American Empire Surplus Lines Insurance Company v. Disano Demolition Co., Inc.
1:18-cv-05047
E.D.N.YJan 2, 2020Background:
- American Empire issued four policies to Disano (2016 primary, 2016 excess, 2017 primary, 2017 excess); premiums were calculated as a percentage of Disano’s gross receipts and subject to post‑period audit adjustments.
- Overland Solutions conducted audits in 2017–2018 that found additional premiums due, totaling $216,394.00 across the four policies.
- Disano did not pay any of the audited additional premiums; American Empire sought payment and filed suit in September 2018 under diversity jurisdiction.
- Defendants’ counsel withdrew; Disano failed to obtain new counsel or file an answer after extended time, and the Clerk entered default on June 24, 2019.
- Plaintiff moved for default judgment; the magistrate judge recommended entering default judgment for $216,394 and declaring American Empire has no duty to defend or indemnify for policies with unpaid premiums; denied interest and fees for lack of supporting authority/documentation.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Entry of default judgment / liability | Breach of contract: Disano failed to pay audit‑adjusted premiums | No response / failed to defend | Default is established; liability sustained and default judgment recommended |
| Damages amount | Audits and policy endorsements show $216,394 owed | No challenge | Award $216,394 recommended based on submitted exhibits |
| Declaratory relief re duty to defend/indemnify | Premium payment is condition precedent; nonpayment voids insurer's duty | No response | Recommend declaration: American Empire owes no duty under unpaid policies |
| Interest and attorneys' fees | Seeks interest and $24,077.04 fees | No response | Denied for lack of legal authority and supporting documentation; fees may be renewed with proof |
Key Cases Cited
- Enron Oil Corp. v. Diakuhara, 10 F.3d 90 (2d Cir. 1993) (two‑step default judgment procedure and court discretion)
- Meehan v. Snow, 652 F.2d 274 (2d Cir. 1981) (default judgment is an extreme remedy; disfavored)
- Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61 (2d Cir. 1981) (well‑pleaded allegations deemed admitted on default except damages)
- Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155 (2d Cir. 1992) (default admissions as to liability)
- Lattanzio v. COMTA, 481 F.3d 137 (2d Cir. 2007) (corporations must be represented by counsel)
- Shapiro, Bernstein & Co. v. Continental Record Co., 386 F.2d 426 (2d Cir. 1967) (corporate appearance through counsel required)
- Jones v. Niagara Frontier Transp. Auth., 722 F.2d 20 (2d Cir. 1983) (rationale for requiring counsel for corporate parties)
- Caidor v. Onondaga Cty., 517 F.3d 601 (2d Cir. 2008) (failure to timely object to R&R waives further review)
- Fustok v. ContiCommodity Servs., Inc., 122 F.R.D. 151 (S.D.N.Y. 1988) (damages proof at default inquest)