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Insurance Commissioner of the State of Connecticut v. Novotny

June 11, 2009

THE INSURANCE COMMISSIONER OF THE STATE OF CONNECTICUT, AS LIQUIDATOR OF THE CONNECTICUT SURETY COMPANY, PLAINTIFF,
v.
RUDOLPH A. NOVOTNY AND KAREN J. NOVOTNY, DEFENDANTS.



The opinion of the court was delivered by: Sean J. McLaughlin United States District Judge

Judge Sean J. McLaughlin

MEMORANDUM OPINION

McLAUGHLIN, SEAN J., J.

This matter is before the Court upon cross-motions for summary judgment filed by plaintiff, The Insurance Commissioner of Connecticut ("Plaintiff"), as Liquidator of the Connecticut Surety Company ("CSC"), and by defendants, Rudolph A. Novotny and Karen J. Novotny ("Defendants").

I. BACKGROUND

This is an action instituted by the Insurance Commissioner of the State of Connecticut on behalf of CSC, a Connecticut-domiciled surety company that issues commercial and contract surety and fidelity bonds. Defendants, as managing members of RAN Oil Company ("RAN Oil"), a Pennsylvania limited liability company, executed a General Indemnity Agreement ("the Agreement") with CSC on April 12, 1999. In connection with the Agreement, CSC issued a series of bonds on behalf of RAN Oil, listing the Pennsylvania Department of Revenue ("The Department") as beneficiary. The Agreement obligated Defendants to indemnify and reimburse CSC for all sums CSC paid out "in and about the matters contemplated by" the Agreement. The Agreement further obligated Defendants to: exonerate, hold harmless, indemnify and keep indemnified [CSC] from and against any and all claims, demands and liability for loss, costs, and expenses of whatsoever kind or nature, including court costs, counsel fees, costs of investigation, and from and against any and all other such losses and expenses which [CSC] may sustain due to: (A) Execution or having procured the execution of the BONDS;

(B) Failure of . . . [Defendants] to perform or comply with any of the covenants or conditions of this Agreement;

(C) Enforcement of any of the covenants or conditions of this Agreement;

(D) Performance of any investigation, obtaining or attempting to obtain a release, or recovering or attempting to recover loss or unpaid bond premium in connection with any BOND; [and]

(E) Prosecution or defense of any action or claim made in connection with any BOND, whether [CSC] at its discretion, elects to employ its own counsel or permits, or requires . . . [Defendants] to make arrangements for [CSC's] legal representation.

(Agreement, ¶ 3).

Following the execution of the Agreement, RAN Oil failed to pay fuel taxes owed to the Department. On September 13, 2002, the Department filed claims with CSC on the bonds to recover RAN Oil's unpaid taxes in the amount of $1,144,747.72. On May 4, 2006, following investigation and negotiations with the Department, CSC and the Department entered into a settlement agreement whereby all claims against CSC were resolved in consideration of CSC's agreement to pay the Department the amount of $425,000.00. CSC tendered this payment on May 30, 2006.

On August 18, 2006, CSC submitted a written demand for indemnification upon the Defendants pursuant to the Agreement. Defendants failed to respond. Thereafter, on September 24, 2007, Plaintiff instituted this action behalf of CSC pursuant to the powers conferred upon the Insurance Commissioner under Connecticut's Insurers Rehabilitation and Liquidation Act, Conn. Gen. Stat. §§ 38a-903 et seq.

Plaintiff and Defendants filed cross-motions for summary judgment on December 2, 2008. In its motion, Plaintiff asserts that Defendants violated the terms of the Agreement with CSC by refusing to indemnify and reimburse CSC for its payment to the Department of $425,000.00 in satisfaction of the Department's tax claims.*fn1 The Defendants cross-motion is premised exclusively on the contention that the Plaintiff's cause of action is barred by the running of the statute of limitations.*fn2

II. STANDARD OF REVIEW

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In order to withstand a motion for summary judgment, the non-moving party must "make a showing sufficient to establish the existence of [each] element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In evaluating whether the non-moving party has established each necessary element, the Court must grant all reasonable inferences from the evidence to the non-moving party. Knabe v. Boury Corp., 114 F.3d 407, 410, n.4 (3d Cir. 1997) (citingMatsushita Elec. Indus. Co. v. Zenith Radio ...


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