SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK: IAS PART 53

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WESTCHESTER FIRE INSURANCE CO., THE

NORTH RIVER INSURANCE CO.,

Plaintiffs,

-against-

                          Index No.602970/98

METROPOLITAN LIFE INSURANCE CO., THE

TRAVELERS INSURANCE CO., THE TRAVELERS

INDEMNITY CO., THE TRAVELERS INDEMNITY

CO. OF AMERICA, NATIONAL UNION FIRE

INSURANCE CO. OF PITTSBURGH, PA., THE

AETNA CASUALTY & SURETY COMPANY, AETNA

CASUALTY & SURETY CO. OF AMERICA, AETNA

COMMERCIAL INSURANCE CO., AETNA

INSURANCE CO., ROYAL INSURANCE CO. OF

AMERICA, ROYAL INDEMNITY CO., ROYAL

SURPLUS LINES INSURANCE CO., CIGNA

INSURANCE CO., CIGNA PROPERTY

CASUALTY CO., CIGNA INDEMNITY

INSURANCE CO., INSURANCE COMPANY OF

NORTH AMERICA, PACIFIC EMPLOYERS

INSURANCE CO., AMERICAN EXCESS

INSURANCE ASSN., LEXINGTON NATIONAL

INSURANCE CORPORATE, FIREMAN'S FUND

INSURANCE CO., NATIONAL SURETY CORP., AIU

INSURANCE CO., TRANSAMERICA INSURANCE

CO., now known as TIG INSURANCE COMPANY,

TRANSAMERICA INSURANCE CO. OF AMERICA,

now known as TIG INSURANCE CO. OF AMERICA,

TRANSAMERICA INSURANCE CO. OF NEW YORK,

now known as TIG INSURANCE CO. OF NEW YORK,

THE CONSTITUTION STATE INSURANCE CO., now

known as THE TRAVELERS INSURANCE GROUP,

INC., INSURANCE COMPANY OF THE STATE OF

PENNSYLVANIA, ZURICH INSURANCE CO., NEW

ENGLAND INSURANCE CO., RELIANCE

NATIONAL INSURANCE, RELIANCE NATIONAL

INSURANCE CO. OF NEW YORK, FEDERAL

INSURANCE CO., NEW ENGLAND RELIANCE

CORP., GRANITE STATE INSURANCE CO., THE

HOME INSURANCE COMPANY, STARR EXCESS

LIABILITY INSURANCE COMPANY, LTD., TWIN

CITY FIRE INSURANCE COMPANY, UNITED

STATES FIDELITY & GUARANTY COMPANY,

TAMARACK INSURANCE COMPANY, TRAVELERS

INDEMNITY CO. OF ILLINOIS, AMERICAN

NATIONAL FIRE INSURANCE CO., and

AMERICAN ZURICH INSURANCE CO.,

Defendants.

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CHARLES EDWARD RAMOS, J.S.C.:

Defendant Metropolitan Life Insurance Company ("MetLife") moves, pursuant to CPLR 2221, for an order granting renewal and reargument of this Court's January 21, 2000 decision and order as it pertains to the duty of MetLife's insurance companies to defend and indemnify MetLife in a number of underlying actions.

In the event this Court reconsiders any of the grounds raised by MetLife, defendant United States Fidelity & Guaranty Company ("USF&G") contends that the Court should consider its cross motion for reargument to address additional coverage defenses previously raised but not discussed in the January 21 decision, including late notice, known loss principle, professional services exclusion, and lack of bodily injury.

Defendants The Travelers Indemnity Company, The Travelers Indemnity Company of America, and The Travelers Indemnity Company of Illinois (collectively, "Travelers") cross-move for an order, pursuant to CPLR 2221, granting leave to renew and reargue the January 21 decision upon the ground that the Travelers' policies at issue do contain a definition of the term "occurrence" which justifies denying MetLife's motion for partial summary judgment on a second independent ground.

The following defendant insurance companies move for an order supplementing the record nunc pro tunc and for partial summary judgment pursuant to CPLR 3212, on the ground that they are entitled to partial summary judgment for the same reasons as set forth in the January 21 decision: ACE Insurance Company (formerly known as Cigna Insurance Co.), ACE Property & Casualty Company (formerly known as CIGNA Property & Casualty Company), ACE Indemnity Insurance Company (formerly known as CIGNA Indemnity Insurance Company), Century Indemnity Company (as successor to CCI Insurance Company, as successor to Insurance Company of North America), and Pacific Employers Insurance Company (collectively, "ACE"); Federal Insurance Company ("Federal"); TIG Insurance Company (formerly known as Transamerica Insurance Company), TIG Insurance Corporation of America (formerly known as Transamerica Insurance Corporation of America), and TIG Insurance Company of New York (formerly known as Transamerica Insurance Company of New York) (collectively, "TIG"); Royal Insurance Company of America, Royal & SunAlliance (formerly known as Royal Indemnity Company), and Royal Surplus Lines Insurance Company (collectively, "Royal"); Fireman's Fund Insurance Company ("Fireman's"); National Surety Insurance Company ("National"); Twin City Fire Insurance Company ("Twin City"); New England Insurance Company and New England Reinsurance Corporation (collectively, "New England"); The Home Insurance Company ("The Home"); Reliance Insurance Company (formerly known as Reliance National Insurance company) and Reliance National Insurance (collectively, "Reliance"); Insurance Company of the State of Pennsylvania ("Pennsylvania"); Granite State Insurance Company ("Granite"); AIU Insurance Company ("AIU"); and Lexington Insurance Company ("Lexington").

Travelers also moves to supplement the record nunc pro tunc and requests that partial summary judgment be extended and granted as to its excess general policies issued to MetLife.

The instant insurance action involves multiple defendant insurers who seek to disclaim liability for underlying actions which allege that MetLife and its sales agents engaged in a pattern and practice of fraud and deceit in their sale of life insurance policies. The primary issue resolved by the Court in the January 21 decision and order was whether the insurance policies issued to MetLife by certain defendant insurers covered the allegations which MetLife is being sued for in nineteen underlying actions. This Court concluded that the policies do not.

Specifically, this Court held that plaintiff Westchester Fire Insurance Company ("Westchester"), defendant National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union"), and Travelers had no obligation to defend MetLife in connection with eighteen underlying lawsuits for which MetLife sought coverage. The decision and order further granted partial summary judgment to defendant American National Fire Insurance Company ("American National") and USF&G, as the policies issued by these insurers were similar to Westchester's policies.

This Court found that the exclusions at issue extended to the sale of life insurance policies and concluded that the alleged fraudulent sales practices were part of MetLife's insurance business. See, Decision and Order, at 21 ("it is difficult to imagine a practice more unique to the insurance industry than the sale of insurance policies."). This Court further reasoned that the underlying actions did not allege a covered "occurrence" as defined by the policies, as the underlying complaints allege deliberate, intentional, and fraudulent schemes conducted with the purpose of deceiving MetLife's clients. The decision and order further concluded that Westchester has a duty to defend a defamation claim in Dong Li, et al. v Metropolitan Life Insurance Company, Index No. 932-9607 (Circuit Ct City of St. Louis, MO).

In now moving for renewal and reargument, MetLife puts forth five major arguments: (1) the definition of "insurance services" found in Westchester's policies establishes that the Westchester policies do not exclude coverage for the underlying actions; (2) the National Union, American National, and USF&G exclusions do not bar coverage; (3) this Court's opinion wrongly omits any discussion of Liberty Life Ins. Co. v Travelers Indemnity Co. of Illinois, a Fourth Circuit unpublished opinion; (4) Agoado Realty Corp. v United International Ins. Co., 260 AD2d 112 (1^st Dept 1999), an opinion issued after the summary judgment motions were briefed and argued, establishes that the underlying actions allege a covered occurrence; and (5) Westchester must defend MetLife for the entire Dong Li action, not only the defamation claim.¹

A motion for leave to renew "shall be based upon new facts not offered on the prior motion that would change the prior determination" and "shall contain reasonable justification for the failure to present such facts on the prior motion." CPLR 2221(e)(2), (3). A motion for leave to reargue, pursuant to CPLR 2221, "may be granted only upon a showing 'that the court overlooked or misapprehended the facts or the law or for some reason mistakenly arrived at its earlier decision.'" William P. Pahl Equip. Corp. v Kassis, 182 AD2d 22, 27 (1^st Dept 1992) (quoting Schneider v Solowey, 141 AD2d 813 [2d Dept 1988]). The purpose of a motion for reargument "is not to serve as a vehicle to permit the unsuccessful party to argue once again the very questions previously decided." Foley v Roche, 68 AD2d 558, 567 (1^st Dept 1979). MetLife's motion is denied in its entirety except as it relates to the Dong Li action, as MetLife has either put forth recycled arguments that are virtually identical to those previously offered or now advocates arguments that are wholly without merit.

MetLife contends that the policies' definition of "insurance services" ("claims handling, engineering, inspection or safety services") precludes the exclusion from taking effect, as none of these services are involved in the underlying actions. The Court rejects such strained reasoning. As previously stated in the January 21 decision and order, Westchester's policy contains an Insurance-Related Operations Exclusion, which provides that the policy does not apply to bodily injury arising out of four specified services, including "[t]he existence of any contract to provide insurance coverage." MetLife, in an attempt to avoid this plain wording of the insurance policy, cites to the third and fourth provisions which deal with "insurance services." Yet this Court did not rely on these provisions in deciding that the exclusion applies, for precisely the reason that MetLife now cites to them: they are simply irrelevant to the claims alleged in the underlying actions. But this does not change the conclusion that other relevant policy provisions, i.e., contract to provide insurance coverage, do justify a finding that the exclusion is enforceable.

Nor does the Court choose to reconsider its interpretation of Reliance Ins. Co. v National Union Fire Ins. Co. of Pittsburgh, PA, 262 AD2d 64 (1^st Dept 1999), as advocated by MetLife. As already stated, such is not the purpose of a motion to reargue. See, Foley, supra, 68 AD2d, at 567. In any event, this Court has already determined that where conduct is excluded from coverage, negligent claims premised on that conduct are also excluded. Accordingly, the National Union, American National, and USF&G exclusions bar coverage as well.

The mere fact that this Court did not previously address Liberty Life Ins. Co. v Travelers Indemnity Co. of Illinois, 181 F3d 88 (table), 1999 WL 417436 (4^th Cir 1999) is of no significance for a number of reasons. First, the Fourth Circuit decision, which applied South Carolina law, is non-binding upon this Court. Second, although the Liberty Life court found that negligent supervision claims arising out of fraudulent sales practices are separate from, rather than derivative of, the alleged fraud and thus covered under the policies, such is not the law in New York. See, Mount Vernon Fire Ins. Co. v Creative Housing Ltd., 88 NY2d 347, 352 (1996) (where conduct is excluded from coverage, negligence claims premised on that conduct are also excluded). Third, the decision is an unpublished one and under the Fourth Circuit's own rules, citation thereto is "disfavored." United States Court of Appeals for the Fourth Circuit, Local Rule 36(c).²

MetLife's contention that Agoado Realty Corp. v United International Ins. Co., 260 AD2d 112 (1^st Dept 1999), supports a finding that the underlying actions allege a covered occurrence is unpersuasive. Since the filing of the parties' papers on the present motions, the Court of Appeals has affirmed the Appellate Division.³ See, Agoado Realty Corp. v United International Ins. Co., ___ NY2d ___, 2000 WL 782134 (June 20, 2000). In concluding that a landlord's alleged negligent security, which led to the murder of a tenant, was an accident covered by the landlord's general liability insurance policy, the Court of Appeals noted that the incident was "unexpected, unusual and unforeseeable." Id., at *2. The same cannot be said in the instant case, as the underlying actions allege that MetLife, an insurer by profession, participated in the alleged schemes to sell insurance nationwide. Rather than being unexpected, unusual, or unforeseeable, the underlying actions allege that MetLife fully intended to engage in a pattern of fraud and deceit in selling life insurance policies.

MetLife argues that "the Underlying Actions do not allege that MetLife intended to cause harm to its policyholders through its alleged negligent supervision. Therefore, the underlying conduct is not excluded from coverage, and under Agoado Realty, negligence claims premised on that covered underlying conduct are therefore covered as well." MetLife Memo of Law, at 13. The Court rejects such reasoning. MetLife may not demand coverage from its insurers on the ground that it did not intend the resulting injury when it is plain from the underlying actions that it did intend the alleged fraudulent conduct. See, Shared-Interest Management Inc. v Travelers Property Cas. Corp., 265 AD2d 622, 623 (3d Dept 1999) ("there is considerable authority to the effect that an intentional act does not constitute an accident or an occurrence") (citations omitted); Commercial Union Assur. Co., PLC v Oak Park Marina, Inc., 198 F3d 55, 60 (2d Cir 1999) (negligent infliction of emotional distress claims arising in a lawsuit where employees of a marina installed a hidden video camera in a restroom and later aired videos in a local bar were not covered by insurer as there was nothing accidental about the alleged conduct; "the harm 'arose out of' conduct that was indisputably an intentional, albeit furtive, wrong"). In any event, as the Appellate Division recently noted, "it is the act giving rise to liability that is determinative, not the theories of liability alleged." United States Fire Ins. Co. v New York Marine and General Ins. Co., ___ AD2d ___, 706 NYS2d 377, 379 (1^st Dept 2000).

MetLife's motion to reargue is granted as to the Dong Li action, and the Court concludes that Westchester must defend MetLife and pay its defense costs in connection with all claims in Dong Li. As this Court noted in its January 21 decision and order, "[i]f any of the claims against the insured arise from covered events, the insurer is required to defend the entire action." Frontier Insulation Contractors, Inc. v Merchants Mutual Ins. Co., 91 NY2d 169, 175 (1997). Because it was previously determined that Westchester is bound to defend MetLife as to the defamation cause of action, Westchester must defend the entire action.⁴

B. USF&G Cross Motion to Reargue

The Court has not changed any of the January 21 decision and order as it relates to USF&G. Accordingly, USF&G's motion to reargue in the event any of MetLife's grounds are reconsidered is denied as moot.

C. Travelers Cross Motion to Renew & Reargue

In moving to renew and reargue, Travelers claims that the policies at issue contain a definition of the term "occurrence" which justifies denying MetLife's motion for partial summary judgment on a second independent ground. Subsequent to the filing of the cross motion, Travelers and MetLife have agreed that if Travelers limits its cross motion to the primary policies in effect from January 1, 1986 through December 31, 1996, MetLife would join in stipulating that those policies contain an occurrence definition. See, Taylor Reply Aff., at ¶ 4. Accordingly, the January 21 decision and order is amended so that the decision with regard to occurrence applies to the Travelers primary policies for those periods.

D. Insurers' Motions to Supplement the Record Nunc Pro Tunc & Partial Summary Judgment

ACE, Federal, TIG, Royal, Fireman's, National, Twin City, New England, The Home, Reliance, Pennsylvania, Granite, AIU, and Lexington contend that as their relevant policies contain language identical to the policies of the insurers who were granted partial summary judgment, the moving insurers should be permitted to supplement the record nunc pro tunc and be granted partial summary judgment as well. In addition, Travelers moves to supplement the record nunc pro tunc and requests that partial summary judgment be extended and granted as to its excess policies issued to MetLife.⁵

In opposing the motions, MetLife argues that an amendment of the January 21 decision and order to include insurance policies not at issue or considered during the original briefing and argument goes well beyond the bounds of a proper nunc pro tunc motion. MetLife further opposes the partial summary judgment motions for the same reasons as originally proffered.

It is well established that "[c]ourts may cure mistakes, defects or irregularities in their judgments and 'may even correct matters of substance where the record offers irrefutable support for such a correction' as long as a substantial right of a party is not prejudiced." Ungar v Ensign Bank FSB, 196 AD2d 204, 208 (1^st Dept 1994) (quoting Solomon v City of New York, 127 AD2d 827, 828 [1987]). See, also, Winckel v Atlantic Rentals & Sales, Inc., 195 AD2d 599, 601 (2d Dept 1993) ("amendment of a judgment will not be allowed where the delay prejudices a substantial right of a party"). Furthermore, the CPLR provides that "[t]he civil practice law and rules shall be liberally construed to secure the just, speedy and inexpensive determination of every civil judicial proceeding." CPLR 104.

Granting the moving insurers the motions to supplement the record nunc pro tunc and for partial summary judgment would not only minimize unnecessary motion practice, but would also expedite the resolution of this action, avoid a piecemeal appeal to numerous orders, and avoid an unwarranted expenditure of this Court's limited resources. Although the Court did not previously examine the insurance policies at issue, there is simply no reason that the conclusions of the January 21 decision should not apply to these insurers. There is no distinction between the language of the policies examined in the previous motions and those now at issue. Nor are there any different arguments made by MetLife pertaining to the language of the policies now before the Court. In fact, MetLife acknowledges that "to the extent any policy follows form to one or more of the Summary Judgment Policies, it should be interpreted in the same manner, and deemed to have the same terms and conditions, as the policy to which it follows form." MetLife Memo in Opposition, at 4. The motions to supplement the record nunc pro tunc and for partial summary judgment are therefore granted.

Accordingly, it is

ORDERED that MetLife's motion to renew and reargue is granted; and it is further

ORDERED that upon reargument Westchester is to defend MetLife and pay MetLife's defense costs in Dong Li, et al. v Metropolitan Life Ins. Co., Index No. 932-9607 (Circuit Ct City of St. Louis, MO) as to the entire action; and it is further

ORDERED that the cross motion by USF&G is denied as moot; and it is further

ORDERED that the January 21, 2000 decision and order is amended so that the discussion with regard to occurrence applies to the Travelers primary policies for the periods January 1, 1986 through December 31, 1996; and it is further

ORDERED that the motions by ACE, Federal, TIG, Royal, Fireman's, National, Twin City, New England, The Home, Reliance, Pennsylvania, Granite, AIU, Lexington, and Travelers to supplement the record nunc pro tunc and for partial summary judgment is granted as to the policies stated in the opinion for the same reasons as those stated in this Court's January 21, 2000 decision and order.

Dated: July 31, 2000

ENTER:

______________________________

J.S.C.

² This Court is fully aware that Rule 36(c) permits citation of an unpublished decision if "there is no published opinion that would serve as well . . . ." This requirement has not been met, however, as New York case law establishes that the premise upon which Liberty Life is based is inapplicable in this jurisdiction.

³ The Court of Appeals did modify the Appellate Division with respect to reinstating certain unrelated affirmative defenses.

⁴ Westchester attempts to convince the Court that it should give full effect to the Insurance and Related Operations Exclusion in the context of the personal injury claim of defamation. The Court refuses to address this contention, as Westchester neither moved nor cross-moved for reargument, and the time to do so has since elapsed.

⁵ The insurer and time periods of the policies at issue are: Federal (excess commercial policies January 1, 1993-January 1, 1999); TIG (excess general policies January 1, 1988-January 1, 1997); Travelers (excess general policies January 1, 1986-January 1, 1997); Royal (excess general policies March 19, 1986-January 1, 1990 and January 1, 1991-January 1997); Fireman's (excess general policies January 1, 1989-January 1, 1991); National (excess general policies January 1, 1988-January 1, 1989); Twin City (excess general policies January 1, 1993-January 1, 1996); New England (excess general policies January 1, 1989-January 1, 1993); The Home (excess general policies January 1, 1993-January 1, 1996); Reliance (excess general policies January 1, 1989-January 1, 1997); Pennsylvania (excess general policy January 22, 1988-January 1, 1989); Granite (excess general policy January 1, 1985-January 1, 1986); AIU (excess general policies January 1, 1988-January 1, 1991); Lexington (excess general policies January 1, 1988-January 1, 1995); and ACE (excess general policies January 1, 1988-January 1, 1994, March 18, 1986-January 1, 1987, March 24, 1986-January 1, 1987, and January 1, 1995-January 1, 1997). MetLife's contention that ACE may not have issued certain of these policies to MetLife is contradicted by MetLife's own admission in Alabama litigation. See, Hughes Reply Aff., Exh. 1, Complaint, at ¶ 59.