Opinion
22-CV-2764 (JLR) (RWL)
06-22-2023
HARLEYSVILLE INSURANCE COMPANY, Plaintiff, v. CERTIFIED TESTING LABORATORIES, INC. and EDGAR TOBAR, Defendants
REPORT AND RECOMMENDATION TO HON. JENNIFER L. ROCHON: DEFAULT JUDGMENT
ROBERT W. LEHRBURGER, UNITED STATES MAGISTRATE JUDGE
Plaintiff Harleysville Insurance Company (“Plaintiff” or “Harleysville”) filed this action for declaratory judgment that it has no duty to defend or indemnify its policyholder, Certified Testing Laboratories Inc. (“Certified”), in connection with the personal injury lawsuit pending in New York State court, captioned Edgar Tobar -against- 1176 Eastchester Operating, LLC, et al., Index No. 20988/2015E (the “Underlying Action”). Certified and Edgar Tobar (“Tobar”) (collectively “Defendants”) failed to answer the complaint or otherwise appear. Harleysville now moves for entry of default judgment in its favor. For the reasons set forth below, I recommend that the Court enter default judgment awarding the declaratory relief requested.
The facts are drawn from the Complaint (Dkt. 1) (“Compl.”), the Declaration of Plaintiff's attorney Thomas Casella dated March 14, 2023 (Dkt. 23) (“Casella Decl.”), and the exhibits attached thereto.
A. The Insurance Policy
On December 31, 2013, Harleysville issued to Certified a commercial insurance policy package, including commercial property and commercial general liability insurance covering the period from December 31, 2013 to December 31, 2014 (the “Policy”). (Compl. ¶ 10; Casella Decl. Ex. A.) The Policy obligates Harleysville to defend and indemnify Certified for losses resulting from bodily injury or property damage caused by an occurrence as defined in the Policy. (Compl. ¶¶ 12-13.)
The Policy also contains numerous exclusions of coverage including, as relevant here, any injury or damage arising out of testing errors or omissions (the “Testing Exclusion”). Specifically, the insurance “does not apply to ‘bodily injury', ‘property damage' or ‘personal and advertising injury' arising out of”:
1. An error, omission, defect or deficiency in:
a. Any test performed; or
b. An evaluation, a consultation or advice given, by or on behalf of any insured;
2. The reporting of or reliance upon any such test, evaluation, consultation or advice; or
3. An error, omission, defect or deficiency in experimental data or the insured's interpretation of that data.(Compl. ¶ 15; Casella Decl. Ex. A at Dkt. 23-1 ECF 81.) The Policy also excludes, with certain exceptions, coverage for bodily injury or property damage “for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement” (the “Contract Exclusion”). (Compl. ¶ 16; Casella Decl. Ex. A at Dkt. 23-1 ECF 53.)
B. The Underlying Action
On February 19, 2015, Tobar commenced the Underlying Action in New York State Supreme Court, Bronx County. (Compl. ¶ 17.) Tobar claimed that he was injured at a worksite during pile driving operations that were being performed by entities other than Certified. (Compl. ¶ 30.)
Although not named as a defendant when the Underlying Action was commenced, Certified was brought into the litigation through a series of third-party claims, counterclaims, and cross claims alleging that Tobar's injuries were partly or wholly the result of Certified's negligence, breach of contract, or other culpable conduct. (Compl. ¶¶ 18-29.) In particular, Certified is alleged to have been involved with inspecting, evaluating, and/or consulting on the pile driving operations that led to Tobar's injuries. (Compl. ¶¶ 31, 38.) Indeed, Certified was subcontracted to provide testing and inspection services for the pilings at the worksite. (Casella Decl. Ex. D.)
C. Harleysville's Disclaimer of Coverage and Reservation of Rights
Harleysville first received notice of the Underlying Action on June 2, 2020 by virtue of service of multiple third-party complaints implicating Certified. (Compl. ¶ 34.) On July 1, 2020, Harleysville issued a timely partial disclaimer and reservation of rights to Certified and sent a copy to Tobar. (Compl. ¶ 35.) Harleysville then proceeded to provide a defense, splitting the costs with Peleus Insurance Company (“Peleus”), an insurance company that issued Certified a professional liability insurance policy. (Compl. ¶¶ 33, 37.)
When subsequent pleadings and discovery in the Underlying Action revealed that the basis for Certified's alleged liability was its inspection and testing of the piling operations, Harleysville issued a supplemental disclaimer of coverage and reservation of rights letter to Certified, with a copy sent to Tobar on July 7, 2021. (Compl. ¶¶ 38-39.) While preserving its earlier bases for disclaiming coverage, Harleysville's letter advised that “there is no cover[age] for defense or indemnification for any of the allegations that fall under professional liability, specifically, claims arising out of any error or omission, defect or deficiency in; any test performed; or an evaluation, a consultation or advice given, by or on behalf of any insured; the reporting of or reliance upon any such test, evaluation, consultation or advice; or an error, omission, defect or deficiency in experimental data or the insured's interpretation of that data.” (Compl. ¶ 39.)
D. The Instant Action
Harleysville seeks judgment declaring that (1) it has no duty to defend or indemnify Certified; 2) it may withdraw its 50% contribution to the defense of Certified; and (3) Tobar has no third-party rights, as a beneficiary or otherwise, under the insurance policy issued to Certified for any award or judgment in relation to the allegations in the Underlying Action. (Proposed Default Judgment at Dkt. 24.)
The Complaint framed the relief Harleysville seeks a bit more broadly than what it has set forth in its proposed Default Judgment. The Complaint asks for a declaration that (1) there is no coverage under the Policy for the Underlying Action; (2) Harleysville has no obligation to defend or indemnify Certified or anyone else in connection with the allegations made in the Underlying Action; and (3) Harleysville can withdraw from its fiftyfifty cost-share with Peleus. (Compl. at 22.)
Harleysville invokes three different Policy provisions as the basis for declaratory relief. First, the Testing Exclusion excludes coverage for all claims against Certified because the basis for Certified's liability in the Underlying Action is its alleged failure to properly inspect, test, evaluate, provide consultation, or give advice on the piling operations at the worksite. (Compl., First Cause Of Action, ¶¶ 42-46.) Second, any of the Underlying Action's claims, cross claims, or counterclaims that assert liability based on Certified's alleged breach of contract are not covered because a breach of contract is neither an “occurrence,” nor “bodily injury,” nor “property damage” as defined by the Policy. (Compl., Second Cause Of Action, ¶¶ 48-52.) Third, any breach of contract claims also are excluded from coverage by the Contract Exclusion. (Compl., Third Cause Of Action, ¶¶ 54-56.)
Harleysville does not seek any monetary relief or attorneys' fees.
Procedural Background
Harleysville commenced this action on April 4, 2022 with the filing of the Complaint. (Dkt. 1.) It filed affidavits attesting to service of the summons and Complaint on Certified on April 6, 2022 (Dkt. 7) and July 21, 2022 (Dkts. 9-10), and on Tobar on April 28, 2022 (Dkts. 8, 11). Neither party answered or otherwise appeared. On June 3, 2022, Harleysville sent letters, by certified mail, to both Certified (by the Secretary of State) and Tobar warning them that Harleysville would move for default judgment if they did not appear in the action. (Casella Decl. Exs. I, J.) Still, neither Defendant appeared.
On September 14, 2022, Harleysville applied for a certificate of default (Dkt. 15), which the Clerk of Court entered the same day (Dkt. 16). On Mach 14, 2023, Harleysville moved for default judgment against both Certified and Tobar. (Dkts. 21-24.) Harleysville served Certified and Tobar with copies of its motion papers by mail on March 16, 2023. (Dkt. 25.)
On April 25, 2023, the motion was referred to me for report and recommendation. (Dkt. 26.) I scheduled a telephonic hearing for June 8, 2023 for Certified and Tobar to show cause why default judgment should not be entered against them. (Dkt. 27.) Harleysville served Certified and Tobar with copies of the show cause order on May 23, 2023. (Dkt. 28.) Neither Defendant appeared for the show cause hearing on June 8, 2023.
Legal Standards
When a party seeking judgment or affirmative relief shows by affidavit that the opposing party has failed to plead or otherwise defend, the Clerk of Court must enter a default. Fed.R.Civ.P. 55(a). The non-defaulting party may then apply to the court to obtain default judgment. Fed.R.Civ.P. 55(b).
“In determining whether to grant a motion for default judgment, a court within this district considers three factors: ‘(1) whether the defendant's default was willful; (2) whether defendant has a meritorious defense to plaintiff's claims; and (3) the level of prejudice the non-defaulting party would suffer as a result of the denial of the motion for default judgment.'” Nespresso USA, Inc. v. Africa America Coffee Trading Co. LLC, No. 15-CV-5553, 2016 WL 3162118, at *2 (S.D.N.Y. June 2, 2016) (quoting Indymac Bank, F.S.B. v. National Settlement Agency, Inc., No. 07-CV-6865, 2007 WL 4468652, at *1 (S.D.N.Y. Dec. 20, 2007)); Mason Tenders District Council v. Duce Construction Corp., No. 02-CV-9044, 2003 WL 1960584, at *2 (S.D.N.Y. Apr. 25, 2003). Ultimately, the entry of a default judgment is entrusted to the sound discretion of the district court. Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993).
The court also “must determine whether the plaintiff has pleaded facts supported by evidence sufficient to establish the defendant's liability with respect to each cause of action.” Nespresso USA, 2016 WL 3162118, at *2; accord Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) (“[A district court] is also required to determine whether [plaintiff's] allegations establish [defendant's] liability as a matter of law”). “It is an ancient common law axiom that a defendant who defaults thereby admits all well-pleaded factual allegations contained in the complaint.” City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011) (internal quotation marks omitted). A factual allegation will be deemed not well-pled “only in very narrow, exceptional circumstances.” Ideavillage Products Corp. v. Bling Boutique Store, No. 16-CV-9039, 2018 WL 3559085, at *2 (S.D.N.Y. July 24, 2018) (internal quotation marks and citation omitted). That said, a court “must still satisfy itself that the plaintiff has established a sound legal basis upon which liability may be imposed.” Jemine v. Dennis, 901 F.Supp.2d 365, 373 (E.D.N.Y. 2012) (citing Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981)).
Once liability is determined, the plaintiff bears the burden of establishing an amount of damages with reasonable certainty. RGI Brands LLC v. Cognac Brisset-Aurige, S.a.r.L., No. 12-CV-1369, 2013 WL 1668206, at *6 (S.D.N.Y. April 18, 2013) (collecting cases), R. & R. adopted, 2013 WL 4505255 (S.D.N.Y. Aug. 23, 2013); see also Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp. Division of Ace Young Inc., 109 F.3d 105, 111 (2d Cir. 1997). The court is charged with “‘determining the proper rule for calculating damages ... and assessing plaintiff's evidence supporting the damages.'” Tiffany (NJ) Inc. v. Luban, 282 F.Supp.2d 123, 124 (S.D.N.Y. 2003) (quoting Credit Lyonnais Securities (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)). The damages award on a default judgment “must not differ in kind from, or exceed in amount, what is demanded in the pleadings.” Fed.R.Civ.P. 54(c). Here, Harleysville has not asserted a claim for damages. Accordingly, the Court does not need to perform a damages inquest.
Discussion
I. Subject Matter Jurisdiction
Whereas on default judgment a district court must assure itself of subject matter jurisdiction, it may but is not required to do so with respect to personal jurisdiction. See Sinoying Logistics Pte Ltd. v. Yi Da Xin Trading Corp., 619 F.3d 207, 213 n.7 (2d Cir. 2010) (“We need not - and explicitly do not - address here whether a district court must investigate its personal jurisdiction over defendant before entering a default judgment. We leave that issue for another day and hold only that a court may raise personal jurisdiction sua sponte when a defendant has failed to appear”) (emphasis in original); CKR Law LLP v. Anderson Investments International, LLC, 544 F.Supp.3d 474, 479-80 (S.D.N.Y. 2021) (declining to inquire into personal jurisdiction over defaulting defendant).
“Before granting a motion for default judgment, a court must first determine whether it has subject matter jurisdiction over the action.” Mt. Hawley Insurance Company v. Pioneer Creek B LLC, No. 20-CV-150, 2021 WL 4427016, at *3 (S.D.N.Y. Sept. 27, 2021) (citing Mickalis Pawn Shop, 645 F.3d at 125-27); accord Sung Taek Kwon v. Leg Resource, Inc., No. 15-CV-9658, 2018 WL 2316630, at *3 (S.D.N.Y. May 7, 2018). Here, the Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332 - diversity jurisdiction. The parties are fully diverse (meaning no plaintiff and no defendant have the same citizenship); Harleysville is a Pennsylvania corporation based in Pennsylvania, while Certified is a New Jersey corporation based in New Jersey, and Tobar is a citizen of New York domiciled in Suffolk County, New York. (Compl. ¶¶ 3-5.) The amount in controversy is alleged to exceed $75,000. (Compl. ¶ 7.) “Though the Complaint ... is silent on the underlying value of [Tobar's] claims, there is a ‘reasonable probability' that the value of the underlying claims - alleged damages for medical costs and mental and emotional harm - could exceed $75,000.” Mt. Hawley Insurance Company, 2021 WL 4427016 at *3 (quoting Tongkook America, Inc. v. Shipton Sportswear Co., 14 F.3d 781, 784 (2d Cir. 1994)).
II. Default Judgment
Default judgment against both Defendants is warranted. First, they willfully defaulted. They never appeared in the action. They did not respond to the Complaint or the motion for default judgment, and they did not appear for the show cause hearing. Second, there is no evidence before the Court to suggest that Defendants have a meritorious defense. Third, denying Harleysville's motion for default judgment would be prejudicial as it would leave its coverage obligations unresolved.
III. Liability
Liability here turns on whether, based on the Policy and the well-plead allegations of the Complaint, Harleysville is entitled to declaratory judgment that it bears no defense or indemnification responsibilities to Certified for the Underlying Action. That determination requires addressing first whether Harleysville has asserted a legally cognizable claim for declaratory relief, and, second, whether the insurance Policy's terms warrant the relief requested.
A. Harleysville Has Stated A Claim For Declaratory Relief
The Declaratory Judgment Act (“DJA”) provides in relevant part that, “[i]n a case of actual controversy within its jurisdiction ... any court of the United States ... may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a); MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 126, 127 S.Ct. 764, 770 (2007). The Act “confers a discretion on the courts rather than an absolute right upon the litigant.” Wilton v. Seven Falls Co., 515 U.S. 277, 287, 115 S.Ct. 2137, 2143 (1995) (internal quotation marks omitted); see also Medimmune, 549 U.S. at 136, 127 S.Ct. at 776 (citing Wilton, 515 U.S. at 277, 115 S.Ct. at 2143); Admiral Insurance Co. v. Niagara Transformer Corp., 57 F.4th 85, 99 (2d Cir. 2023) (district courts retain “broad discretion” to decline jurisdiction under the DJA).
As a prerequisite to the Court's authority to issue a declaratory judgment, there must be “a case of actual controversy.” 28 U.S.C. § 2201(a). For a dispute to qualify, it must be “definite and concrete, touching the legal relations of parties having adverse legal interests,” “real and substantial” and “admi[t] of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.” MedImmune, 549 U.S. at 127, 127 S.Ct. at 771 (internal quotations and citations omitted); see also Nike, Inc. v. Already, LLC, 663 F.3d 89, 95-96 (2d Cir. 2011), aff'd Already, LLC v. Nike, Inc., 568 U.S. 85, 133 S.Ct. 721 (2013) (quoting MedImmune, 549 U.S. at 127, 127 S.Ct. at 771). In sum, “the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Id. (quoting Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 512 (1941)); see also Duane Reade, 411 F.3d at 388 (articulating same standard).
Courts commonly acknowledge the propriety of declaratory relief in actions, like this one, initiated by insurers against their insureds to bring certainty to their coverage obligations, particularly where underlying actions against the insured already are pending. See, e.g., Continental Indemnity Company v. Bulson Management, LLC, No. 20-CV-3479, 2022 WL 1747780, at *4-5 (S.D.N.Y. May 31, 2022) (denying motion to vacate default judgment declaring that insurer did not have duty to defend and indemnify defendant in connection with the litigation pending in state court); Mt. Hawley Insurance Company, 2021 WL 4427016 at *5 (“There is a live case or controversy in this action. Mt. Hawley seeks a declaration about whether its Policy requires the payment of defense and indemnification costs to Defendants in connection with the Underlying Action”); GuideOne Specialty Mutual Insurance Co. v. Rock Community Church, Inc., 696 F.Supp.2d 203, 212-13 (E.D.N.Y. 2010) (granting declaratory judgment that insurer did not owe coverage to defaulting defendant, and stating, that “[t]his case presents an immediate ‘substantial controversy' ... namely, whether and to what extent an insurance company is liable for future coverage”); see Admiral Insurance Co., 57 F.4th at 95 (a pending underlying third-party action against the insured is a sufficient, although not a necessary, condition for finding jurisdiction to declare an insurer's duty to defend an insured).
Like such insurance coverage cases, the instant matter meets the requirements of an actual case or controversy. Harleysville's insured has been named as a third-party defendant in the Underlying Action, and Harleysville has notified Certified, and Tobar, that it denies coverage. Harleysville currently is sharing the costs of defense but seeks to end that arrangement. Although the Complaint does not expressly allege that Certified, or Tobar, disputes Harleysville's non-coverage position, Harleysville's position is indisputably adverse to Certified and Tobar and is specific in the relief it seeks. Further, that relief, if granted, will resolve uncertainty as to whether or not Harleysville may terminate its cost sharing and refuse any coverage without subjecting itself to liability for failing to comply with its contractual obligations. In short, the prerequisites for declaratory relief are met.
Even where a sufficient case or controversy exists for purposes of declaratory judgment relief, a district court, as noted, retains the discretion to decline to exercise jurisdiction over the claim. As the Second Circuit recently has clarified, in determining whether to decline exercising jurisdiction over a declaratory judgment claim, the court considers the totality of circumstances, including but not limited to “(1) whether the declaratory judgment sought will serve a useful purpose in clarifying or settling the legal issues involved; (2) whether such a judgment would finalize the controversy and offer relief from uncertainty; (3) whether the proposed remedy is being used merely for procedural fencing or a race to res judicata; (4) whether the use of a declaratory judgment would increase friction between sovereign legal systems or improperly encroach on the domain of a state or foreign court; (5) whether there is a better or more effective remedy; and (6) whether concerns for judicial efficiency and judicial economy favor declining to exercise jurisdiction.” Admiral Insurance Co., 57 F.4th at 99-100 (internal alterations, quotation marks, and citations omitted).
The Court finds no reason to decline to exercise jurisdiction over Harleysville's declaratory judgment claim. None of the factors noted above, nor any other factors, favor doing so. Declaratory judgment here will serve a useful purpose in settling Harleysville's duties to Certified and, as mentioned above, will relieve the parties of uncertainty over the coverage issue. Meanwhile, there is no indication that Harleysville is engaging in procedural gamesmanship, that entry of declaratory judgment here conflicts with proceedings in the Underlying Action, that there is a better or more effective remedy, or that exercising jurisdiction will disserve judicial efficiency or economy. Accordingly, the Court should proceed with exercising jurisdiction over Harleysville's claim for declaratory judgment.
B. The Policy Excludes Coverage For The Underlying Action
Based on the record before the Court, the Policy indisputably excludes coverage for the allegations against Certified in the Underlying Action. Harleysville thus has no duty to defend or indemnify Certified under the Policy.
In New York, insurance policies are agreements “interpreted according to general rules of contract interpretation.” Olin Corp. v. American Home Assurance Co., 704 F.3d 89, 98 (2d Cir. 2012) (citations omitted). An insurance contract thus “is interpreted to give effect to the intent of the parties as expressed in the clear language of the contract.” Parks Real Estate Purchasing Group v. St. Paul Fire & Marine Insurance Co., 472 F.3d 33, 42 (2d Cir. 2006) (quotation marks and citation omitted). Whereas “unambiguous provisions of an insurance contract must be given their plain and ordinary meaning,” White v. Continental Casualty Co., 9 N.Y.3d 264, 267, 848 N.Y.S.2d 603, 605 (2007), “unresolvable ambiguities in insurance contracts are construed in favor of the insured.” Hugo Boss Fashions, Inc. v. Federal Insurance Co., 252 F.3d 608, 615 (2d Cir. 2001) (citing Handelsman v. Sea Insurance Co., 85 N.Y.2d 96, 623 N.Y.S.2d 750 (1994)).
Harleysville seeks declaratory relief with respect to both its obligation to defend and to indemnify. “In New York, an insurer's duty to defend is ‘exceedingly broad' and distinct from the duty to indemnify.” Euchner-USA, Inc. v. Hartford Casualty Insurance Co., 754 F.3d 136, 140 (2d Cir. 2014) (quoting Automobile Insurance Co. of Hartford v. Cook, 7 N.Y.3d 131, 137, 818 N.Y.S.2d 176, 179 (2006)). “[A]n insurer will be called upon to provide a defense whenever the allegations of the complaint suggest ... a reasonable possibility of coverage,” id. at 141 (internal quotation marks omitted), “even though it may not be required to pay once the litigation has run its course.” Automobile Insurance Co., 7 N.Y.3d at 137, 818 N.Y.S.2d at 180. “The duty to defend insureds ... is derived from the allegations of the complaint and the terms of the policy.” Cincinnati Insurance Co. v. Roy's Plumbing, Inc., 692 F. App'x. 37, 38 (2d Cir. 2017) (summary order) (quoting Technicon Electronics Corp. v. American Home Assurance Co., 74 N.Y.2d 66, 73, 544 N.Y.S.2d 531, 533 (1989)).
In contrast to the duty to defend, “[t]he narrower duty to indemnify arises only if the claim for which the insured has been judged liable lies within the policy's coverage.” Allianz Insurance Co. v. Lerner, 416 F.3d 109, 115 (2d Cir. 2005) (citing Frontier Insulation Contractors, Inc. v. Merchants Mutual Insurance Co., 91 N.Y.2d 169, 178, 667 N.Y.S.2d 982, 986-87(1997)). “Thus, while the duty to defend is measured against the possibility of a recovery, the duty to pay is determined by the actual basis for the insured's liability to a third person.” Id. (quoting Servidone Construction Corp. v. Security Insurance Co. of Harford, 64 N.Y.2d 419, 424, 488 N.Y.S.2d 139, 142 (1985) (internal quotation marks omitted).
The allegations against Certified in the Underlying Action are that it breached the terms of its subcontract to provide testing and inspection services and that it was negligent or otherwise culpable in performing those services. (See, e.g., Ex. C at ECF 12 at ¶¶ 5657, ECF 18-19 at ¶ 8, ECF 29 at ¶¶ 52-53, ECF 43 at ¶¶ 35-36, ECF 48-50 at ¶¶ 1-4; see also id. Ex. D (Certified's scope of services).) Yet the Policy contains an exclusion for “Testing Or Consulting Errors Or Omissions,” which excludes coverage precisely for injury or damage arising out of “[a]n error, omission, defect or deficiency in ... “[a]ny test performed ... or [a]n evaluation, a consultation or advice given, by or on behalf of any insured” or “[t]he reporting of or reliance upon any such test, evaluation, consultation or advice.” (Casella Decl., Ex. A at Dkt. 23-1 ECF 81.) As Harleysville explains, the Policy includes commercial general liability coverage and property coverage, not professional liability coverage, which is what Harleysville separately obtained, in later years, from Peleus. (See Memorandum Of Law In Support Of Plaintiff's Motion For Default Judgment (Dkt. 22) at 23-24; Compl. ¶ 33.)
The language of the Testing Exclusion is plain and unambiguous. The liability alleged against Certified in the Underlying Action falls directly within that exclusion eliminating any “reasonable possibility of coverage.” Euchner-USA, Inc., 754 F.3d at 141. Accordingly, Harleysville is entitled to declaratory judgment that it owes no duty to defend or indemnify Certified in the Underlying Action.
The Court finds Harleysville's two other arguments for why it has no coverage obligations to be less clear. Accordingly, the Court does not base its recommendation on the Contract Exclusion or the definition of an “occurrence.”
Conclusion
For the foregoing reasons, I recommend that the Court enter judgment in favor of Plaintiff declaring that (1) Harleysville has no duty to defend or indemnify Certified in connection with the Underlying Action; (2) Harleysville may withdraw from its 50% contribution to the defense of Certified; and (3) Edgar Tobar has no third-party rights, as a beneficiary or otherwise, under the Policy issued to Certified for any award or judgment in relation to the allegations in the Underlying Action.
Service
Within three days after entry, Plaintiff shall serve this Report and Recommendation on Defendants through means previously approved by the Court. Within seven days after entry, Plaintiff shall file proof of service.
Procedure For Filing Objections
Pursuant to 28 U.S.C. § 636(b)(1) and Rules 72, 6(a), and 6(d) of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days to file written objections to this Report and Recommendation. Such objections shall be filed with the Clerk of Court, with extra copies delivered to the Chambers of the Honorable Jennifer L. Rochon, United States Courthouse, 500 Pearl Street, New York, New York 10007, and to the Chambers of the undersigned, United States Courthouse, 500 Pearl Street, New York, New York 10007. FAILURE TO FILE TIMELY OBJECTIONS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW.