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A.P. Pino & Associates, Inc., et al v. Utica Mutual Insurance Co

July 3, 2012

A.P. PINO & ASSOCIATES, INC., ET AL., PLAINTIFFS,
v.
UTICA MUTUAL INSURANCE CO.,
DEFENDANT.



The opinion of the court was delivered by: Schiller, J.

MEMORANDUM

This is an insurance dispute. Plaintiffs A.P. Pino & Associates, Inc. ("APA") and Gerald A. Pino sued Defendant Utica Mutual Insurance Company ("Utica"), seeking: (1) a declaratory judgment that Utica has a duty to defend and indemnify Pino for claims in an underlying action; (2) reformation of the policy to provide the requested coverage; and (3) a judgment of bad faith. Presently before the Court are the parties' cross-motions for summary judgment. For the reasons that follow, the Court grants Defendant's motion and denies Plaintiffs' motion.

I. BACKGROUND

A. The Utica Policy

APA sells life insurance for several companies. (Pls.' Mem. of Law in Supp. of Mot. for Summ. J. [Pls.' Mem.] at 3.) Pino is a partial owner of APA and has worked for APA since 1975. (Pls.' Statement of Undisputed Facts in Supp. of Pls.' Mot. for Summ. J. [Pls.' SOF] ¶ 4; Pls.' Mem. at 3.) APA is the named insured on two Life Insurance Agents and Brokers Errors and Omissions Liability policies issued by Utica for the policy periods of October 15, 2009 to October 15, 2010 and October 15, 2010 to October 15, 2011. (Pls.' SOF ¶ 2.) The policies contain a retroactive date of October 15, 2009, and state that they do not cover loss occurring from acts that took place before the retroactive date. (Pls.' Mot. for Summ. J. [Pls.' Mot.] Ex. C [Utica Policy, 10/15/2009 to 10/15/2010]; Def.'s Mot. Ex. D [Utica Policy, 10/15/2010 to 10/15/2011].)

Prior to seeking coverage by Utica, Pino was insured under an errors and omissions policy issued by NAPA/Scottsdale Insurance Company, with policy periods of June 1, 2008 to June 1, 2009 and June 1, 2009 to June 1, 2010. (Pls.' SOF ¶ 5; Pls.' Mem. at 3.) NAPA/Scottsdale provided Pino with an insurance policy that listed Pino, and not APA, as the named insured. (Pls.' SOF ¶ 6.) At that time, Pino was the only sales agent at APA and only needed an individual errors and omissions insurance policy for himself. (Pls.' Mem. at 4.) Because Pino intended to expand and add additional producers for the agency, he needed to expand insurance to cover all APA producers. (Pls.' SOF ¶ 7; Pls.' Mem. at 4.) Pino understood that NAPA/Scottsdale only insured individuals and not agencies, so he sought a different company to cover APA as an agency. (Pls.' SOF ¶ 6; Def.'s Mot. for Summ. J. [Def.'s Mot.] Ex. L [Pino Dep.] at 23, 74.)

Pino was interested in Utica in part because of its prior acts coverage, which is subject to underwriting approval. (Pls.' SOF ¶ 8; Def.'s Resp. to Pls.' SOF [Def.'s Disputed SOF] ¶ 8.) Utica determines applicability for prior acts coverage and whether to insert a retroactive date in an insurance policy based on whether the insured is a new business entity. (Def.'s Mot. Ex. M [Griffiths Dep.] at 36, 98-99; Pls.' Mem. at 3; Pls.' SOF ¶¶ 15-17; Def.'s Disputed SOF ¶¶ 15-17.) Utica treats a business as a new entity based on the business's insurance coverage history. (Pls.' Mem. at 3; Pls.' SOF ¶¶ 15-17; Def.'s Disputed SOF ¶¶ 15-17.) Pino explained to a Utica representative that he had been insured by NAPA/Scottsdale but that he was seeking coverage for additional APA producers.

(Pls.' SOF ¶ 12; Pino Dep. at 74-75.) In the APA application for Utica insurance, Pino stated that NAPA/Scottsdale was the agency's error and omissions carrier from June 1, 2009 to June 1, 2010. (Pls.' SOF ¶ 18; Pl.'s Mot. Ex. E [APA Application].) Pino failed to answer whether the agency "had not had Errors and Omissions coverage for the last (3) years or have had a gap in coverage." (APA Application.) He selected October 15, 2009 as the desired effective date for the Utica policy. (Id.) As a result of the lack of prior insurance coverage for APA, Utica's underwriter Rebecca Griffiths treated APA as a new business entity throughout Utica's insurance application process and inserted a retroactive date of October 15, 2009 in the insurance policy. (Pls.' SOF ¶¶ 15, 20; Utica Policy, 10/15/2009 to 10/15/2010.)

It is disputed whether Griffiths explained the import of the retroactive date to Pino, but the two insurance policies, the two coverage proposals, and the two sets of terms and conditions, all of which Pino signed, clearly and repeatedly state the retroactive date and its effect. (Id.; Utica Policy, 10/15/2010 to 10/15/2011; Def.'s Mot. Ex. F [Utica Coverage Proposal, 10/9/2009]; Def.'s Mot. Ex. G [Utica Coverage Proposal, 8/10/2010]; Def.'s Mot. Ex. H [Utica Terms and Conditions, 10/9/2009]; Def.'s Mot. Ex. I [Utica Terms and Conditions, 8/10/2010].) The two-page declarations sheet states under "Retroactive Date": "This insurance does not apply to loss, whenever occurring, from 'wrongful acts' which took place before the Retroactive Date, if any, shown below: 10/15/09." (Utica Policy, 10/15/2009 to 10/15/2010.) On the same declarations sheet, the first paragraph under the description of the insurance policy states:

The policy, subject to its terms and conditions, provides full prior acts coverage if no Retroactive Date is entered in the Declarations. If a Retroactive Date is entered in the Declarations, the policy will not apply to loss from "wrongful acts" which took place before the Retroactive Date. The policy will not apply to loss from "wrongful acts" which take place after the expiration of the policy period.

(Id.) The coverage proposal also specifies a retroactive date of October 15, 2009. (Utica Coverage Proposal, 10/9/2009.) Terms and conditions are attached to the coverage proposal, which consist of three paragraphs, the second of which states:

*** The above proposal is for a policy which will contain a retroactive date. This means that the policy will apply only to those claims first made during the policy period that arise out of negligent acts, errors or omissions which occur subsequent to the retroactive date. The retro credit will diminish on next year's renewal. (Utica Terms and Conditions, 10/9/2009.)

Pino testified that he signed the insurance policies, coverage proposals, and terms and conditions, but that he did not read them because "once a policy is explained to me, I don't typically read all of the print." (Pino Dep. 101; Pls.' Mem. at 10-11.) He said that he did not read the retroactive date language, nor would he ...


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