Starr Indemnity & Liability Company v. Brightstar Corp.
1:13-cv-08580
S.D.N.Y.Jul 12, 2019Background
- Starr issued a continuous marine cargo Policy to Brightstar covering worldwide warehouse storage with endorsements (No.2, No.17, No.40) that set limits: scheduled locations up to $25M (or $25M auto if minimum standards/notice met) and an unnamed-location limit of $3M.
- Endorsement No.40 (effective Mar.26,2013) provided $25M "per occurrence at all locations as per schedule on file with underwriters" and $25M for new locations reported within 90 days if they met listed minimum standards; otherwise unnamed limit $3M.
- Brightstar began storing goods at a Frankfurt warehouse (operated by third‑party getgoods) in March 2013; Brightstar’s internal security assessment exists but Gallagher (broker) did not timely forward requisite COPE/security data to Starr.
- Key communications: Brightstar (O’Brien) emailed Starr (Scrobe) Feb.20,2013 about the Frankfurt site; Starr underwriter (Factor) circulated a March 19,2013 spreadsheet (the alleged "schedule on file") that did not include Frankfurt; Gallagher only forwarded an SOV including Frankfurt on Nov.5,2013—after the November 2013 loss (large theft/misappropriation by getgoods’ CEO).
- Starr sued for declaratory relief denying coverage; Brightstar counterclaimed. The court considered motions for partial summary judgment on (inter alia) which limit applied ($3M or $25M), scope of an Errors & Omissions clause, and whether a Misappropriation exclusion barred coverage.
Issues
| Issue | Plaintiff's Argument (Starr) | Defendant's Argument (Brightstar) | Held |
|---|---|---|---|
| Choice of law | New York law applies; no substantive conflict with Florida law | Florida law could govern extrinsic evidence rules | New York law applied; no conflict found |
| Limit applicable to German warehouse | Frankfurt was not on the Endorsement No.40 "schedule on file" and did not meet mandatory minimum standards or provide required COPE/notice, so it was an unnamed location capped at $3M | The February 20 email, internal assessment, broker conduct, industry practice, or subsequent SOV meant Frankfurt was covered at $25M | Court held Frankfurt was an unnamed/unscheduled location and $3M limit applied (Endorsement No.40) |
| Errors & Omissions clause scope | Clause cannot be read to create or add coverage after a loss; it only preserves coverage for risks already agreed | Clause should prevent forfeiture or defeat technical objections where omission was inadvertent | Clause cannot be used to add or extend coverage that was never agreed; Starr entitled to judgment on that point |
| Misappropriation exclusion ("warehouses owned, leased or controlled by the Assured") | Exclusion applies because Brightstar exercised contractual/"legal" control over the warehouse via its agreement with getgoods | "Control" requires dominion or physical control of the warehouse as a whole; Brightstar did not control the facility itself | Misappropriation exclusion does not apply as a matter of law; Brightstar entitled to summary judgment on that exclusion (no control of warehouse shown) |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (genuine issue for trial standard)
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (federal courts apply forum state's choice-of-law rules)
- Morgan Stanley Grp. Inc. v. New England Ins. Co., 225 F.3d 270 (insured bears burden to show coverage; contract‑interpretation/ambiguity rules)
- Universal Am. Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 25 N.Y.3d 675 (unambiguous insurance terms given plain meaning)
- Westview Assocs. v. Guar. Nat. Ins. Co., 95 N.Y.2d 334 (exclusions must be clear and unmistakable; ambiguities construed for insured)