Representing Insureds Since 1970

United States District Court Southern District Of New York


MR. D’ANTONIO: In any event, your Honor thank you very much. And I don't think l have any thing further in summation.

THE COURT: Thank you. Mr. Ginos, any very brief final comment?

MR. GINOS : Your Honor, I think there are many comments I could make, but I think at this point, if you rule against us, we will have to take it up.

THE COURT: Well --

MR. GINOS: The record, is clear. The law, I think, I have to take issue with -- let me take the podium.

I cannot agree with counsel' s characterization of the evidence. I do not believe that these people, meaning Elite, excuse me, that Elite had real authority or apparent authority. And I don't believe that the law supports the verdict that they've requested. I cannot say more, because we take issue, I take issue with so much chat he's got, I could be up here for an hour going over it.

I think the record speaks for itself

THE COURT: I'm going to make a summary statement of findings and conclusions this afternoon, because I find it's useful to do that when everything is fresh in my mind. And then, to the extent that anybody feels that I have not adequately covered some point that you think needs to be covered, you can move under Rule 59, within the time limits for additional findings, and I would ask you net to 6.0 that unless you think you really need it. And indeed, I trust when you hear what I have to say, you'll be content. But that's what I'm going to do instead or going back and spending a week writing an enormous opinion. I've already done that once in this case, and I don't see the need. I do reserve the right to edit the remarks I make when I see them in the draft transcript.

The general nature of the dispute here, save for the aspect of it that deals with the fight over what the policy limit was, is set forth in my opinion denying the plaintiff's motion for summary judgment declaring the policy void, which-is reported at 386 F-Supp.2d 394. Much of the background of the-dispute, in terms of what the policy said, what the agency agreement between Elite and the insurer said, and so forth, is, in fact, undisputed. And it's just as I set it forth in the opinion, and so I don't need to take the tin: to repeat all that this afternoon.

Coming to the nub of it, the first question, given the existence of the antiassignment clause in the policy, is the question what did Bromberg know and when did he know it, to paraphrase the late Senator Howard Baker.

Mr. Bromberg was the principal of Elite Insurance. Elite Insurance was a party to an agency agreement with One Beacon and its predecessor, Commercial Union. There's no dispute here that One Beacon itself, as distinguished from Bromberg, to whatever extent he was an agent, has no knowledge of the change in ownership, control, the transaction involving Old Williamsburg.

So the first question logically is: What did Bromberg know and when does he know it? I've listened and paid close attention to the testimony of the two witnesses) who are really in my view essentially dispositive of this issue Mr. Loevinger and Mr. Bromberg.

On the basis of their testimony, and he other evidence of record, and my evaluation of their respective credibility and persuasiveness, I find that prior to the closing date of the transaction between Old Williamsburg Candle New York, and the acquiring company. Old Williamsburg Candle Delaware, which now, of course, is the insure, that closing date having been March 19, 2002, Mr. Loevinge told Mr. Bromberg that the business was being sold that the form in which the sale was taking place was a sale of the assets or the business to a new corporate entity, new in the sense of different from the old corporate entity, not necessarily newly formed, and that a new group of corporate officers and management were taking over Old Williamburg candle Corporation and the business that it had operated previously.

He made it clear to him that it was a sale of assets, and that, of course, implies that it included an assignment of the insurance policy. Indeed, there were discussions about continuation of the coverage, and so it had to have been clear to Mr. Bromberg that it was the expectation of the insured that the transaction didn’t affect the insurance coverage. He knew that before the closing, and after the closing, it was reported to him that the closing had taken place, chat t e assets had bean sold, and all the circumstances, I find as a fact that Bromberg knew that the assets had been sold, that the business had been sold to a new corporation, and that the policy had been assigned. He knew that long before the anniversary date of the policy; that is to say, he knew it shortly after March 19, 2002, and well before the anniversary date of April 29, 2002.

He never communicated that, as far as I can tell, to the insurer, but he was well aware of it.

In consequence, if Bromberg was an agent of the insurer, and if the knowledge he acquired to which I have just referred was held by him within the scope of his agency, that knowledge is the knowledge of the insurer. I find that he was an agent, and I find that the knowledge was acquired and held by him within the scope of his agency.

I could go on this subject at scope considerable length, but let me just make one or two comments.

First of all, the agency agreement between one Beacon and Elite Insurance Agency, Defendants' Exhibit NNNNN, specifically provides that Elite was an agent of the insurer. Paragraph 1A expressly granted authority to Elite to operate as an agent of the insurer, where the agent is properly licensed, with respect to the lines of business for which commission is specified in commission schedules for addenda attached hereto.

The commission schedules -- I'm sorry, the commission schedules, which I believe are Plaintiff's Exhibits 28 and 29A, make clear that commissions are provided by commercial Union, also One Beacon, it's been stipulated they're the same for this purpose, on a whole range of lines of insurance including ocean marine, and this was an ocean marine policy.

It is true that in paragraph 1B of the agency agreement, there is a grant of authority to solicit, receive, accept, bind, issue, or endorse insurance contacts. to the extent authorized in the statements of binding authority, with certain other qualifications, and that the statement of binding authority attached to the agency agreement states with respect to ocean marine under the heading limits of liability "prior approval required."

I believe that is crystal clear in its meaning. It means that with respect to, and I'll refer to both paragraphs 1A and 1B, I construe it to mean, and I think it is unambiguous in saying that Bromberg, specifically Elite Insurance Agency, was constituted by this agreement on agent on One Beacon and its predecessor, with respect to ocean marine insurance, and that its authority to bind, accept, and endorse ocean marine contracts and the other activities specified in 1B, was limited in that prior approval of the company was needed with respect co limits of liability only.

Thus, I think ifs crystal clear on the face of the agreements that Elite was an agent for all other purposes relating to ocean marine, except as expressly carved out in this agreement, and one of those purposes was receiving notice and information relating to the policies.

Were there ambiguity in this agreements I nevertheless am persuaded as a matter of fact and find as a matter of fact that Bromberg's authority was exactly what I said a "moment ago it was, as a matter of law. So, whichever was the Court of Appeals slices that, as to whether it's clear as a matter of law or ambiguous, I come out the same way. I come out that way as a matter of law. Alternatively, I come out that way as a, matter of fact.

Therefore, I find and conclude that whatever Bromberg knew, and I've already said what I think he I knew about the transaction involving a sale of assets by Ql: Williamsburg New York to Old Williamsburg Delaware waS, as of the moment he learned it, the knowledge of One Beacon, jus. The same as if that information was communicated to One Beacon's board of directors.

Now, that being said, the question is what's the effect here of the antiassignment clause, there being no question that it was assigned, the policy, and that the carrier never approved it. I conclude, ultimately, that it does not affect the coverage one bit. There are several routes to that result. I spell them out in my ruling on summer judgment, although I was not than in a position to make a definitive ruling, and I don't mean to do more than advert to them here.

First of all, just in summary statement, One Beacon renewed the policy on April 29, 2002, and it did, so chargeable with knowledge through Bromberg that the assets had been sold and the policy assigned. When it renewed the policy, knowing that the assets and the policy had been assigned, whatever went before, just is of no moment.

Alternatively, in view of there knowledge, constructive though it may be, their acceptance of premium after knowledge of the assignment equitably stops them to deny coverage under the policy

I also believe that counsel for the insured is correct in saying that the circumstances for reformatted on are satisfied here, on the grounds of mutual mistake as self forth in Court Tobacco, and the more recent decision in the Eastern District of New York by Judge Gershon and the citatic, for which has just escaped me but will pop up the minute anybody shepherdizes or key cites the Court Tobacco case to which counsel referred. So there isn't any doubt in my mind at all that the carrier is liable. The parties have stipulated that the loss exceeds the policy limits, so the next question is what were the policy limits.

There's no dispute that until on or about December 24, 2002,the policy limit was $2-1/2 million. On December 23, Mr. Mazor, of old Williamsburg Candle, telephone Mr. Bromberg at Elite, and he told him that he wanted to reduce the policy limits on, if memory serves, 300 Liberty Avenue Premises, in Brooklyn, which were already on the policy, and institute coverage or, in effect, transfer that million dollars in coverage to a new location, 315 Liberty Avenue in Brooklyn, which I gather was across the street. In other words, a request was not ultimately to change the amount of coverage but it was to divide the 2-1/2 million in coverage differently with one million of it being shifted to the new location at 315 Liberty Avenue.

Now, as Mr. D'Antonio said, that's the point where it all gets fuzzy. But having listened to this for two days, having read all this material, I don't find it so fuzzy at all.

On December 23, 2002, Elite sent Mr. Palmieri a fax, Plaintiff's Exhibit 85, requesting a reduction of the policy limit on 300 Liberty by a million dollars and a shift of that million dollars of coverage to 315 Liberty Avenue.

On December 24, in Defendants' Exhibit LLLLLL, Mr. Palmieri responded, and he said, in relevant part, that before he could approve the location and the limit requested, he needed to get some COPE information on it. COPE information is information relating to construction, protection, and other factors that are critical in deciding whether to underwrite the risk.

since the request to reduce coverage on 3Q0 Liberty and to put coverage in place on 315 were interrelated, the point of it all toeing to accommodate a shift of inventory from one location to the other, they were interrelated. It was well known to everybody and understood by everybody that there was no suggestion of a desire merely to reduce coverage at 3Q0 Liberty unless coverage was going to be underwritten on 315 Liberty. Everybody knew that. Nobody really disputes that proposition.

So, when Mr. Palmieri responded in the December 24 fax by saying before I can approve the location, he needed the COPE information, he intended to communicate and - is in fact communicated that he was not agreeing either to reduce the limits on 300 Liberty or to institute coverage at 315 Liberty.

Now, there's this claim that there was a telephone conversation between Mr. Palmieri and Mr. Bromberg or conceivably Dena Segall at Elite. The first thing I would note about it is that Ms. Segall was never called as a witness. No explanation for her absence has been produced. In the circumstances, I infer from the failure of One Beacon, who, after all, isan indemnity, to some extent, of Elite with respect to the loss in this case that her testimony would have been adverse to One Beacon had she bean called. Nevertheless. I don't rely on that. I would reach the same result in the absence of the inference.

Now, so far as Mr. Bromberg and Mr. palmieri are concerned, with all due respect, I don't believe either one of them about this issue. Their testimony was all over the place. They contradicted themselves and they contradicted one another. Mr. Bromberg testified yesterday that in this conversation that he claims he had, Mr. palmieri, in direct contradiction of the memorandum Palmieri wrote, Defendants' Exhibit LLLLLL, agreed to make the change in coverage.

Today, he flatly admitted that he was wrong about that. Having thought about it more and looks at all the evidence, he doesn't think that's what happened. Indeed, I take from Mr. Bromberg that his present view of events is that what Palmieri said when he spoke to him, if need he spoke to him, which I severely doubt, was I hear you, Mr. Bromberg, put in in writing, I'll get back to you.

In fact, on two occasions yesterday, amidst all the other things he said, that's what Mr. Bromberg testified to, once at page 99, lines 19 to 33, and a second time at page 144, lines 17 to 22.

Now we have Mr. Palmieri. I listened to him. I can't square the account of this conversation with his memorandum, Defendants' Exhibit LLLLLL. He indeed realizes the problem because today he comes in with this story that he wrote memorandum saying he couldn't approve the change because he didn't have the COPE information, but now the conversation takes place after the memo, and in that conversation supposedly gives him all the COPE information or Ivy.

well, that's really interesting because then we have this purported handwritten note by Palmieri, supposedly on December 24, Defandeirits' Exhibit KKKKKK, which conveniently enough, purports to record that Palmieri agreed to the change in coverage, presumably in this telephone call if there ever was a telephone call.

There' s not anything in the note indicating that COPE information was provided or what it was. Yet the admits that was critical to the decision on whether to underwrite the risk. Not only is that the case, we have a memorandum from Palmieri to Elite, dated February 11, 2003,Almost two months later, in which he repeats, "before I can approve the location and limit requested, I need to get some COPE information it." That's Defendants' Exhibit A1.

There's a sports program I sometime listen to, and when a caller calls in and says something really ridiculous, the guy who hosts the program says give me a break.

Give ma a break- If Palmieri is writing to Elite in February, saying I can't approve this until I get the COPE information, how can he sit here with a straight face and tell me that he got it orally on the phone on December 24, made a memo of half the conversation and doesn't mention the COPE information? It doesn't even withstand the straight face test. I understand he's probably under all corts of business pressures here. But I just don't believe it.

That, handwritten MM, in my view, is not accurate. It's not credible, and It wasn't written on December 24. In ray view, it was written on December 27 fire. So, there we are. The state of play on Christmas Eve, when ever/body goes home, under the mistletoe, is that there's a request to change the coverage, there's a request by the carrier for COPE information. That's where it stands. And that's where it. stands when, the fire breaks out.

Palmieri learns on December 2S, even though it's still the weekend or Christmas holiday, that there’? been a fire and a big loss. He goes into the office on December 27, and he writes Plaintiff's Exhibit 151, to Elite, in which he purports to confirm that the limit of liability had been reduced on 300 and coverage put in place on 315 Liberty Avenue.

It's not what happened. It's a memo designed to cover himself- And to cover the company. I don't believe it.

Furthermore, it's even more interesting than that, because plaintiff's Exhibit 151, the December 27 memorandum, says I need the checklist; in other words, the COPE information. But, wait a minute. What does he need it for if he got it on the phone on December 24? Now, I understand he wants to confirm in writing. That's a theoretical explanation of. it. It's not one I accept. And then, of course, before very long, the company churns out the warehouse endorsement, changing the coverage, and attempting to make it retroactive to December 24. It was not an honest bit of work

I heard Mr. Palmieri use a phrase, the essence of which was, and I'm not quoting him accurately but time his business depends on trust and confidence, wel1, I don't trust this evidence and I have no confidence in it. It was not an honest day's work.

So the policy limit, I find, was $2 1/2 million at the time of the loss. In light of the stipulation on damages, the defendant is entitled to judgment on the counterclaim in the amount of $2.5 million.

There's also the question of prejudgment interest which lies in my discretion. I haven't the slightest doubt that the plaintiff should be awarded prejudgment interest. Indeed, that is the default rule, in admiralty in the absence of exceptional circumstances. There are no exceptional circumstances in this case that cut in favor of the carrier. The exceptional circumstances all cut against the carrier, and therefore prejudgment interest is awarded.

The rate is also in my discretion. There is a Second Circuit case, Independent Bulk Transport, 5TS F.2d 23, that upheld an award o£ 12 percent, There's a more recent case, called Central Hudson Gas and Electric v. Empress. Naviera Santa, 56 F.3d 359, 372, that upheld 9 percent. I’ve concluded that -the amount I should award is 9 percent. The independent Bulk Transport, case was decided in. 19S2. The interest rate environment at that time was a lot different then it is today. I think 12 percent would be excessive. It would be at least in my judgment here in the nature of punitive damages, which are neither sought nor appropriate in this case. But 9 percent, I do think, is appropriate, it is probably, it' certainly higher than the T-Bill rate, but in all the circumstances here, especially considering the manner in which the case was litigated by the insurer, it seems co me entirely appropriate.

So, that is the ruling. Judgment for the defendant on the counterclaim in the amount o£ $2.3 million with interest, simple interest at the rate o£ 9 percent from December 26, 2002, to the date of entry of judgment.

The complaint for declaratory relief is dismissed, because the ruling on the prayer for Court; relief fully resolves the controversy.

Now, if there is, believe me, I'm not inviting reargument, but if somebody thinks I made I glaring factual error, that is I just missed something, not that you don't agree with me, or there's an issue that suddenly appears to you I should resolve today, please call me and I'll do whatever’s appropriate. Otherwise, you have your remedies under Rule 59.


All right. I thank everybody. And I wish you all a good weekend, and I'm sad to say I suppose you have to leave all this stuff here in case there’s a motion, but as soon as that's resolved, please get it out of here.