Colony Insurance Company v. DTC Services Inc. and Novatae Risk Group, LLC
- Valerie Caproni
- 1:24-cv-07466
- U.S. District Court · Southern District of New York
- 5
In Colony Insurance v. DTC Services, Judge Caproni denied Novatae Risk Group’s motion to dismiss Colony’s breach-of-contract claim over delayed notice.
Colony Insurance Company and Novatae Risk Group, LLC. The ruling allows Colony’s breach-of-contract allegations against Novatae to proceed past the motion-to-dismiss stage; it does not resolve whether Colony will ultimately recover defense costs.
What happened
In Colony Insurance Company v. DTC Services Inc. and Novatae Risk Group, LLC, Colony alleged that Novatae failed to promptly report an injury and lawsuit involving DTC, violating a contract between Colony and Novatae. Colony sought a declaration about its insurance coverage for DTC or damages from Novatae for defense costs.
Novatae argued that its receipt of notice did not legally count as notice to Colony because Novatae was not Colony’s agent. It also argued that Colony’s defense costs were voluntary payments and could not be recovered. Colony responded that Novatae had a direct contractual duty to report notice promptly and that the defense costs were a foreseeable result of the delay.
Judge Valerie Caproni denied Novatae’s motion to dismiss. She ruled that Colony had plausibly alleged a contract, its own performance, Novatae’s breach, and damages, and that whether the defense costs were foreseeable and reasonable could not be decided at the motion-to-dismiss stage.
The detailed version
- Colony Insurance Company v. DTC Services Inc. and Novatae Risk Group, LLC · No. 1:24-cv-07466
- Valerie Caproni
- Oct. 24, 2025
Background
Colony Insurance Company sued DTC Services Inc. and later added Novatae Risk Group, LLC. Colony insured DTC, and Novatae was the wholesale insurance broker that helped place DTC’s policy. Colony and Novatae had a Producer Agreement requiring Novatae to report promptly—generally within 48 hours—any incident, complaint, or lawsuit involving a policy Novatae had procured.
An employee of DTC’s subcontractor was injured at a DTC construction site on August 1, 2023. The employee later sued DTC. Novatae received notice of the incident in September 2023 and received the lawsuit’s complaint on February 28, 2024, but did not notify Colony until April 24, 2024. Colony then denied coverage based on a policy exclusion for bodily injury to contractors or their employees. Colony later agreed to provide DTC a “courtesy defense” while reserving its rights concerning coverage.
The amended complaint asserted four claims against Novatae: breach of contract, errors and omissions, contractual indemnification, and common-law indemnification. Novatae moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim. Although Novatae described its motion as seeking dismissal of all claims, its opening brief addressed only the breach-of-contract claim. The court therefore considered the motion as directed only to that claim and did not consider new arguments about other claims raised for the first time in Novatae’s reply brief.
Court’s analysis
Under New York law, a breach-of-contract claim requires allegations of an agreement, the plaintiff’s adequate performance, the defendant’s breach, and damages. Colony alleged that the Producer Agreement required Novatae to report promptly any notice it received; that Colony performed its obligations; that Novatae breached this duty by delaying notice; and that the delay directly caused Colony to incur defense costs.
Novatae argued that it was not Colony’s agent, so its receipt of notice did not constitute legal notice to Colony. The court rejected that argument as a basis for dismissal at this stage because Colony’s claim relied on Novatae’s alleged breach of a direct contractual duty, not on Novatae’s general status as an agent.
The court also declined to decide whether Colony’s defense costs were recoverable damages. Whether those costs were a foreseeable consequence of Novatae’s alleged breach and a reasonable effort to limit Colony’s potential losses was a factual question requiring a more developed record. The court further held that Novatae’s reliance on the voluntary-payment doctrine—an affirmative defense that can bar recovery of payments made with full knowledge of the facts—did not support dismissal because the complaint did not establish that defense on its face.
Disposition
Judge Valerie Caproni denied Novatae’s motion to dismiss. The court also directed the Clerk of Court to terminate the open motion at docket entry 59 and the amended motion at docket entry 72.
Read the full 5-page opinion on CourtListener, the free public archive maintained by the Free Law Project.