Berkley Custom Insurance Managers v. York Risk Services Group, Inc.

Background

York Risk Services Group, Inc. moved under Federal Rule of Civil Procedure 56 for summary judgment, or alternatively for partial summary judgment, against Berkley Custom Insurance Managers. A bench trial was scheduled for November 2, 2021.

The parties’ Master Claims Administration Agreement required York to receive and administer claims according to the policies, the agreement, and every applicable code, statute, law, rule, or regulation. It also required York to perform claims services according to written standards, guidelines, instructions, policies, procedures, or limitations approved by Berkley.

York’s Arguments

York’s motion largely relied on its view that New York Insurance Law Section 3420 did not apply to the policies when York conducted its coverage investigation and issued disclaimers in March 2016. York argued that it therefore did not violate duties owed to Berkley and that any violation could not have caused Berkley’s claimed losses.

For the excess policies, York alternatively argued that its disclaimers were timely. York also argued that, even if the disclaimers were untimely and resulted in waiver, it was entitled to partial summary judgment because it followed Berkley’s direction from late 2016 not to submit a disclaimer letter and was required to follow that direction under the parties’ agreement.

New York Insurance Law Section 3420

York relied in substantial part on an Appellate Division decision, Carlson v. American International Group, Inc., which had held that Section 3420 did not apply to a policy issued and delivered outside New York. That decision was issued in July 2015. The New York Court of Appeals granted leave to appeal in February 2016 and reversed the Appellate Division’s Section 3420 ruling in November 2017.

The claims in this case were submitted in October 2015, after the Appellate Division decision but before the Court of Appeals decision. York sent its disclaimer letters in early to mid-March 2016, after leave to appeal had been granted but before the Court of Appeals ruled.

The Court of Appeals described Section 3420’s coverage as having been resolved by an earlier decision and said its decision was not a sharp change in the law. It held that Section 3420 applies to policies covering insureds and risks located in New York. The district court did not resolve how that law applied to the disputed policies on summary judgment.

Issues Remaining for Trial

The court identified genuine disputes about:

Excess Policies and Disposition

The court also denied York’s motion for partial summary judgment concerning the excess policies. Berkley did not dispute York’s assertion that it satisfied its contractual and legal obligations from late 2016 forward. Berkley instead sought a declaratory judgment stating that, if a state court determined that Berkley had waived an exclusion by acting untimely and Berkley had to defend and indemnify the insured, Berkley’s damages would be attributable solely to York’s conduct from October 2015 through March 2016.

The court treated Berkley’s allegations concerning York’s compliance with the applicable contractual and tort standards after that period as abandoned. The remaining claim was limited to whether York’s conduct from October 2015 through March 2016 violated contractual or tort-law duties, caused Berkley damages, and supported declaratory relief. The court also left for trial whether the requested declaratory relief was appropriate or too speculative. Judge Lewis J. Liman concluded: “The motion for summary judgment is DENIED.”