Great Lakes Reinsurance SE v. Peter Herzig

Background

This insurance dispute concerns damage that Hurricane Matthew caused to Herzig’s yacht, the Crescendo, in October 2016. The policy initially provided $600,000 in coverage. During the handling of Herzig’s claim, Great Lakes’ claims agent issued an endorsement reducing the coverage limit to $300,000. Herzig disputed the endorsement and negotiated with Great Lakes about his claim.

On December 29, 2016, Herzig signed a release in exchange for a $175,000 payment. The release discharged Great Lakes and Concept Special Risks Ltd. from claims relating to the yacht’s damage and the resulting insurance claim. It also stated that Herzig would provide a dismissal with prejudice of the complaint in this case.

Great Lakes later sought summary judgment on several claims. In the earlier ruling, the court granted summary judgment on Great Lakes’ claim seeking a declaration that the release was valid and binding, denied summary judgment on two other causes of action, and did not decide Herzig’s counterclaims because Great Lakes had not sought summary judgment on them. The court also struck a declaration from Herzig’s former lawyer, Adam Heffner, and did not consider corresponding portions of Herzig’s declaration.

Herzig’s Motion for Reconsideration

Herzig asked the court to reconsider two issues: the ruling that portions of his declaration contained inadmissible hearsay, and the ruling that he had not shown reasonable reliance on alleged misrepresentations sufficient to support fraudulent inducement of the release.

The court denied reconsideration. It held that Herzig’s statements about what Heffner told him about statements allegedly made by Great Lakes’ lawyer, Steven Goldman, were out-of-court statements offered to prove that Goldman made misrepresentations and threats. The court therefore treated them as hearsay. It rejected Herzig’s argument that the statements were offered only to show their effect on him or Heffner, explaining that his prior submissions used them to prove that Goldman made the alleged statements and that Herzig relied on them.

The court also rejected Herzig’s argument that it should have given him additional notice before considering the hearsay issue and reasonable reliance. The court stated that the evidentiary requirements for declarations submitted at summary judgment provided notice that the materials had to contain admissible evidence, and that Herzig had already addressed the hearsay issue in his briefing.

On fraudulent inducement, the court held that Herzig had not shown reasonable reliance as a matter of law. The court reasoned that each of the three alleged misrepresentations contradicted written documents in Herzig’s possession: the policy did not expressly authorize Great Lakes to reduce the coverage amount unilaterally; the November 2016 endorsement stated that it took effect on November 18, 2016 and was not retroactive; and the endorsement did not make its validity dependent on a premium credit. Because the alleged oral statements contradicted those documents, the court held that Herzig could not reasonably rely on them and therefore was not fraudulently induced to sign the release.

The court also rejected Herzig’s arguments that it had improperly made credibility findings or failed to draw reasonable inferences in his favor. It concluded that the earlier rulings concerned admissibility and the lack of admissible evidence, not improper credibility determinations or speculation about facts that might have existed.

Fourth Counterclaim

Herzig’s Fourth Counterclaim alleged that Great Lakes breached the insurance contract by failing to pay the reasonable cost of repairs. The court had directed Herzig to explain why the release did not bar that counterclaim.

Herzig responded that the counterclaim concerned Great Lakes’ obligation to pay reasonable repair costs as repairs were performed, rather than merely the adequacy of the $175,000 settlement payment. The court found that this response did not address why the release did not apply. The release covered claims arising from the October 2016 property damage and the resulting insurance claim involving the Crescendo. The court held that the Fourth Counterclaim grew out of that damage and insurance claim and was therefore precluded by the release.

The court dismissed Herzig’s Fourth Counterclaim with prejudice.

Great Lakes’ Cross-Motion

Great Lakes asked the court to enter final judgment in its favor on all of Herzig’s counterclaims, arguing that the prior ruling on the release had resolved them. The court denied that request. It explained that the prior summary-judgment ruling was not a final judgment and that the rules Great Lakes invoked for changing or obtaining relief from a judgment did not apply.

The court also noted that Great Lakes had not moved for summary judgment on Herzig’s counterclaims. Because the deadline for such a motion had passed, Great Lakes could not seek summary judgment on those counterclaims through its cross-motion for reconsideration. Although the release might ultimately support judgment on the remaining counterclaims, the court stated that those counterclaims must proceed to trial.

Disposition

The court denied Herzig’s motion for reconsideration, dismissed Herzig’s Fourth Counterclaim with prejudice, and denied Great Lakes’ cross-motion for reconsideration. The Clerk was directed to terminate the two motions.