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Umoe Schat Harding, Inc., et al v. New York

March 29, 2011

UMOE SCHAT HARDING, INC., ET AL., PLAINTIFFS,
v.
NEW YORK MARINE AND GENERAL INSURANCE COMPANY, ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: William J. Martini, U.S.D.J.:

OPINION HON. WILLIAM J. MARTINI

This matter comes before the Court on defendant New York Marine and General Insurance Company's ("NYMAGIC") Motion to Dismiss, Transfer, or Stay the action. Plaintiffs Umoe Schat Harding, Inc. ("SH Inc.) and Umoe Schat Harding AS ("SH AS" or collectively "Plaintiffs") and Defendant Patricia Lane Schmaltz oppose. For the reasons stated below, the motion will be denied in its entirety.

I.Factual and Procedural Background

Plaintiff SH Inc. is a Delaware corporation with its principal place of business in Louisiana. Plaintiff SH AS is a Norwegian Corporation with its principal place of business in Norway. SH AS is the parent corporation of SH Inc. Both plaintiffs engage in the manufacture and service of lifeboats. Defendant NYMAGIC is a New York corporation with its principal place of business in New York. It is an insurance company licensed to conduct certain related business in every state. Defendant Schmaltz is a resident and domiciliary of Florida and has a business address in Florida. Schmaltz is an insurance broker.

In late 2003, SH Inc. purchased through Schmaltz as broker a policy of commercial general liability insurance (the "Primary Policy") from Osprey Insurance ("Osprey"), who was acting as a representative for certain insurers with Lloyd's of London. At the same time, SH Inc. also purchased through Schmaltz as broker a policy of excess insurance (the "Excess Policy") from NYMAGIC. Both policies were procured through additional intermediaries between Schmaltz and the final insurer.

In April of 2004, SH AS was added as an insured party under both policies. Plaintiffs understood the policies as providing insurance for obligations that would include damages arising out of personal injury claims. Plaintiffs further understood that the Excess Policy and the Primary Policy would cover the same risks.

On September 7, 2004, an accident occurred on a cruise vessel somewhere outside of New Jersey involving a lifeboat manufactured and serviced by SH AS. Sometime in 2004 thereafter, Plaintiffs provided notice of the accident to Schmaltz, who represented that she would place all insurers on notice.

In July 2006, an individual injured in the accident brought suit against Plaintiffs in the Superior Court of New Jersey, Hudson County. Some time thereafter, a second individual brought suit in the same court. Both actions were consolidated. Plaintiffs provided copies of the complaints to Schmaltz in the fall of 2006, and Schmaltz again represented that she would place the insurers on notice. Plaintiffs filed a third-party complaint against the owner of the cruise vessel. Communications between Plaintiffs and Schmaltz continued throughout this time, and Plaintiffs pressed Schmaltz to ensure support from the insurers to fund a settlement prior to trial. A motion to sever the claims between Plaintiffs and the cruise vessel owner was scheduled for July 23, 2010. The consolidated trial of the actions was scheduled to begin on July 26, 2010.

In the morning of July 22, 2010, Osprey tendered the limits of the Primary Policy in support of settlement. That same morning, counsel for Plaintiffs' requested from NYMAGIC settlement authority for an additional $2.25 million.

But in the afternoon of July 22, 2010, a representative of NYMAGIC issued a letter denying coverage under the Excess Policy. The letter gave the following reasons for the denial: (a) that notice of the claim had not been received until July 14, 2010, in violation of the Excess Policy; (b) NYMAGIC had not been given an opportunity to participate in the defense of the lawsuits, also in violation of the Excess Policy; and other alleged breaches of the contract that are not germane to the issue of venue.

In the evening of July 22, 2010, Plaintiffs, now aware of the denial of coverage, settled the outstanding claims from the lawsuit. On July 23, 2010, Plaintiffs filed this action against NYMAGIC and Schmaltz, claiming NYMAGIC breached its contract with Plaintiffs by denying coverage, and, in the alternative, raising various claims against Schmaltz sounding in professional malpractice and/or her failure to properly notify NYMAGIC of the claims. Also on July 23, 2010, NYMAGIC filed an action for declaratory judgment against Plaintiffs in the United States District Court for the Southern District of New York.

NYMAGIC now moves to dismiss or transfer the action under 28 U.S.C. §§ 1391 and 1406, arguing that venue in this District is improper. Alternatively, if the Court finds venue is proper, NYMAGIC moves to transfer this case to the Southern District of New York under 28 U.S.C. § 1404(a) for the convenience of the parties. Finally, in the event this Court finds venue is proper and refuses to transfer, NYMAGIC asks this Court to stay this action in favor of NYMAGIC's declaratory action in the Southern District of New York.

Plaintiffs cross-move for an injunction preventing NYMAGIC from proceeding in the action in the Southern District of New York. On October 22, 2010, the United States District Court for the Southern District of New York, Judge William H. Pauley III, stayed the declaratory judgment action pending this Court's disposition on the present motion. New York Marine and General Ins. Co. v. Umoe ...


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