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KITCHNEFSKY v. NATIONAL RENT-A-FENCE OF AMERICA

March 31, 2000

KEVIN KITCHNEFSKY ET AL., PLAINTIFFS,
V.
NATIONAL RENT-A-FENCE OF AMERICA, INC., ET AL., DEFENDANTS.



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

OPINION ON DEFENDANT NATIONAL, FOURTH PARTY DEFENDANT TIG, AND FOURTH PARTY PLAINTIFF CONTI'S MOTION FOR SUMMARY JUDGMENT AGAINST FOURTH PARTY DEFENDANT FIREMAN'S FUND

Presently before this Court is Defendant/Third Party Plaintiff National ("National"),*fn1 Fourth Party Defendant TIG Insurance Company ("TIG") and Third Party Defendant/Fourth Party Plaintiff Conti's motion for summary judgment*fn2 seeking indemnification and attorney's fees from Fourth Party Defendant Fireman's Fund ("Fireman's Fund;" "the Primary Insurer"). Jurisdiction is based on 28 U.S.C. § 1332 (diversity of citizenship).

I. FACTUAL & PROCEDURAL BACKGROUND

The instant matter involves a dispute between insurance companies regarding a primary insurer's duty to indemnify an excess insurer and an insured for the settlement of underlying litigation.

On April 2, 1997, the Plaintiff and his wife instituted suit against National, asserting claims of negligence, breach of contract, strict liability, products liability and failure to warn. (See id. at 4) Apparently the Plaintiff did not file suit against Conti because New Jersey's workmen's compensation laws barred Kitchnefsky from instituting a suit against his employer. National, however, filed a third party complaint against Conti on January 16th 1998, seeking complete indemnification pursuant to an agreement between the parties. (See id. at ¶ 7)

Approximately nine months later, on September 22d 1998, counsel for Kitchnefsky transmitted a settlement proposal to National. (See id. at ¶ 14) Plaintiff's proposed terms included a demand that: 1) National enter into a consent judgment for $15.5 million dollars; 2) pay the Plaintiff $11 million dollars (the total amount of presumed coverage available to National); and 3) assign National's indemnity claim against Conti to Kitchnefsky. (See id. at ¶ 14) Three days later, a copy of the Plaintiff's demand letter was forwarded to Conti. (See id.) At this time, both Conti and National were represented by counsel. Conti was defended by its insurer under its comprehensive general liability policies. (See id. at ¶ 15) National was represented by TIG, an insurance carrier with whom it had purchased umbrella coverage. (See Letter from Michael B. Oropollo, Esq., Atty. for Def. Conti, to John Osorio, Esq., Atty. For Def. National, Sept. 30th 1998, attached as Ex. L to Conti Undisputed Facts) Fireman's Fund, the insurer that provided primary coverage to National pursuant to a $1,000,000 commercial automobile liability policy, had yet to receive notice of the claim. (See id. at ¶ 16) This oversight appears to have resulted from counsel for Conti and National's mistaken impression that coverage under the Fireman's Fund policy was not implicated by the accident.

Subsequently discovering that coverage potentially existed under the Fireman's Fund policy, Conti sent a letter to Fireman's Fund on October 8th 1998. The letter placed the Primary Insurer on notice of its claim for coverage as an additional insured under National's policy. (See id. at ¶ 18) Included within the correspondence were forwarded copies of the amended complaint, both Conti and National's answers, Magistrate Judge Robert B. Kugler's Fourth Amended Scheduling Order, and a letter of correspondence from Conti to National addressing Fireman's Fund related coverage issues. (See id.) The letter also requested that Fireman's Fund inform Conti by October 16th 1998 whether it would agree to provide a defense and indemnify the Third party defendant (See id. at ¶ 19), and stated that "[i]f you require any further information to evaluate this claim, please do not hesitate to call[.]" (See Letter from Elizabeth F. Lorell, Esq., Atty for Def. Conti, to Martin Metzmer, Supervisor, Auto Claims Dep't of Fireman's Fund Insurance Company, Oct. 8th 1998, attached as Ex. N to Conti Undisputed Facts) This request, however, was ignored by the Primary Insurer. (See Conti Undisputed Facts at ¶ 19)

Less than one week later, on October 13th 1998, counsel for National forwarded caselaw to Fireman's Fund supporting Conti's prior assertion "that Fireman's Fund would cover both National . . . and Conti in regard to this incident." (See id. at ¶ 21) Although the Primary Insurer informed National that it would be discussing the matter in the "near future," there is no indication in the record that any follow-up dialogue occurred.(See id. at ¶ 22)

Having received no response from Fireman's Fund regarding its coverage position, on November 3rd 1998 Conti informed the Primary Insurer that it was filing a fourth party complaint. (See id. at 24) Conti's letter also apprised the insurer that pursuant to Magistrate Judge Kugler's Fifth Amended Scheduling Order, a settlement conference was calendered for December 1st 1998. (See id.) The carrier was given a copy of the order, which directed that "counsel must attend with clients and carriers with settlement authority." (Id.)

On December 1st 1998, counsel for the parties and insurance companies appeared before Judge Kugler for the settlement conference. Despite Magistrate Kugler's instruction to the contrary, counsel for Fireman's Fund arrived at the courthouse without its client or authority to settle. (See Fireman's Fund Undisputed Facts at ¶ 3, 4) During a conference amongst the various defense counsels, the Primary Insurer's attorney stated that the carrier had not taken a position with respect to coverage. (See id. at ¶ 3,4) Although Fireman's Fund's counsel did not participate further in the December 1st settlement discussions, he remained present in the courthouse the entire day. (See Conti Undisputed Facts at ¶ 27)

After over ten hours of negotiations, Plaintiff's case was settled for a total of $6.25 million. (See id. at ¶ 28) Defendant National agreed to contribute $4,937,500, Conti $812,000, and Kitchnefsky's worker's compensation carrier paid $500,000. (See id.) Because Fireman's Fund refused at that time to contribute to the settlement, National's excess insurer TIG agreed to fund the entire agreement. (See Cert. of Allan Maitlin at ¶ 9) At no point did counsel for Fireman's Fund object to the matter being settled, nor was there any statement that the amount being settled was unreasonable. (See Fireman's Fund Undisputed Facts at ¶ 6) As part of the final settlement agreement between the parties, Conti assigned its indemnification rights under Fireman's Fund's policy to National and TIG. (See Conti Undisputed Facts at ¶ 32)

After the December 1st settlement, counsel for Conti repeatedly asked Fireman's Fund to clarify its position regarding coverage and indemnity under its policy. (See id. at ¶ 31) The insurer rejected counsel for Conti's invitation to review and inspect its entire litigation file, instead requesting certain categories of discovery documents. Conti complied with Fireman's Fund's requests by promptly forwarding the documents to the insurer thereafter. (See id.) However, despite receipt of these documents and Conti's repeated requests, Fireman's Fund refused to take any position in the matter.

In an attempt to resolve the dispute between Fireman's Fund and its insureds, Judge Kugler met with the parties on several occasions. (See id. at ¶¶ 36 & 37) At an April 16th 1999 settlement conference, Fireman's Fund conceded that both National and Conti were insureds under the policy at issue. (See id. at 39) Because Fireman's Fund nonetheless refused to provide a defense and indemnification, Magistrate Judge Kugler set forth a dispositive motion schedule which permitted TIG (National's excess insurer pursuant to umbrella coverage) and Conti to file motions against the Primary Insurer. Shortly thereafter, on May 5th 1999, National's Third Party Complaint was amended to include Fireman's Fund. Additionally TIG, National's excess insurer, asserted a crossclaim against Fireman's Fund, seeking indemnification from the insurer. (See Docket at ¶¶ 37 & 38) Shortly thereafter this motion for summary judgment was filed.

II. SUMMARY JUDGMENT STANDARD

The standard for granting summary judgment is a stringent but surmountable one. That is, summary judgment is appropriate only when the materials of record "show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Serbin v. Bora Corp., 96 F.3d 66, 69 n. 2 (3d Cir. 1996). In deciding whether there is a disputed issue of material fact, the court must grant all reasonable inferences from the evidence in favor of the non-moving party. Serbin, 96 F.3d at 69 n. 2. The threshold inquiry is whether there are "any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

Supreme Court decisions mandate that a motion for summary judgment must be granted unless the party opposing the motion "provides evidence `such that a reasonable jury could return a verdict for the non-moving party.'" Lawrence v. National Westminster Bank of New Jersey, 98 F.3d 61, 65 (3d Cir. 1996) (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505). Moreover, once the moving party has carried its burden of establishing the absence of a genuine issue of material fact, "its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Instead, the non-moving party must "by affidavits or by depositions and admissions on file `mak[e] a showing sufficient to establish . . . [that a genuine issue of material fact exists as to each] . . . element essential to that party's case.'" Equimark Commercial Fin. Co. v. C.I.T. Fin. Servs. Corp., 812 F.2d 141, 144 (3d Cir. 1987) (declaring that a ...


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