Coverage Case Summary Update from Reed Smith

The declaratory judgment action filed against Grandview by its Illinois Union and Great American Insurance Company in New York Supreme Court is currently proceeding after some delay because of various motions filed by other parties, all of which have now been resolved.

One key development in the case is that, in March 2014, Grandview Palace sued the Ott Insurance Agency, the broker who placed the insurance at issue. The lawsuit alleges that, if Illinois Union and Great American succeed in having the property coverage declared void, then Ott will be responsible for paying any amounts that would have been paid by the insurance companies for the fire damage at Grandview, due to Ott's negligence or breach of contract in the placement of coverage.

Ott moved to dismiss Grandview's complaint for failing to state a claim. The court denied Ott's motion to dismiss in November 2014, ruling that Grandview's case against Ott could proceed. The court also ordered that the Ott action should be consolidated with the pending declaratory judgment action for purposes of discovery.

Western Heritage and National Surety, Grandview's general liability carriers, previously had brought declaratory judgment actions against Grandview in Sullivan County, seeking declarations that the general liability policies they sold to Grandview were void. The insurers moved to consolidate those actions with the New York action. The court granted the motions.

Now that the various motions to dismiss and consolidate have been resolved, the court set a new schedule. All discovery previously exchanged by the parties has now been provided to Ott, and the general liability insurers. The parties are required to complete depositions by September 18, 2015, and all fact discovery must be completed by October 16, 2015. The note of issue must be filed by February 5, 2016. If trial is necessary,it will take place in early 2016.

The first deposition under the new schedule will be of John McAuley, the Grandview plumber. We expect this deposition to be very positive for Grandview, as Mr. McAuley will testify that there were sprinklers in most of the buildings, including in the units in most of the buildings. This contradicts the insurance company theory that most of the buildings had no sprinklers, and thus strengthens Grandview's defense. We hope the outcome of this deposition will speed up the case and lead to a favorable resolution.