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North American Specialty Insurance Co. v. Bader

July 23, 1999

NORTH AMERICAN SPECIALTY INSURANCE COMPANY,
PLAINTIFF,
V.
FRANK J. BADER, CAROLYN L. SHAGEN, EXECUTRIX OF THE ESTATE OF EDWARD G. SHAGEN, DECEASED, AND CAROLYN L. SHAGEN, INDIVIDUALLY, ROBERT J. BRUCE
DEFENDANTS.



The opinion of the court was delivered by: Irenas, District Judge:

HONORABLE JOSEPH E. IRENAS

OPINION

Presently before this court is plaintiff North American Specialty Insurance Company's motion for summary judgment as to its request for a declaratory judgment against defendant Frank Bader. For the reasons set forth below, defendant's motion for summary judgment is denied.

I.

On July 6, 1996, defendants Frank Bader ("Bader") and Robert Bruce ("Bruce") were involved in a water boat accident that resulted in fatal injuries to Edward Shagen ("Shagen"). Each defendant, as well as Shagen, were operating separate watercraft when the accident occurred.

At the time of the accident, the watercraft belonging to Bader was insured under a liability and property policy ("the policy") issued by National Marine Underwriters on behalf of plaintiff North American Specialty Insurance Company ("North American" or "Plaintiff"). The insurance policy between Bader and plaintiff was a one year policy that was initially issued on August 25, 1991, and renewed annually thereafter. The last insurance policy in effect prior to the accident was a renewal policy that began coverage on September 6, 1995.

Each year, from 1991 through 1995, Bader's policy was renewed and paid for by credit card telephonically. Thereafter, North American mailed an application to Bader who signed and returned such application to plaintiff. The signed application then became the declaration sheet for the policy.

As declared on the renewal policy, the rated horsepower for Bader's boat was 330 horsepower per each of its two engines. Subsequent to the September, 1995, renewal and prior to the July, 1996, accident, Bader replaced the original engines with high performance engines of 480 horsepower each. There is no evidence that suggests that the increased horsepower of Bader's watercraft contributed to his accident with the deceased.

As a result of the accident, Carolyn Shagen ("Shagen"), Executrix of the Estate of Edward Shagen, Deceased, and Carolyn Shagen, Individually, filed a wrongful death action against Bader and Bruce seeking special and liquidated damages in New Jersey state court. Defendant Bruce has asserted cross claims against Bader in the underlying state court matter.

North American was unaware that Bader's boat engines were replaced until they investigated the claim after the fatal accident. As Bader's insurance carrier, North American is currently defending Bader against Shagen's state court action under a reservation of rights assertion.

On September 24, 1997, North American filed a complaint seeking a declaratory judgment that its obligation to defend and indemnify Bader is null and void. On January 23, 1998, defendant Bader filed a counterclaim against North American seeking a declaratory judgment that North American is required to defend and indemnify him in the underlying state court action.

On June 8, 1999, North American brought the instant motion for summary judgment. Specifically, plaintiff alleges that Bader has violated his duty of good faith and fair dealing based on his material misrepresentations concerning the alteration performed on his boat. North American argues that they should not be required to indemnify Bader because, at the time of Bader's 1995 policy renewal, Bader was already under contract to have his boat's engines replaced. Plaintiff contends that the modification, if disclosed to them, would have resulted in a non-renewal or cancellation of all coverages.

Bader contends that there is nothing in the record to support plaintiff's allegations that he is not entitled to indemnification, and that summary judgment for the plaintiff is improper.

II.

Under Fed. R. Civ. P. 56(c), a court may grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The non-moving party may not simply rest on its pleadings to oppose a summary judgment motion but must affirmatively come forward ...


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