant to § 1292(b) is hereby granted. (Signed by Judge Loretta A. Preska on 1/25/2013) (ago)

USDCSDNY

DOCUMENT
ELECfRONICALLY FILED

lWITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

DOC#:
; DAlE FiLED: }:-g.i"\~
, ............._ _ •

--x
CERTAIN UNDERWRITERS AT LLOYDS OF
LONDON
Plaintiff,

I.

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.......

09 Civ. 4418 (LAP)
-~ ..... ~

1

ORDER

-againstILLINOIS NATIONAL INSURANCE
COMPANY ET AL.,
Defendants.
1

x

LORETTA A. PRESKA , Chief United States District Judge:
Defendants Continental Casualty Company ("Continental

ll

and

)

Insurance Company of the State of Pennsylvania ("ICSOplI)
("Defendants

ll
)

have moved for certification for interlocutory

appeal pursuant to 28 U.S.C.

§

1292(b) of both the March 3

2011

1

Opinion denying Defendants motions for summary judgment and
[dkt. No. 181] the November

2012 Order denying Defendants

271

motion for reconsideration of that summary judgment denial
no. 252]

[dkt.

In order for a district court to certify one of

,I

orders for interlocutory appeal

1

s

the party seeking certification

must show that the order it seeks to appeal "involves a
controlling question of law as to which there is substantial
ground for difference of opinion and that an immediate appeal
. . . may materially advance the ultimate termination of the
litigation.

II

28 U.S.C.

§

1292 (b) i see

e . . , Dicola v. American

Defendants' request was made via letters, and plaintiffs
responded also via letter, Those letters are attached.

1

Steamship Owners Mutual Protection and Indemnity Ass’n (In re
Prudential Lines, Inc.), 59 F.3d 327, 332 (1995); Klinghoffer v.
S.N.C. Achille Lauro Ed Altri–Gestione Motonave Achille Lauro in
Amministrazione Straordinaria, 921 F.2d 21, 23–25 (2d Cir.
1990).

Only “exceptional circumstances [will] justify a

departure from the basic policy of postponing appellate review
until after the entry of a final judgment.”

Klinghoffer, 921

F.2d at 25 (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463,
475 (1978)); see also In re Prudential Lines, Inc., 59 F.3d at
332 (quoting Coopers & Lybrand); In re Del–Val Fin. Corp. Sec.
Litig., 874 F. Supp. 81, 83 (S.D.N.Y. 1995) (stating that
interlocutory appeal process “should be used sparingly”); McNeil
v. Aguilos, 820 F. Supp. 77, 78 (S.D.N.Y. 1993) (citing
Klinghoffer).
First, a question is a “controlling question of law” where
“reversal of the district court’s order would terminate the
action.”

Klinghoffer, 921 F.2d at 24.

The defendants argue

that the issue sought to be certified—whether the insurance
policy at issue should be analyzed under New York law as opposed
to New Jersey law—is controlling.

This issue indeed presents a

controlling question in this case because if the Court of
Appeals were to rule in Defendants’ favor, and New York law
indeed applies, the Defendants will have no duty to provide
coverage under the Norbet policy.

2

Second, there must be substantial ground for difference of
opinion on the issue for which certification is sought.
Substantial ground for difference of opinion may arise where an
issue is difficult and of first impression.

E.g., Klinghoffer,

921 F.2d at 25; In re Del–Val Fin. Corp. Sec. Litig., 874 F.
Supp. at 83.

However, “the order appealed from must concern

something more than a novel and interesting issue about which
there may be substantial disagreement.”
Corp. Sec. Litig., 874 F. Supp. at 83.

In re Del–Val Fin.
Although I am confident

of the ruling on these facts, I find that there is a substantial
ground for difference of opinion of the interpretation of the
decision in Worth Construction Co. v. Admiral Insurance Co., 836
N.Y.S.2d 155 (1st Dep’t 2007), as it relates to the choice-oflaw analysis in this case.
Finally, I find that immediate appeal will materially
advance the ultimate termination of this litigation.

If the

Court of Appeals finds that I have misconstrued the applicable
controlling question of law and that Defendants have no
obligation to provide coverage under the Norbet policy, the
issue of liability will have been resolved and no further
litigation on that issue will be required.

Plaintiffs would not

be entitled to argue the extent of Defendants’ liability, and
the great deal of time and expense of discovery and a trial
would be avoided.

3

Accordingly, defendants' motion for certification pursuant
to

§

1292(b) is hereby granted.

SO ORDERED.
Dated:

New York, New York
January ~, 2013

~a~

LORETTA A. PRESKA
Chief U.S. District Judge

4

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908 848 6310

Carroll McNulty & Kull

CM<CARROLLMCNULTYKUlL LLC

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January 2, 2013
VIA FACSIMILE [phone]
Honorable Loretta A. Preska, ChiefU.S.D.J.
United States District Court
Southern District of New York
United States Courthouse
500 Pearl Street
New York, New York 10007-1312

Re:

Certain Undenvriters at Lloyds of London v. Illinois Nat'l. Ins. Co. et al.
Civil Action No.: 09-ev-04418

Dear Judge Preska:
This finn represents Defendant Continental Casualty Company ("Continental") in
connection with this matter. Pursuant to Your Honor's Individual Practices, Continental submits
this letter to request a pre-motion conference. In particular, ContiI!J.ental requests that it be
permitted to file a Motion to Direct Entry of Judgment Pursuant to Rule 54(b) or, in the
Alternative, for Certification of the March 3, 2011 and November 27, 2012 Orders for
Interlocutory Appeal Pursuant to 28 U.S.C. § 1292(b), and for a Stay of Remaining Claims
Pending Appeal.
As this Court is aware, Plaintiff Certain Underwriters at Lloyds of London ("Lloyds")
commenced this declaratory judgment action seeking a ruling that each of the defendant
insurance companies had an obligation to provide coverage for the liability of DCM Erectors
("DCM"), Component Assembly Systems ("CAS"), Goldman Sachs, Battery Park City
Authority and Tishman in connection with the personal injury claims of Robert Woo and Wilbert
Rocco. The underlying claims arose from an accident occurring when metal studs fell from a
crane at a construction site.
Each of the defendants moved for summary judgment on the issue of whether its
respective insurance policy provided coverage for the Woo and Rocco claims. By Order and
Opinion dated March 3, 2011, the Honorable Richard Holwell concluded that New York law
applied to the policies issued by Hartford, Travelers and Arch but that New Jersey law applied to
the primary trucking policy issued by Insurance Company of the State of Pennsylvania
("ICSOP") and the umbrella policy issued by Continental. ICSOP and Continental had asserted
that New York law applied to their policies under the "center of gravity" test and cited to the
Appellate Division's decision in a directly analogous case of Worth Construction Co. v. Admiral
Insurance CQ.,40 A.D. 423. 836 N.Y.S.2d 155 (1st Dep't 2007). In Worth, the court applied New
York law to an additional insured coverage dispute arising from construction site accident occurring

01/0212013 10:30 FAX

908 848 6310

Carroll McNulty & Kull

I4l 000310004

eM< CARROLLMCNULTYKULL LAW
LlC
OOUNSELLORS AT
Honorable Loretta A. Preska

January 2, 2013

Page 2 of3

in New York, despite the policy being issued to the named insured in New Jersey. Judge Holwell
sought to distinguish Worth on the basis that the policy at issue there "contained a special
endorsement insuring the company against liability inc[UTed at the White Plains site where the
loss at issue occurred." (Doc. 181 at 6.) As discussedtbelow, this purported factual distinction
i
was incorrect.
Pursuant to the Court's ruling, choice of law iSS· outcome-determinative issue. Under
New York law, the Court concluded that Goldman Sa hs, Tishman, DCM and CAS were not
"using" a covered auto so as trigger coverage under e policies and, in any event, that the
mechanical device exclusion would preclude coverage. i Conversely, under New Jersey law, the
Court concluded that DCM (but not CAS, Tishman or Goldman Sachs) was "using" a covered
auto so as to trigger coverage and that the mechanical d~vice exclusion was unenforceable under
the New Jersey compulsory motor vehicle statute. Accordingly, the Court concluded that
Hartford, Travelers and Arch had no duty to provide coverage but that ICSOP and Continental
did have such an obligation. The Court granted partial summary judgment to Lloyds with
respect to the ICSOP and Continental policies issued to Norbet Trucking.
On March 17, 2011, Continental filed a Motion for Reconsideration of the Court's
summary judgment ruling, which ICSOP joined. Judge Holwell heard oral argument on May 11,
2011, during which time Continental advised the Court that the Worth case did not involve a
site-specific endorsement limiting coverage to New York. Judge Holwell requested supplemental
submissions on the choice of law issue. That same day, Continental filed a copy of the insurance
policy and briefing at issue in the Worth case reflecting the lack of a New York site-specific
endorsement. On ~ovember 27, 2012, this Court entered an Order denying Continental's
Motion for Reconsideration.
Continental now requests that it be permitted to file a motion to certify a final judgment
with respect to Lloyds' claim for coverage under the Continental umbrella policy so as to allow
for an immediate appeal of the coverage issue and the c~oice of law determination that underlies
it. The Court has the discretion to direct entry of a parti<U fmal judgment that disposes of claims
against fewer than all of the parties. See. e.g., Avondale Indus .. Inc. v. Travelers Indem. Co.,
123 F.R.D. 80, 82 (S.D.N.Y. 1988). Entry of a final judgment is appropriate where the claim is
"separable from the claims that survive" and there is "no)ust reason for delay." Id.; FED. R. Cry.
P. 54(b). In addition, a motion under Rule 54(b) should: be granted where it serves the interests
of "sound judicial administration and efficiency" and where failure to enter a judgment "would
likely result in the unnecessary trial" of issues that maYLbe mooted by an appellate ruling. See
U.S. Fid. & Quar. Co. v. Frosty Bites. Inc., 350 F. SUPp.lld 508,514 (S.D.N.Y. 2004).
Here, the interests of judicial efficiency would be served by entering a partial final
judgment against Continental under the Norbet policy. ,There is no just reason for delay of an
appeal of the coverage/choice of law issue. Although all of the defendants remain parties to the

01/0212013 10:30 FAX

908 848 6310

Carroll McNJlty & Kull

@ 0004/0004

eM< CARROLLMCNULTYKULL LAW
LLC
COUNSELLORS AT
Honorable Loretta A. Preska

January 2, 2013

Page 3 of3

lawsuit, the only issues left for detennination under the current posture of the case involve
LIoyds, ICSOP and ContinentaL In particular, there will need to be a detennination of the extent
of liability potentially covered under the ICSOP and Continental policies, which will require
discovery and a trial, as well as the priority of coverage among the implicated carriers.
Since Lloyds settled the underlying claims under its project-specific "wrap-up" policy on
behalf of Battery Park City Authority, Goldman Sachs, Tishman, DCM, CAS and two other
entities involved in the project, but the Court concluded that only DCM was "using" an auto
covered by the ICSOP and Continental policies, there must be an allocation of liability
attributable to DCM. Continental can have no obligation to provide coverage for an entity that
does not qualify as an insured under its policy. Since the issue of liability among the various
parties was not resolved in the underlying lawsuits, LIoyds, ICSOP and Continental will have to
litigate those issues by way of the current coverage action. This Court also will have to make a
detennination of the priority of coverage among the LIoyds, ICSOP and Continental policies.
Thus, if Continental is not pennitted to appeal the coverage detennination at this time, the
parties will have to engage in costly discovery and a trial to detennine the scope of coverage
available under Continental policy, which would not be necessary in the event Continental is
successful on appeal. This would be an inefficient use of judicial and litigant resources. By
contrast, an immediate appeal from the summary judgment ruling "would require little new
briefing and would be more cost-effective for all parties." See id. Continental and Lloyds both
have submitted extensive briefing in connection with the summary judgment and reconsideration
motions, which will fonn the basis of the appeal. The appellate issues are completely separable
and distinct from those remaining to be litigated. To the extent the United States Court of
Appeals for the Second Circuit reverses the Court's finding that a coverage obligation exists
under the Continental policy, there will be no need to delve into issues of allocation of liability
among Battery City Park Authority, Goldman Sachs, Tishman, DCM and CAS or the priority of
insurance among Lloyds, ICSOP and Continental.
Accordingly, Continental respectfully requests that it be pennitted to file a Motion to
Direct Entry of Judgment Pursuant to Rule 54(b) or, in the Alternative, for Certification of this
Court's March 3, 2011 and November 26, 2012 Orders for Interlocutory Appeal Pursuant to 28
U.S.C. § 1292(b), and for a Stay of Remaining Claims Pending Appeal.
Respectfully submitted,
CARROLL, McNULTY & KULL LLC

C-CChristopher R. Carroll
cc:

All Counsel (via e-mail)

To:

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Fax: [phone]

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LIPS11JS -BENFfATh1
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LLP

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Kew Gardens, NY 11415
212.981.8 440
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Email: [e-mail]

January 8, 2013

VIA FACSIMILE (212--805-7941)
The Honorable Loretta A. Preska
United States District Court
Southern District of New York
500 Pearl Street, Room
New York, NY 10007
Re:

Certain Undenvriters et aI. v. nlinois National Insurance Co. et aI.
Southern District Docket No. 09 Ov 4418 (RJH)

Dear Judge Preska:

Pursuant to Her Honor's Individual Rules of Practice , the Plaintiffs, Certain Underwriters at

Lloyds of London, Aspen Insurance UK Ltd, and Arch Insurance Company (Europe) Ltd

("Underwriters"), through their attorneys, submit their response to defendant Continental

Casualty Company's ("Continental") request for the a pre-trial conference to permit it to move to

direct entry ofjudgment pursuant to Rule 54(b) ofthe Federal Rules of Civil Procedure or for an

order permitting an interlocutory appeal pursuant to 28 USC § 1292(b). It is respectfully

submitted that Continental is not entitled to the relief requested.

28 USC § 1292(b):

The Supreme Court has stated that rnly "exceptional circumstances justify a departure from the

basic policy of postponing appellate review until after the entry of a final judgment." Coopers &

Lybrand v. Livesqy, 437 US. 463,475, 57 L. Ed. 2d 351, 98 S. Ct. 2454 (1978). This court has

addressed, on numerous occasions, the issue of interlocutory appeal pursuant to 28 USC §

1292(b). In Stemcor UK LTD. v. Sesa Int'! LTD., 2009 US. Dist. LEXIS 63588, (S.D.N.Y.) this

court addressed the standard to be applied in determining whether to permit an interlocutory

appeal:

Under Section 1292(b), a district court may certify an immediate appeal of an
interlocutory order if the order (1) involves a controlling question of law (2) as to which
there is substantial ground for difference of opinion and (3) an immediate appeal from the
order may materially advance the ultimate termination of the litigation. 28 US.C. §
1292(b).... The Second Circuit has held that "use of this certification procedure should
be strictly limited because only exceptional circumstances [will] justify a departure from

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Page:> of 5 118f20136:23

the basic policy of postponing appellate review until after the entry of a final judgment."
In addition, the party seeking an interlocutory appeal has the burden of showing the
existence of the exceptional circumstances that justify immediate appeal.
Continental has failed to meet its burden. The issue between Underwriters and Continental (and
the Insurance Co. ofthe State Of Pennsylvania 1 ("ICSOP")) is an issue as to the interpretation of
two insurance policy contracts; the Continental policy and the ICSOP policy. Continental
challenges the interpretation ofthe contract and the law applied to the interpretation of the
contract. This court found that the policies may be interpreted differently under New York law
than New Jersey law. Continental asserts that the controlling issue of lawis the choice of law and
its application to the policies. This court in its decision cited numerous deJcisions including the
decisions of the Court of Appeals in In re Allstate Ins. Co., 81 N.Y.2d219, 223,613 N.E.2d 936,
597 NY.S.2d 904 (1993), the Second Circuit inMd Cas. Co. v. Cont'l Cas. Co., 332 F.3d 145,
153 (2d Cir. 2003), as well as numerous other decisions in support of application ofNew Jersey
law. Continental challenged the court's interpretation of one decision, W<prth Constr. Co. Inc. v.
Admiral Ins. Co., 40 AD.3d 423 (1 st Dep't 2007), which was distinguish~ by this court and did
not involve a motor vehicle policy, the type of policy at issue in this actio* and analyzed in
Allstate. Continental cannot show there is any substantial ground for difference ofopinion other
than its difference of opinion with this court's interpretation of Worth, a ~cision that did not
even address an automobile liability poJicy. In fact the principal applied by this court in a choice
of law analysis, that, in grouping of contacts the jurisdiction with the most significant contacts is
the location ofthe insured risk, here New Jersey, has been applied consistently subsequent to
Allstate and subsequent to this court's decsion, see, Matter ofLiquidation of}.l1dlandins. Co., 16
NY.3d 536, 544 (2011); FC Bruckner Assoc., L.P. v Fireman's Fundins. Co., 95 AD.3d 556
(1st Dep't 2012); Tudor Ins. Co. v. First Advantage Litig. Consulting, LLC, 2012 US. Dist.
LEXIS 120178 (S.D.N.Y.); Avrio GroupSulVeillance Solutions, Inc. v. Essex Ins. Co., 790 F.
Supp. 2d 89 (W.D.NY. 2011); Feldman Law GroupP.C v. LibertyMut. Ins. Co., 819 F. Supp.
2d 247, 256 (S.D.N.Y. 2011). There is no controlling issue oflaw. Even if there was a
controlling issue, there is no substantial ground for difference of opinion.
Even if Continental had met the first two of the Stemcor three prong test, Continental fails to
meet the third prong. As this court noted in Stemcor, "the party seeking an interlocutory appeal
has the burden of showing the existence of the exceptional circumstances." If the matter involves
an interpretation of a contract, or involves a unique set of facts then the exceptional
I
circumstances are not met. Aryai v. Foifeiture Support Assocs., LLC., 20 q US. Dist. LEXIS
125227, (S.D.N.Y.). In re lvfIV Rickmers Genoa Litig., 2011 US. Dist. LEXIS 154420,9-11
(S.D.N.Y.). Here, the legal issues involve an interpretation of a contract and involve the unique
factual questions of this case; the application of a policy of insurance to a tehicle registered in
New Jersey o\Wed by a company domiciled in New Jersey insured under ~ New Jersey policy of
insurance with the accident taking placing in New York. Continental has fi·iled to meet the
burden of showing exceptional circumstances.
.

Rule 54(b):
Continental, as an alternate remedy to interlocutory appeal, would like to move for a fmal
judgment as to part of Underwriters claim. Rule 54(b) provides:
1

ICSOP has not requested similar relief, grounds alone to deny Continental the relief sought.
,

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Page 4 of 5 118/20136:23

When an action presents more than one claim for relief-whether as a claim, counterclaim,
crossclaim, or third-party claim-or when multiple parties are involved, the court may
direct entry of a final judgment as to one or more, but fewer than all, claims or parties
only ifthe court expressly determines that there is no just reason for delay.
This court has already ruled that the Continental and ICSOP policies provide coverage for the
accident. Underwriters have asserted their policy, as well, provides coverage.· What remains in
this action is the allocation between the three policies of insurance. It is Underwriters' position
that there are no factual issues which must be decided to determine the allocatlon between
policies. It appears that Continental believes that there is a need for a hearing to allocate
liability. In any event this court cannot direct judgment as to Underwriters' cltum as the amount
is yet to be determined. It was held in Cinerama, Inc. v. Sweet Music, S. A" 4~ F.2d 66, 69 (2d
Cir. 1973) that there cannot be a final judgment pursuant to Rule 54(b) where the court "had not
yet fixed the damages sought by the prevailing ones, even though the computation would now
seem to be comparatively simple, ifnot ministerial in nature." Accord, City iew York v.
MilhelmAttea & Bros., 2012 U.S. Dist. LEXIS 149512 (E.D.N.Y.). Here the is far more than
a ministerial calculation. The court must analyze the terms of the three polici s (see
Underwriters' pre-motion letter dated January 7,2013). Continental has even asserted that a full
trial is needed prior to the entry ofjudgment in sum certain.
Even if the entry of a final judgment in the absence of a sum certain was permissible, Rule 54(b)
is not applicable as Continental cannot meet the burdens imposed by Rule 54. Like 28 USC §
1292 ,judgment under Rule 54(b) is an exceptional remedy to be used sparingly. The Second
Circuit frowns upon such judgments. As the court noted in Novick v. AXA Network, lLC,642
F.3d 304,310 (2d Cir. N.Y. 2011), "[t]he policy against piecemeal appeals 'requires thatthe
court's power to enter such a final judgment before the entire case is concluded, thereby
permitting an aggrieved party to take an immediate appeal, be exercised sparingly.'" Further, the
Second Circuit has held that the power "should be used only in the infrequent harsh case" where
there exists "some danger of hardship or injustice through delay which would be alleviated by
immediate appeal." L.B. Foster Co. v. America Piles, Inc., 138 F.3d 81,86 (2d Cir. N.Y. 1998).
Continental cannot show any hardship or danger in not permitting this, matter to go final
judgment and cannot bear the burden necessary for the granting ofthe motion.
Finally, "it is incumbent upon a party seeking immediate relief in the form of ~ Rule 54(b)
judgment to show not only that the issues are sufficiently separable to avoid judicial inefficiency
but also that the equities favor entry of such a judgment." Novick In the instant matter the claims
of ICSOP, which has not requested judgment under 54(b), or the right to interl?cutory appeal,
potentially will be in front ofthe court of appeals causing two panels to hear, apd familiarize
themselves with the same issues, grounds alone to deny Continental's motion. fJarriscom
SvenskaAB v. Harris Corp., 947 F.2d 627, 629 (2d Cir. 1991).
For the reason stated herein, it is respectfully submitted that Continental' s mo~on, if made,
should be denied.
!

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Respectfully submitted,
UPSIUS-BENHAIM LAW, LLP

Ira S. Lipsius
cc:

VIA FACSIMILE

Anthony J. Zarillo, Jr., Esq.
Christopher R. Carroll, Esq.
Nicholas P. Calabria, Esq.
Andrew M. Premisler, Esq.
Richard P. Byrne, Esq.
John P. DeFilippis, Esq.
Dominic M. Pisani, Esq.

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