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Zahoruiko v. Chubb National Insurance Co.

United States District Court, D. Connecticut

February 28, 2017

J. GRAHAM ZAHORUIKO, Plaintiff,
v.
FEDERAL INSURANCE COMPANY and CHUBB GROUP OF INSURANCE COMPANIES, Collectively and Individually, Defendants.

          MEMORANDUM OF DECISION GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT [DKT. 34]

          Hon. Vanessa L. Bryant United States District Judge

         I. Introduction

         Plaintiff J. Graham Zahoruiko brings this action for breach of contract, unjust enrichment, conversion, and for declaratory relief, against Defendants Federal Insurance Company (“Federal”) and Chubb Group of Insurance Companies, individually and collectively (“Chubb”), for denying coverage under a directors and officers (“D&O”) liability insurance policy. Federal moved for summary judgment pursuant to Federal Rule of Civil Procedure 56. [Dkt. 34]. For the reasons that follow, the Court GRANTS Federal's motion.

         II. Background

         Plaintiff was an officer of SpaceWeb Corporation (“SpaceWeb”), which was later known as Refresh Software Corporation (“Refresh”), while these companies were insured under two Federal D&O policies. [Dkt. 14 ¶¶ 7, 11; Dkt. 40 ¶¶ 4, 5, 7]. Federal issued SpaceWeb its first policy (the “SpaceWeb Policy”) on October 1, 2000. [Dkt. 35 ¶ 5]. The SpaceWeb Policy was canceled for non-payment of premium on or about May 26, 2001. [Dkt. 35 ¶ 6]. Federal then issued a new, separate policy to Refresh (the “Refresh Policy”) effective December 14, 2002. [Dkt. 35 ¶ 2]. The Refresh Policy remained effective until April 14, 2011. [Dkt. 35 ¶ 7].

         A. The Policies

         Both policies are “claims-made” policies, which provide coverage based on when a claim is first made rather than when the events giving rise to the claim took place. [Dkt. 35-1, Declarations, at 1; Dkt. 35-2, Declarations, at 1]. The SpaceWeb Policy states:

THIS IS A CLAIMS MADE POLICY. EXCEPT AS OTHERWISE PROVIDED HEREIN, THIS POLICY COVERS ONLY CLAIMS FIRST MADE AGAINST THE INSURED DURING THE POLICY PERIOD.

[Dkt. 35-1, Declarations, at 1]. The Refresh Policy states,

THIS COVERAGE SECTION PROVIDES CLAIMS MADE COVERAGE, WHICH APPLIES ONLY TO “CLAIMS” FIRST MADE DURING THE “POLICY PERIOD”, OR ANY EXTENDED REPORTING PERIOD.

[Dkt. 35-2, D&O Liability Coverage Section, at 1]. The parties do not dispute that the Plaintiff was an “insured person” under these policies. [Dkt. 34-1 at 9]. The Policies both define a D&O Claim as:

(a) a written demand for monetary damages;[1]
(b) a civil proceeding commenced by the service of a complaint or similar pleading

[Dkt. 35-1, Declarations, at 16; Dkt. 35-2, D&O Liability Coverage Section, at 4]. A “Loss” under the Refresh Policy was defined as:

[T]he total amount which an Insured becomes legally obligated to pay as a result of any Claim made against any Insured for Wrongful Acts, [2] including, but not limited to, damages (including punitive or exemplary damages which has a substantial relationship to the Insureds, the Company, this Policy or the Claim and which is most favorable to the insurability of such damages), judgments, settlements, pre-judgment and post-judgment interest and Defense Costs.

Id. Additionally, to obtain coverage for losses under the D&O policy, an insured could not:

[S]ettle any Claim, incur any Defense Costs, or otherwise assume any contractual obligation or admit any liability with respect to any Claim without [Federal's] written consent, which shall not be unreasonably withheld. [Federal] shall not be liable for any settlement, Defense Costs, assumed obligation or admission to which it has not consented.

[Dkt. 35-2, General Terms and Conditions, at 9]. The policy also required the insured to provide Federal “written notice as soon as practicable of any Claim.” Id. at 8. The Refresh Policy also provides that:

No coverage will be available under this Coverage Section for any Claim against an Insured . . . based upon, arising from, or in consequence of a written demand, suit, or other proceeding pending, or order, decree or judgment entered for or against any Insured on or prior to the applicable Pending or Prior Litigation Date . . . or the same or any ...

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