Opinion
Civil Action Nos. 99-3689, 00-2482.
August 6, 2004
MEMORANDUM ORDER
Presently before the Court is Specialty Insurance Agency, Inc.'s ("Specialty") Motion for Reconsideration of the Court's Order Granting Plaintiff Royal Indemnity Company's Motion for Summary Judgment on its Affirmative Claim. (Doc. No. 50, 99-cv-3689.) For the following reasons, Specialty's Motion will be denied.
I. BACKGROUND
On July 9, 2004, we granted Royal Indemnity Company's ("Royal") Motion for Summary Judgment in Royal's lawsuit against Specialty. (Doc. No. 46.) In doing so, we concluded that, as a matter of law, Specialty had breached its underwriting contract with Royal. The agreement was formalized in the Managing General Agency Agreement ("MGA"). In entering into the MGA, Specialty, as managing agent, had authority to solicit, underwrite, and bind and issue policies in accordance with the "underwriting guideline, [and any] bulletin or instruction which may be issued by Royal from time to time." (MGA at 1-2, Ex. A to Specialty's Mot. for Summ. J. in 99-cv-3689.) In reaching our conclusion, we found that the terms of the Restaurant Program Underwriting Guidelines ("Guidelines"), which Royal issued pursuant to its authority under the MGA, were unambiguous in requiring that Specialty perform certain inquiries and make certain determinations, before binding Royal to an applicant. We also found that the indemnification clause entered into by the two parties required Specialty to indemnify Royal for any costs related to Specialty's failure to adhere to the Guidelines. Specialty's present argument in support of its Motion for Reconsideration maintains that we made an error of law in concluding that the MGA and Guidelines were unambiguous. For the reasons stated in our Memorandum of July 9, 2004, and in the following analysis, we disagree.
On July 9, 2004, we also denied Specialty's Motion for Summary Judgment in that same matter, (Doc. No. 47), and granted Royal's (Second) Motion for Summary Judgment in Specialty's affirmative case against Royal, (Doc. No. 48). Specialty has not asked for reconsideration in those matters.
The terms of the agreement are discussed in full detail in our Memorandum of July 9, 2004, and we need not restate them here.
V. Financial
• Risk must be in business a minimum of three years at the present location.
• Risk must have a DB [Dun and Bradstreet] report or Profit Loss [("PL")] statement available to support the success of the business.
• Any risk having experienced a criminal, civil, or liquor law violation within the last five years should not be written.
• Any risk exhibiting signs of financial difficulty (other than shown on the DB or PL) such as claim frequency, lawsuits, citations, or revocation of license, should not be written.
• Any risk whose principals and/or managers have violated criminal or civil laws should not be written.
Financial stability is vital to the success of any business. The best indicator of a financially sound risk is a growing business, under the same management, at the same location for a minimum of three years. Financial stability needs to ensure that the insured can:
• Provide employees and public a properly maintained and safe environment
Part of your underwriting evaluation should include financial evaluation.
II. LEGAL STANDARD
Federal Rule of Civil Procedure 59(e) and Local Civil Rule 7.1(g) of the United States District Court for the Eastern District of Pennsylvania allow parties to file motions for reconsideration or amendment of a judgment. Courts should grant these motions sparingly, reserving them for instances when: (1) there has been an intervening change in controlling law; (2) new evidence has become available; or (3) there is a need to prevent manifest injustice or correct a clear error of law or fact.General Instrument Corp. v. Nu-Tek Elecs., 3 F. Supp. 2d 602, 606 (E.D. Pa. 1998), aff'd, 197 F.3d 83 (3d Cir. 1999).
III. DISCUSSION
We note from the outset that none of the justifications for reconsideration apply to the instant situation. First, Specialty contends that the Third Circuit Court of Appeals' recent decision in Justofin v. Metropolitan Life Insur. Co., precluded this Court from discerning the parties' intent when entering into the MGA. 372 F. 3d 517 (3d Cir. 2004). This reading of Justofin is incorrect. Justofin involved an insurer's attempt to void an insurance policy based on material misrepresentation by the insured. Under Pennsylvania law, the insurer had to prove that the insured knowingly, or in bad faith, made false representations that were material to the risk being insured.Id. at 521-22. In overturning the district court's grant of summary judgment for the insurer, the Third Circuit concluded that genuine issues of material fact existed as to what the insured actually knew and the precise character of the alleged misrepresentation. When the Third Circuit concluded that it was inappropriate for the district court to discern intent at the summary judgment stage, it was referring to the state of mind of the insured when she provided the allegedly false and/or incomplete information. Id. at 524 ("Generally, an insured's state of mind is an issue of fact for the jury.") (emphasis added). The question in Justofin was whether the insured knew the information was false at the time, and therefore intended to misrepresent the information.
We also note that while Specialty did file a cross motion for summary judgment in this case, its actual response to Royal's Motion for Summary Judgment was limited to a two-paged letter to the Court. (Doc. No. 44 in 99-cv-3689.)
Unlike Justofin, in the instant case we determined the intent of the contracting parties, based on the language of the contract. It is well-established under New York law that when the language of a contract is unambiguous, as it is here, contract interpretation is a question of law for the court, and is appropriately decided at the summary judgment stage. Lopez v. Fernandito's Antique Ltd., 760 N.Y.S.2d 140, 141 (N.Y.App.Div. 2003) ("The objective of contract interpretation is `to determine what is the intention of the parties as derived from the language employed.'") (quoting Hartford Accident Indem. Co. v. Wesolowski, 33 N.Y.2d 169, 171-172 (1973)). The New York court in Oswegatchie Light Power Co. v. Niagra Mohawk Power Corp., examined its own role in interpreting contracts at the summary judgment stage and concluded: "If the words as used by the parties in this disputed clause are unambiguous and clear, considering the entire agreement, then the construction of this clause is for the court and no trial is warranted." 167 N.Y.S.2d 587, 590 (N.Y.Sup.Ct. 1957). For the reasons detailed in our Memorandum of July 9, 2004, we concluded that the MGA and the Guidelines were unambiguous in their requirement that Specialty not bind Royal to a financially unstable applicant, and like the court in Oswegatchie, we concluded that summary judgment was appropriate.
The MGA contains a choice of law provision requiring that New York law be applied in its interpretation and enforcement. (MGA at 16(e), Ex. A to Royal's Mot. for Summ. J. in 99-cv-3689.)
Despite the unambiguous language of the MGA and Guidelines, Specialty contends that it had "discretion in exercising underwriting judgments and whether the judgment was properly exercised is a question of fact." (Specialty's Mot. for Recons. at 3.) It is clear that Specialty was authorized to use its discretion in soliciting and binding applicants, however, it is also clear from the language of the MGA that Specialty's discretion was limited by the requirement that it adhere to the Guidelines. (MGA at 5(m) (requiring that Specialty "comply with any underwriting guideline, bulletin or instruction which may be issued by Royal from time to time"), Ex. A to Royal's Mot. for Summ. J. in 99-3689.) It defies logic, and the principles of contract interpretation, to conclude that Specialty's discretion would override the clear limitations and obligations that Royal laid out in the MGA and Guidelines.
In support of its position, Specialty relies on statements made by its expert, Richard Lofberg. However, Specialty's contention that the competing views of experts in this case "creates a clear fact question which precludes the granting of summary judgment" is incorrect. Again, we emphasize that it is a court's duty to interpret the clear meaning of the contract and to determine the parties' respective obligations in light of that language. Expert testimony contradicting language that the court has deemed clear and unambiguous is not controlling, even at the summary judgment stage. Oswegatchie, 167 N.Y.S. 2d at 590 ("Mere assertion by one that contract language means something to him, where it is otherwise clear, unequivocal and understandable when read in connection with the whole contract, is not in and of itself enough to raise a triable issue of fact.").
Specialty further contends that we erred in stating that the Dun Bradstreet ("DB") report had to be obtained before Specialty bound Royal to the insured. While we again question what value the DB would have if coverage had already been bound, we also emphasize that our opinion further concluded that even if the DB were not required before binding coverage, a positive DB was required at some point. Our Memorandum of July 9, 2004, clearly states:
Even if we were to accept Specialty's contention that it is standard in the industry to bind coverage before receiving a DB, when Specialty finally received the DB, it failed to meet the clear mandate that "[r]isk must have a DB report . . . available to support the success of the business."
(Mem. of July 9, 2004, at 8-9 (quoting Guidelines at V, Ex. D to Royal's Mot. for Summ. J. in 99-cv-3689).) At no point was a positive DB ever produced. The one and only DB reported that Mamma Maria Restaurant, the insured to whom Specialty bound Royal, had a recent bankruptcy filing, two civil judgments totaling $2,900, and federal and state tax liens in excess of $140,000. Under no circumstances can this information be interpreted as supporting "the financial success of the business."
In further support of its contention that a DB was not required before binding coverage, Specialty cites the deposition testimony of David Cather, Royal's expert witness. Specialty selects a part of Cather's testimony to support its position. Specialty emphasizes Cather's statement: "This is kind of unusual, but they did order it, so I mean, they live up to this aspect of the requirement. . . ." (Specialty's Mot. for Reconsideration at 9 (quoting Cather Dep. at 66, Ex. M to Specialty's Br. in Supp. of Mot. for Summ. J. in 99-cv-3689).) Specialty suggests that this indicates that Cather believed that a positive DB was not necessary prior to binding coverage. However, it is clear from a full reading of Cather's testimony that his conclusion was to the contrary. When asked if Specialty should have run the DB before binding coverage, Cather replied: "That would have been consistent with the underwriting guidelines. Choosing to insure a risk and then run the DB would not be consistent with underwriting guidelines. . . ." (Cather Dep. at 78-79, Doc. 40 in 99-cv-3689.) As we noted in our Memorandum of July 9, 2004, the timing of the DB is not dispositive here because Specialty failed to obtain a DB that supported the success of the business both before and after binding coverage.
In way of further support, Specialty provides an affidavit from Barry Moffett, Specialty's President. However, B. Moffett's affidavit, taken after our decision of July 9, 2004, is inappropriate at the motion for reconsideration stage. The affidavit does not contain newly discovered information, but simply provides B. Moffett's views of the contractual expectations between the two parties. Accordingly, B. Moffett's affidavit is inadmissible. "Only newly discovered evidence may be presented on a motion for reconsideration. Such a motion cannot be used to introduce evidence that is not newly discovered and that could have been presented in response to a summary judgment motion." Hannon v. Terra, Civ.A. No. 94-2845, 1995 WL 134813, *1 (E.D. Pa. Mar. 29, 1995) (citing Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985); Keyes v. National R.R. Passenger Corp., 766 F. Supp. 277, 280 (E.D. Pa. 1991)).
Specialty also mischaracterizes the deposition of John Woychak, Specialty's contact at Royal, by suggesting that Woychak would have allowed the Mamma Maria account to have been written. However, Woychak's statements were in response to hypothetical situations posed by Specialty's counsel. Moreover, when asked directly about Mamma Maria's financial history, Woychak opined that binding coverage was "obviously outside of the underwriting guidelines because of all of the numerous liens, judgments and then the bankruptcy." (Woychak Dep. at 160, Doc. No. 30 in 00-2482.) Specialty similarly mischaracterizes Woychak's testimony regarding the number of days needed to investigate the DB report. While Woychak's testimony is not dispositive in concluding that Specialty violated the terms of the contract, we include it here only to clarify Specialty's use of that testimony.
As a final argument, Specialty contends that "reasonable minds could differ as to whether Mam[m]a Maria was financially unstable within the practice of the parties." We disagree. As discussed herein above, and in our Memorandum of July 9, 2004, the DB clearly indicated that Mamma Maria had filed for bankruptcy, had more than $2,900 in judgments against it, and more than $140,000 in state and federal tax liens. (DB, Ex. G to Royal's Mot. for Summ. J. in 99-cv-3689.) In light of this information, we are not persuaded that reasonable minds could differ as to Mamma Maria's financial strength.
IV. CONCLUSION
Specialty has failed to establish that there has been an intervening change in the controlling law, that new evidence is available, or that there is a need to prevent a manifest injustice or correct a clear error of law or fact. Accordingly, Specialty's Motion for Reconsideration will be denied.
An appropriate Order follows.
ORDER
AND NOW, this 6th day of August, 2004, upon consideration of Specialty Insurance Company's Motion for Reconsideration of the Court's Order Granting Plaintiff Royal Indemnity Company's Motion for Summary Judgment on its Affirmative Claim, (Doc. No. 50, 99-cv-3689), and all papers filed in support thereof and opposition thereto, it is ORDERED that Specialty's Motion is DENIED.IT IS SO ORDERED.