Bits & Pieces

Harco National Insurance Co. v. Arch Specialty Insurance Co.


United States District Court,S.D. New York.



ARCH SPECIALTY INSURANCE COMPANY, Axis Specialty Insurance Company, and Zurich North American Insurance Company, Defendants.


April 9, 2008.


Amended Memorandum & Order


SAND, District Judge.

Before the Court is a motion by the plaintiff, Harco National Insurance Company (“Harco”), seeking reconsideration of the Court’s January 24th Memorandum and Order, see Harco Nat’l Ins. Co. v. Arch Specialty Ins. Co., 2008 U.S. Dist. LEXIS 7373 (D.N.Y.2008) (hereafter the “Opinion”), brought pursuant to Local Rule 6.3. In our Opinion, the Court denied Harco’s motion for summary judgment.


Plaintiff’s motion for reconsideration was granted by this Court in an Order dated February 25, 2008, and this Court’s prior opinion was withdrawn. See Harco Nat’l Ins. Co. v. Arch Specialty Ins. Co., 06 Civ. 2928, 2008 U.S. Dist. LEXIS 16526 (S.D.N.Y. Feb. 25, 2008). This Amended Memorandum and Order constitutes this Court’s determinations on the parties’ motions for summary judgment.




“Motions for reargument and reconsideration pursuant to Local Rule 6.3 are governed by the same standards governing motions pursuant to Rule 59(e) of the Federal Rules of Civil Procedure.”Burda Media, Inc. v. Blumenberg, 97 Civ. 7167, 1999 U.S. Dist. LEXIS 17336,(S.D.N.Y. Nov. 8, 1999) (citing Candelaria v. Coughlin, 155 F.R.D. 486, 491see also Range Road Music. Inc., v. Music Sales Corp., 90 F.Supp.2d 390, 391 (S.D.N.Y.2000) (“The standards governing motions for reconsideration or reargument are set forth in Local Civil Rule 6.3 and Rule 59(e) of the Federal Rules of Civil Procedure.”). A motion for reconsideration “allows a party to direct the court to an argument the party has previously raised but the court has overlooked.”Perez v. N.Y. Presbyterian Hosp., 05 Civ. 5749, 2006 U.S. Dist. LEXIS 27318,(S.D.N.Y. April 14, 2006).


Harco has correctly pointed out that this Court’s prior opinion failed to note that its umbrella policy was not subject to the primary insurance requirements of New York’s Vehicle and Traffic Law § 345, and thus its motion for reconsideration is granted. For the sake of clarity, this Amended Memorandum will reconsider the entirety of the parties’ summary judgment motions.




This insurance coverage action arises out of an underlying personal injury action, in which Mary Brace sustained serious injuries on October 16, 2004, after her car was struck by a tractor-trailer. The tractor portion of the tractor-trailer was leased by DeCaroiis Truck Rental, Inc. (“DeCaroiis”) to JM Trucking and Excavating (“JM”). The trailer was leased by William Scotsman d/b/a ATCO Trailer Rental (“ATCO”) to JM. At the time of the accident, the tractor-trailer was being driven by David W. Boyle, an employee of JM.


DeCarolis is a corporation engaged in the business of leasing and renting commercial vehicles.


Mary Brace and her husband, Steven Brace, subsequently filed suit against JM, ATCO, and DeCaroiis. The Brace action was settled at mediation by the various insurers for JM, ATCO, and DeCaroiis for $11 million.


JM had only $1 million in auto liability coverage, issued by National Casualty Company (“National”). National contributed its $1 million policy limits to the settlement, but did not reserve its right to litigate the priority of coverage issues. The insurers for DeCaroiis and ATCO also contributed to the settlement while reserving their rights to litigate the priority of coverage issues. The insurers agreed that any insurer found entitled to recover would also receive nine percent interest from the date of settlement.


Zurich, which issued a $2 million Business Auto Policy to ATCO, contributed its $2 million policy limits to the settlement. Harco, which issued both a $1 million Business Auto Policy (“Harco Primary Policy”) and a $10 million Commercial Umbrella Policy (“Harco Umbrella Policy”) to DeCaroiis, contributed $4 million to the settlement. Axis Specialty Insurance Company (“Axis”), which issued a $5 million Umbrella Liability Policy to ATCO, contributed $4 million to the settlement. Arch Specialty Insurance Company (“Arch”), which provided $15 million in Commercial Excess coverage above the Axis policy, did not contribute.


Harco then filed this action, seeking a declaration regarding priority of coverage between the various policies. Specifically, Harco seeks a declaration that it is entitled to indemnification from Axis and Arch for the $4 million it paid towards the underlying settlement.


The Harco Policies


Harco issued Business Auto insurance policy number LR-0005279-03 to DeCarolis effective August 1, 2004, through August 1, 2005 (“Harco Primary Policy”) and Commercial Umbrella policy number BU-0005279 03 to DeCarolis effective August 1, 2004, through August 1, 2005 (“Harco Umbrella Policy”).


1. Harco Primary Policy


The Harco Primary Policy provided coverage in the Business Auto Coverage Form as follows:




A. Coverage


We will pay all sums as “insured” legally must pay as damages because of “bodily injury” or “property damage” to which this insurance applies, caused by an “accident” and resulting from the ownership, maintenance or use of a covered “auto”.


* * *


The following are “insureds”:


a. You for any covered “auto”.


b. Anyone else while using with your permission a covered “auto” you own, hire or borrow …


c. Anyone liable for the conduct of an “insured” described above but only to the extent of that liability


Section I identifies “covered auto” as follows:




Item Two of the Declarations shows the “autos” that are covered autos for each of your coverages. The following numerical symbols describe the “autos” that may be covered “autos”. The symbols entered next to a coverage on the Declarations designate the only “autos” that are covered “autos”.


* * *


7. Specifically Described “Autos”


Only those “autos” described in Item Three of the Declarations for which a premium charge is shown (and for Liability Coverage any “trailers” you don’t own while attached to any power unit described in Item Three).


The Schedule identifies the covered autos as “LEASE AND RENTAL UNITS PER SCHEDULE ON FILE WITH THE COMPANY.”


The Harco Primary Policy required DeCarolis to report to Harco which of six categories for insurance coverage each of its vehicles fell into for each month, in order to ascertain the correct level of coverage required.Its insurance premiums depended partially on whether its customers provided liability coverage or DeCarolis provided liability coverage for the vehicles. Harco and DeCarolis agreed that DeCarolis would pay premium based on the gross rental receipts of each category, subject to Harco’s right to audit the lease agreements and invoices, rather than detailing the information for each vehicle.


The categories were as follows: Primary Liability, Primary Physical Damage, Contingent Liability, Contingent Physical Damage, Not Rented, and No Insurance.


Harco’s primary policy also contained a section titled “New York Lease or Rental Concerns-Contingent Coverage” (“Contingent Coverage Endorsement”). It provided:




A. LIABILITY INSURANCE and any required No-fault, Uninsured Motorist and Supplementary Uninsured Motorist insurance provided by the policy for a covered “auto” which is a “leased auto” or “rented auto” applies subject to the following provisions:


1. At the time of an accident the insurance or indemnity as required in the “lease or rental agreement” is not collectible.


2. For you, your employees or agents, the limit of insurance provided by this endorsement is the lesser of:


a. The limits required by the “lease of rental agreement”; or


b. The limit shown on the Declarations Page.


3. For the lessee or rentee, any employee or agent of the lessee or rentee any employee or agent of the rentee or lessee or any person, except you or your employees or agents, operating the leased or rented auto with the permission of any of these, the limit of insurance provided by this endorsement is the minimum limit required by any applicable compulsory or financial responsibility law. This endorsement does not apply to the limit or limits specified by any law governing Motor Carriers of passengers or property.


2. The Harco Umbrella Policy


Relevant portions of the Harco Umbrella Policy are:




A. Insuring Agreement


We will pay on behalf of the “insured” the “ultimate net loss” in excess of the applicable underlying limit which the insured becomes legally obligated to pay as damages because of “bodily injury”, “property damage”, “personal injury”, or “advertising injury” to which this insurance applies when caused by an “occurrence” or “offense” anywhere in the world, provided suit is brought in the United States or Canada. However, we have no duty to defend any “suit” not covered by this coverage part.


B. Exclusions


17. Any “covered auto” while leased or rented to others. But this exclusion does not apply to:


a. A “covered auto” you rent to one of your customers while their “covered auto” is left with you for service or repair;


b. “Bodily injury” or “property damage” arising out of the work you performed or defective products; or


c. “Bodily injury” or “property damage” caused by an “occurrence” resulting from the ownership of a “covered auto”.




A. If you are designated in the Declarations as:


1. An individual, you and your spouse are “insureds”, but only with respect to the conduct of a business of which you are the sole owner.


2. A partnership or joint venture, you are an “insured”. Your members, your partners and their spouses are also “insureds”, but only with respect to the conduct of your business.


3. An organization other than a partnership or joint venture, you are an “insured”.


B. Each of the following is also an “insured”:


1. As respects the “covered auto”;


a. Anyone using an “auto” you [DeCarolis] own, hire or borrow including any person or organization legally responsible for such use provided it is with your [DeCarolis’] permission;


* * *


None of the following is an insured under a … above:


(3) Any person or entity to whom an automobile has been leased or rented; and


(4) Any person or entity other than the named insured who is operating, maintaining, using, loading or unloading an automobile which has been leased or rented from “you.”


Section V.H of the Harco Umbrella Policy defines “covered autos” “as described in the applicable underlying insurance [the Harco Primary Policy].”


The Zurich Policy


Zurich issued Business Auto insurance policy number BAP 2983563-03 to ATCO with coverage effective April 1, 2004, through April 1, 2005. Zurich’s policy has a policy limit of $2 million. The Zurich policy identified “covered autos” as “any auto.”


The Axis Policy


The Axis policy provides $5 million in liability coverage to ATCO as follows:


I. Insuring Agreement


1. We will pay on behalf of the insured those sums in excess of the “retained limit” which the insured becomes legally obligated to pay as damages to which this insurance applies because of “bodily injury”, “property damage” or “personal and advertising injury”…


Section IV identifies an insured as follows:




1. If you are designated in the Declarations as:


* * *


d. An organization other than a partnership, joint venture or limited liability company, you are an insured …


* * *


2. Any person or organization not included in 1.a through 1.e above and included in the “underlying insurance” as an insured is also an insured, but this insurance is limited to the same coverage provided by the “underlying insurance.”


The “underlying insurance” is identified in the policy as the Zurich policy and the “retained limit” is identified as the $2 million limit of the Zurich policy.


The Arch Policy


Arch issued a $15 million insurance policy to Atco. It provides coverage as follows:




a. This is excess insurance and only applies to those coverages for which underlying insurance is shown in Item 3. of the Declarations of this policy.


b. We will pay on behalf of the insured those amounts of loss exceeding the limits of liability of all underlying insurance as stated in Item 3. of the Declarations.


c. Except as otherwise provided by this policy, the coverage follows the definitions, terms, conditions, limitations and exclusions of the controlling underyling insurance in effect at the inception of this policy.


The Arch policy defines insured as follows:




d. insured means


1. you; and


2. any person or organization qualifying as an insured under controlling underlying insurance, but only to the extent that


a. coverage is provided by this policy; and


b. coverage is provided by the controlling underlying insurance, or would have been provided but for the exhaustion of the policy’s limits of insurance.


The policy identifies “underlying insurance” and “controlling underlying insurance” as the Axis policy.




In analyzing the choice of law question in a diversity case, a federal court applies the law of the forum state, including that state’s choice of law.Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477(1941). Here, Harco’s policies were issued to a New York insured doing business in New York covering vehicles garaged, registered and leased in New York. New York law applies to the Harco policy. Atco’s principal place of business is in Maryland and the policies issued to Atco, as evidenced by the multi-jurisdictional endorsements, cover vehicles operating in a vast number of states.


There appears to be no dispute to the proposition, set forth by Harco, that both Maryland and New York Courts interpret insurance policies in the same manner. Under New York law, “[u]nambiguous provisions of an insurance contract, as with any written contract, must be given their plain and ordinary meaning and the interpretation of such provisions is a question of law for the court .”Mazzuoccolo v. Cinelli, 245 A.D.2d 245, 666 N.Y.S.2d 621, 622-23 (1st Dept.1997) (internal citations omitted); see Uniroyal, Inc. v. Home Ins. Co., 707 F-Supp. 1368, 1374 (E.D.N.Y.1988) (“[i]f the policy is unambiguous, its interpretation is strictly a question of law for the court”). Extrinsic evidence may be considered to ascertain the intent of the parties only in the event that the contract’s language is ambiguous. See Andy Warhol Found. for Visual Arts, Inc. v. Federal Ins. Co., 189 F.3d 208, 215 (2nd Cir.1999). If the Court is unable to resolve the ambiguity through extrinsic evidence, the ambiguity is to be construed against the insurer. Id.




The first question that arises is whether Harco’s primary insurance policy provides coverage for the Brace settlement, or whether it is absolved of liability through its ‘contingent coverage exception.’ Harco argues that, on the rental agreement between Harco and JM, JM initialed in the space entitled “BI & PD TO BE PROVIDED BY CUSTOMER,” signifying that JM was to provide primary insurance for the truck. The Contingent Coverage Exception “applies when the ‘lease or rental agreement’ in effect at the time of an ‘accident’ specifies that the lessee or rentee is responsible for providing primary liability insurance or primary physical damage insurance.”(Harco Br. at 18).


“BD & PI” stands for “Bodily Injury and Property Damage” coverage, as defined in the contract. (Harco Br. at 3.)


Arch argues that the contingent coverage exception does not apply because the entire rental agreement expired on May 27, 2004, six months before the date of the Brace accident. The rental agreement terminated on that date “unless the Truck Rental Agreement is extended.”(Arch Opp. Br. at 9). Harco argues that the terms of the lease contemplated extension, and that the lease was, in fact, extended because DeCarilis kept the vehicle after the lease ended, and continued to pay invoices without contesting them. (Harco Reply Br. at 4-5). Harco points to testimony noting that the DeCarolis’s practice was to extend leases by simply allowing the customer to keep the vehicle and continuing to send bills for its lease, as occurred here. (Harco Reply Br. at 4).


New York law permits a Court to find that a lease was extended by the conduct of the parties after a contract expires. “Where, after the expiration of a contract fixing the reciprocal rights and obligations of the parties, they continue to do business together, the conduct of the parties may at times permit, or even constrain, a finding that the parties impliedly agree that their rights and obligations in connection with such business should continue to be measured as provided in the old contract.”Town of Webster v. Village of Webster, 280 A.D.2d 931, 934 (N.Y.App.Div.2001).


Where the parties continue to do business after the expiration of a contract as though the same contract terms apply, New York Courts will construe their actions as extending the terms of the original contract. “[I]t is well settled in New York that ‘when an agreement expires by its terms, if, without more, the parties continue to perform as theretofore, an implication arises that they have mutually assented to a new contract containing the same provisions as the old.’ “ North Am. Hyperbaric Ctr. v. City of New York, 198 A.D.2d 148, 149 (N.Y.App.Div.1993) (citing Martin v. Campanaro, 156 F.2d 127, 129 (2d Cir.1946)). DeCarolis continued to issue JM the same invoices as though the contract was still in effect, and JM paid them and operated as though the contract had been extended. Thus, this Court will infer from the parties’ actions that the lease was extended according to the terms of the original agreement, including the contingent coverage exception.The contingent coverage endorsement provides that the Harco primary Policy would only provide coverage if the renter’s primary insurance is not collectible. That did not occur in this case, as the primary policy provided by National Casualty was collected. Thus, the Harco primary policy will not provide coverage here.


Arch argues that, by the terms of the contract, any extension of the rental agreement would need to be in writing. New York cases clearly state that a court may consider a contract extended based on the actions of the parties, thus, this argument fails.




This Court must next consider whether the Harco umbrella policy provides coverage in this dispute. In order to do so, several issues of contract interpretation must be addressed. The parties dispute whether the tractor-trailer is a “covered auto” under Harco’s umbrella policy, and whether David Boyle, the driver at the time of the accident, qualifies as an “insured.”


Harco contends that its policy does not cover Boyle because “[w]hen more than one policy is applicable to a loss, but only one of them covers the ultimately liable party, that policy provides primary coverage.”Allianz Insurance Company v. Otero, 353 F.Supp.2d 415 (S.D.N.Y.2004). Harco argues that because Zurich, Axis and Arch all insured Boyle, the tortfeasor, their insurance coverage therefore precedes the coverage of Harco.


Arch argues, in contrast, that it is irrelevant whether Boyle and JM are active tortfeasors “because under the Harco policies’ ‘other insurance’ clauses, the Harco policies respond first to the Brace settlement.”(Arch Opp. Br. at 6). Arch argues that the tractor-trailer that Boyle was driving was a “covered auto” under Harco’s primary policy, and that Boyle qualifies as an “insured” under the policy because he was driving a “covered auto” with DeCarilis’s permission. (Arch Opp. Br. at 7). Thus, to resolve this dispute, this Court must determine whether Boyle and the tractor-trailer are covered by Harco’s policies.


Arch also argues that Harco has waived its right to deny coverage under its umbrella policy to Boyle because Harco “failed to promptly deny coverage.” However, Harco denied coverage as soon as Boyle attempted to assert a claim under Harco’s umbrella policy, and so this argument fails.


A. The Tractor-Trailer


The parties do not dispute that the tractor-trailer qualifies as an “auto” under Harco’s policies.Harco only argues that under its umbrella Policy, exclusion 17 specifically excludes “Any ‘covered auto’ while leased or rented to others.”(Harco Br. at 20). Therefore, Harco argues that its umbrella policy excludes coverage for the tractor, a covered auto that was rented to JM.


Defined as “[a] land motor vehicle, ‘trailer’ or semitrailer designed for travel on public roads …”.


1. New York Vehicle and Traffic Law § 345


Arch bases its first argument on the fact that exclusion 17 states that it does not apply to “ ‘Bodily injury’ … caused by an ‘occurrence’ resulting from the ownership of a ‘covered auto.’ “ (Arch Opp. Br. at 15). Based on that exclusion, Arch argues that exclusion 17 is unenforceable because it violates New York law and public policy. Specifically, Arch argues that it violates New York’s Vehicle and Traffic Law § 345, which prohibits creating a gap in insurance coverage by excluding automobiles driven by third parties from insurance policies. Connecticut Indemnity Company v. 21st Century Transport Co., Inc., 186 F.Supp.2d 264, 271 (E.D.N.Y.2002) (“The problem with such an endorsement [is that the] Policy creates a gap in coverage for vehicles rented to third parties … In such a situation, a party injured in an accident with a … vehicle that was rented to a third-party and was being used in the course of the third-party’s business may not have ‘recourse to a financially responsible defendant.”).


However, Arch’s argument fails because the law it cites applies to primary, not excess or umbrella, insurance policies. Harco correctly points out that the Second Circuit, in an unpublished decision, has rejected exactly this argument. See Tokio Marine & Fire Ins. Co. v. Rosner, 206 Fed. Appx. 90, 92 (2d Cir.2006) (“Section 345(f) specifically exempts excess insurance protection from provisions of the law relating to primary insurance, including the § 345(b)(2) requirement that permissive users be treated as primary insureds.”).


2. “Others”


By its terms, exclusion 17 applies only to ‘covered autos’ leased or rented “to others.” Both Arch and Zurich argue that “others” should be read to apply to anyone “other” than those defined as “insureds” in the policy, which they argue would include Boyle. (Arch Opp. Br. at 19). This strained reading of exclusion 17 defies common sense, which dictates that the undefined term “others” should be read to indicate any third party to whom DeCarolis leases a vehicle. A contrary reading would defy the entire purpose of the exclusion, creating coverage for any lessee in a provision that attempted to exclude such coverage. See Sears Petroleum & Transp. Corp. v. Archer Daniels Midland Co., 03 Civ. 1120(DEP), 2007 U.S. Dist. LEXIS 53576 (S.D.N.Y. July 24, 2007) (“As a rule of construction, a term should ordinarily not be given an interpretation which should render other portions of a claim redundant or unnecessary.”). Further, because this Court holds infra that Boyle does not qualify as an “insured” under the contract, Arch and Zurich’s argument fails for that reason as well.


3. Exception (c)


Finally, Arch and Zurich argue that Exclusion 17 expressly provides that the exclusion does not apply to “ ‘Bodily injury’ … caused by an ‘occurrence’ resulting from the ownership of a ‘covered auto’.” (Arch Opp. Br. at 19). Arch argues that this exception applies because “DeCarolis is the owner of the tractor (a “covered auto”) involved in the Brace accident and the Brace lawsuit involves liability for bodily injury caused by Boyle and JM’s of the DeCarolis-owned tractor.”(Id.).


Harco argues that the bodily injury in this case occurred because of Boyle’s negligence, and not because of DeCarolis’s ownership of the vehicle. (Harco Reply Br. at 8). Harco also notes in its brief that this provision was intended to give DeCarolis protection from New York Vehicle and Traffic Law § 388, which makes an owner liable for injury caused by his automobile under a vicarious liability theory. (Harco Reply Br. at 8). Harco argues that this provision provides DeCarolis with specific insurance coverage in case it is found to be vicariously liable, but cannot be used to expand the coverage of DeCarolis’s policy to cover Boyle. This Court agrees that the contract is unambiguous in its exclusion of coverage for vehicles leased from DeCarolis to third parties, and thus Arch and Zurich’s argument fails. (Arch. Opp. Br. at 19-20).


Thus, this Court concludes that Exclusion 17 does apply to the dispute at issue here, and thus the tractor-trailer was covered under Harco’s umbrella policy.


B. Boyle as an “Insured”


Finally, this Court will consider the arguments over whether Boyle was an “Insured” under the Harco umbrella policy.The Harco umbrella policy defines “insured” to exclude“[a]ny person or entity to whom an automobile has been leased or rented; and … [a]ny person or entity other than the named insured who is operating, maintaining, using, loading or unloading an automobile which has been leased or rented from ‘you.’ “ (Harco Br. at 9). Harco argues that Boyle was “operating” and “using” an automobile which had been “leased or rented from” DeCarolis, and thus was not an insured. The term “automobile” is undefined in the contract, although the term “auto” is defined to include tractor/trailers. Arch and Zurich argue that because the term “automobile” is undefined, it should be interpreted to mean a private passenger auto, not a truck/tractor.


The Court notes that for Harco’s umbrella policy to apply, the tractor-trailer must qualify as a “covered auto” and Boyle must qualify as an “insured.” Thus, the fact that the tractor-trailer is not a “covered auto,” as described above, is sufficient alone to find that Harco’s umbrella policy does not apply. However, this Court also holds, in this section, that Boyle does not qualify as an “insured” under the policy.


Arch’s first argument, that this exclusion violates New York law and public policy, fails for the same reason as discussed above, because the law relates to primary, not umbrella, policies.


Arch and Zurich argue that the undefined term “automobile” in this exclusion should “be accorded a strict and narrow construction .”Seaboard Sur. v. Gillete Co., 64 N.Y.2d 304, 311, 486 N.Y.S.2d 873 (1984). Arch argues that New York Courts have held that “an insurance policy’s use of the term ‘automobile’ rather than the more comprehensive term ‘motor vehicle’ means that the policy applies only to those motor vehicles popularly understood to be automobiles.”(Arch Opp. Br. at 21).


In response, Harco points to several New York cases in which trucks and trailers have been construed as “automobiles” by courts interpreting insurance agreements. See, e.g. Michigan Alkali Co. v. Bankers Indemnity Ins. Co., 20 F. Supp 424, 426 (S.D.N.Y.1937) (“Travelers issued a certain ‘hired automobile’ policy of insurance to the plaintiff” covering a tractor-trailer); Baughman v. Merchants Mut. Ins. Co., 213 A.D.2d 1030, 624 N.Y.S.2d 715 (4th Dept.1995) ( “unambiguous language establishes that there is coverage when the automobile [a tractor-trailer] is being used exclusively in the named insured’s business or en route to engage in that business”). Further, Harco argues that the contract references “passenger vehicle automobiles” in numerous places, and thus if the parties had meant the term “automobile” to include only passenger vehicles, they would have used the same term in this section that they used in other sections where passenger vehicle automobiles were indicated.


When the terms of a contract are ambiguous, a court may turn to evidence extrinsic to ascertain the intent of the parties. Scholastic, Inc. v. Harris, 259 F.3d 73, 82 (2d Cir.2001) (citing Curry Rd. Ltd. v. K Mart Corp., 893 F.2d 509, 511 (2d Cir.1990)).“A contract is ambiguous if its terms ‘suggest more than one meaning’ when viewed objectively by a reasonably knowledgeable person who has examined the context of the entire integrated agreement.”Alexander & Alexander Servs., Inc. v. These Certain Underwriters at Lloyd’s, London, 136 F.3d 82, 86 (2d Cir.1998).“If contractual terms have a definite and precise meaning and are not reasonably susceptible to differing interpretations, they are not ambiguous.”Seiden Assocs. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir.1992).


Harco points to evidence it has provided that the parties’ intent was to include tractor-trailers in this provision in the agreement. (Harco Reply Br. at 9-10). Arch can point to no evidence in the record to suggest otherwise. Thus, for this undefined term, Harco wants this Court to use extrinsic evidence to determine its meaning, as is appropriate under New York law. Arch simply argues that because the term is undefined, it should be read using the most limited definition Arch can create, despite extrinsic evidence to the contrary. “In resolving an ambiguous contract term, the court should look to extrinsic evidence for aid in ascertaining the parties’ intent.”Witco Corp. v. American Guar. & Liab. Ins. Co., 1999 U.S. Dist. LEXIS 17279, 7-8 (S.D.N.Y. Nov. 2, 1999). Because the extrinsic evidence available only points to one outcome on this issue, i.e., that the parties meant for tractor-trailers to be included within the term “automobile,” Arch’s argument fails.


Because the Harco umbrella policy does not provide coverage in this dispute, the Court need not reach the issue of whether it drops down to provide coverage as a primary policy and takes precedence over Zurich’s primary policy.




The remaining insurance policies are as follows: The Zurich Primary Policy provides a limit of liability of $2 million. The Axis Umbrella Policy provides a limit of liability of $5 million. The Arch Excess Policy provides a limit of liability of $15 million.


National Casualty has already contributed $1 million, so $10 million of the Brace settlement remains to be paid. The $2 million Zurich primary policy contributes first, up to its limits. After that, the $5 million Axis umbrella policy will contribute up to its limits, $5 million. Finally, the Arch Excess Policy, as excess over the Zurich primary policy and the Axis umbrella policy, will make up the difference and contribute $3 million.


The parties have stipulated that any alterations in the insurance payments as litigated in this suit would be subject to 9% simple annual interest running from the date of the settlement. (Harco Br. at 4). Thus, Arch should pay $3 million, plus the applicable interest, to Harco. Axis should pay an additional $1 million, plus the applicable interest, to Harco.




For the reasons stated above, plaintiff Harco’s motion for summary judgment is GRANTED. Defendant Arch’s cross motion for summary judgment is DENIED. Defendant Zurich’s cross motion for summary judgment is DENIED.



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