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Canusa Corp. v. The Owens Group, Ltd., Inc.

United States District Court, D. New Jersey

December 19, 2019

CANUSA COPORATION, as a subrogee of ANW/CRESTWOOD, INC. Plaintiff,
v.
THE OWENS GROUP LTD., INC., Defendant.

          OPINION & ORDER

          KEVIN McNULTY. U.S.D.J.

         Pending before the Court are the parties' competing motions for summary judgment. Plaintiff Canusa Corporation ("Canusa"), as subrogee of ANW/Crestwood, Inc. ("ANW"), moves for partial summary judgment on four of the affirmative defenses asserted by defendant Owens Group LTD., Inc. ("Owens"). (DE 40). Defendant Owens moves for summary judgment seeking to dismiss all of the claims in this five-count complaint. (DE 41).

         For the reasons explained herein, I will grant in part and deny in part Canusa's motion for summary judgment. I will also grant in part and deny in part Owens's motion for summary judgment.

         I. Summary [1]

         a. The parties

         ANW, a New Jersey corporation, was "engaged in the procurement, distribution and sale of craft papers, cardstock and other related products" from the 1980's until 2012 (PSOF ¶¶ 1-2; see also DSOF ¶ 3). In 2012, an involuntary petition under Chapter 7 of the U.S. Bankruptcy Code was filed against ANW. (PRSOF ¶ 2). Todd Caliguire was president of ANW from 2001 until 2012. (PSOF ¶ 3).

         Canusa, the plaintiff here, is a subrogee of ANW by virtue of a 2001 lending agreement in which Canusa became a secured lender to ANW. (PSOF ¶ 51). Pursuant to a bankruptcy court order, Canusa was afforded the right to commence and prosecute certain causes of action belonging to ANW, including those claims asserted here. (Id.; DSOF ¶ 2).

         Owens is a licensed insurance broker in New Jersey. (DSOF ¶ 4). From ANW's inception until September 2011, ANW was a client of Owens. (DSOF ¶ 5; PSOF ¶ 4). Brian Bonelli was an account executive with Owens and was responsible for the ANW account beginning in 2008 through 2011. (PSOF ¶ 7; DSOF ¶ 6).

         b. ANW's warehouse and insurance needs

         In July 2002, ANW leased a warehouse located at 510 Ryerson Road, Lincoln Park, New Jersey. (PSOF ¶I4). ANW used this warehouse as a multifunction space-storing its inventory and property and operating its business from there. [Id.). The warehouse was located near a river in a FEMA-designated "AO9" flood zone, i.e., a high-hazard area that had the potential to flood. (Id. ¶ 20).

         ANW, through Caliguire, worked with Owens to purchase insurance for ANW and its warehouse. (Id. ¶¶ 15-16). Owens procured a variety of insurance policies-automobile, property, general liability, employment practices liability, flood and other coverages. [Id. ¶ 17). For example, beginning in 2004, The Hartford provided ANW's primary annual packaged policy, which comprised business personal property, business income insurance, automobile insurance, and general liability insurance. [Id. ¶¶ 18-19). However, The Hartford package expressly excluded coverage for floods. (Id. ¶ 19). Owens therefore obtained a $500, 000 National Flood Insurance Program ("NFIP") policy through Travelers for ANW. (Id. ¶ 23; DSOF ¶ 8).

         Upon taking over the account in 2008, Bonelli understood that the ANW warehouse was in a flood zone and understood that ANW's inventory and personal property in the warehouse was valued at approximately $6 million. (PSOF ¶ 21). Thus, Bonelli considered ANW to be underinsured with respect to flood coverage. (Id. ¶ 22).

         c. Renewal of ANW's policies

         On April 8, 2011, Bonelli and his supervisor, Jean Dennehy, went to the ANW warehouse to meet with Caliguire to discuss ANW's insurance needs and renewal of its policies. (PSOF ¶ 27; DSOF ¶ 9). Bonelli and Dennehy observed that the warehouse was located near a river and thus was susceptible to flooding. (PSOF ¶ 29).

         That April 8, 2011 meeting primarily focused on renewal of The Hartford package of policies; however, the issue of increasing ANW's flood insurance was also discussed. (Id.; DSOF ¶ 9). While the parties do not recall who first suggested the possibility of acquiring excess flood insurance, they do not dispute that Bonelli and Dennehy agreed during the meeting to attempt to provide ANW with quotes for excess flood insurance. (PSOF ¶ 29).

         After the meeting, on April 11, 2011, Bonelli emailed The Hartford and a representative at Westrope, Vincent Flemming, regarding excess flood insurance for ANW. (Id. ¶¶ 33-34). Westrope was a wholesale insurance broker that Owens used for excess and surplus lines of insurance. [Id. ¶ 35).[2] Bonelli indicated that he was interested in sourcing $6 million in flood coverage for ANW and asked Flemming to provide a quote. [Id. ¶ 36).

         On April 19, 2011, Flemming responded to Bonelli with a "quote indication" of $26, 000 for $2 million in coverage. (Id. ¶ 37). This was not a formal quote, but Bonelli understood that one would be made available on request. (Id. ¶ 38). Bonelli never informed Caliguire in writing of this quote indication. (Id. ¶ 39).

         Caliguire and Bonelli next spoke at least twice via telephone on May 3, 2011. (Id. ¶ 40).[3] The parties dispute the contents of those conversations.

         Caliguire contends that he and Bonelli discussed The Harford policy renewal, reduction of ANW's business personal property insurance in California from $250, 000 to $100, 000, and reduction of ANW's business income insurance from $6 million to $2 million or less. (Id. ¶¶ 40, 42). The quote indication from Westrope was never discussed, says Caliguire, and therefore never rejected. (Id. ¶ 41). Instead, according to Canusa, Bonelli informed Caliguire that excess flood insurance was not available. (Id. ¶ 40). This last point-that the ultimate message conveyed to Caliguire was that excess flood insurance was not available-Owens curiously concedes for purposes of these motions while also contesting die contents of the conversations. (See DSOF ¶ 10).

         According to Owens, Bonelli informed Caliguire of the Westrope quote indication during their May 3, 2011 telephone conversations. Caliguire rejected the quote, says Owens, because Caliguire claimed that $26, 000 was too costly. (DRSOF ¶¶ 39-41). Owens points to ANW activity reports as confirmation of its position. These activity reports contain notes inputted by Bonelli. On May 3, 2011, for example Bonelli made this entry: "Todd advised to lower BPP for CA to 100K instead of 250K, and he is still considering lowering die BI as he feels it is to high. I have requested revised quotes for 2MM and 4MM per his request." (DE 45-4 at 76; sic in original). An entry from a minute later reads "PCKG: request revised with 100K BPP in CA, also requesting lower BI to 2MM and 4MM." (Id.). In separate entries from May 3, 2011, under "FLOD: Excess flood indication" the following activities were reported: "Spoke with insured and he advised that he feels 2MM is to high. If you were to quote 500K and 1MM would we still be hitting the minimum premium of 25k?", "advised insured he advised 2MM might be to high, wants quotes for 500K and 1MM. requested from underwriter", and "received confirmation ro carrier that we would still be hitting minimum premium of 25K" under lower limits. (DE 45-4 at 78; sic in original). No other entries related to flood insurance indicate what follow-up information, if any, was conveyed to ANW.

         d. Hurricane Irene

         On August 28, 2011, Hurricane Irene made landfall in New Jersey. (PSOF ¶ 46; DSOF ¶ 11). As a result, the ANW warehouse was flooded and a significant portion of ANW's inventory and property was destroyed. (PSOF ¶ 47; DSOF ¶ 11). There was approximately $6 million in inventory in the warehouse at the time. ANW was paid $500, 000 under its NFIP flood insurance policy, but its total losses far exceeded that amount. (Id.).

         e. The Complaint

         On December 8, 2016, Canusa filed its complaint in this action. (DE 1).

         The complaint asserts five causes of action:

Count 1: Negligent Procurement of Insurance/Malpractice (Compl. ¶¶ 24-31);
Count 2: Negligent Misrepresentation (Compl. ¶¶ 32-41);
Count 3: Breach of Fiduciary Duty (Compl. ¶¶ 42-52);
Count 4: Breach of Contract (Compl. ¶¶ 53-61);
Count 5: Breach of Implied Covenant of Good Faith and Fair Dealing (Compl. ¶¶ 62-73).

         On January 25, 2017, Owens filed its answer to the complaint and asserted 21 affirmative defenses. (DE 6). During the course of discovery, Owens withdrew eight (see stricken items in chart, below), but continued to assert 13 affirmative defenses (PSOF ¶ 57):

Affirmative Defense

1.

Failure to State a Claim

2.

No Legal Duty

3

Waiver, Laches, Reo Judicata, Collateral-Estoppel, Judicial Estoppel, and Equitable Estoppel

4.

Statute-of-Limitations

5.

Mutual Mistake

6.

Assumption of Risk

7.

All Applicable Defenses under the Contract

8.

Failure to Mitigate

9.

Damages were Caused by Plaintiff or a Third Party

10.

Comparative Negligence

11.

Owens complied with all laws

12.

No Proximate Cause

13.

Frivolous Pleading

14.

Absence of Privity

15.

Unclean Hands

16.

Fraud

17.

Entire Controveroy Doctrine

18.

Failure to Join Necessary Parties

19.

Failure to Supply an Affidavit of Merit

20.

Absence-of-a Contract

21.

Catchall

         f. Competing motions for summary judgment

         On March 29, 2019, the parties filed the competing motions for summary judgment at issue here.

         i. Canusa's motion (DE 40)

         Canusa moved for partial summary judgment seeking to dismiss four affirmative defenses raised by Owens in its Answer: (1) the Second Affirmative Defense: No Legal Duty; (2) the Sixth Affirmative Defense: Assumption of Risk; (3) the Eighth Affirmative Defense: Failure to Mitigate; and (4) the Tenth Affirmative Defense: Comparative Negligence.

         Owens's second affirmative defense is "that it had no legal duty to procure excess flood insurance for ANW . . . ." (PSOF ¶ 59; DRSOF ¶ 59). Canusa moves to dismiss this defense while simultaneously moving for an order that Owens had a duty as a matter of law to act in good faith and with reasonable skill when it undertook to provide ANW excess flood insurance quotes. (DE 40-1 at 5).

         Owens's sixth affirmative defense is that "Todd Caliguire, who is a sophisticated businessman, assumed the risk that his business would be flooded when he moved into a flood zone and close to a body of water. In addition, Mr. Caliguire (ANW) assumed the risk that he would not have enough flood insurance when he decided not to purchase excess flood insurance offered to him by Owens Group prior to Hurricane Irene." (PSOF ¶ 60; DRSOF ¶ 60). Canusa asserted in its briefing that Owens's assumption of the risk defense should be dismissed because New Jersey has essentially eliminated this defense except in limited circumstances not applicable here. (DE 40-1 at 16-17). Owens agrees and withdrew this defense. (DE 45 at 10). Accordingly, Canusa's motion to dismiss Owens's sixth affirmative defense is GRANTED.

         Owens's eighth affirmative defense is "that ANW failed to procure excess flood insurance and therefore failed to mitigate its damages from Hurricane Irene. In addition, it is unclear at this time whether ANW could have taken any additional steps to minimize its damages after Hurricane Irene, including but not limited [to] exploring the immediate sale of its business or salvage of any damaged equipment or property." (PSOF ¶ 61; DRSOF ¶ 61). Canusa moves to dismiss this defense because ...


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