On Nоvember 30,1998, plaintiff National Union Fire Insurance Company of Pittsburgh, Pennsylvania (“National Union”) brought this declaratory judgment action against The Stroh Companies, Inc. and its wholly owned subsidiary, The Stroh Brewery Company (collectively, “Stroh”), in the *101 United States District Court for the Southern District of New York. National Union seeks to avoid liability under a “Contaminated Products Insurance” policy (the “Policy”) issued to The Stroh Companies and its affiliates and subsidiaries. The claim arose from a product recall initiated by Stroh in response to glass contamination discovered in beverages bottled at a plant that was formerly owned by the Heileman Companies (“Heileman”) and was acquired by Stroh, along with Heile-man’s other assets, after the Policy took effect. At Stroh’s request, National Union extended coverage to Heileman and its assets under the Policy as of the date of the acquisition. Stroh initiated the recall at issue in this case approximately six weeks after Heileman was added to the Policy.
National Union’s amended complaint alleges that Stroh and Heileman knew or should hаve known of the contamination problem and the need for a recall before Heileman was added to the Policy, and that coverage is therefore barred both by the express terms of the Policy and by the insurance-law principles of “fortuity” and “known loss.” National Union further claims that Stroh breached several other provisions of the Policy, including the requirement that Stroh disclose material facts to National Union. Finally, National Union seeks a declaration that even if covered under the Policy, Stroh’s claim is subject to more than one deductible. The district court (Denise Cote, Judge) granted summary judgment to Stroh on all of National Union’s claims. This appeal followed.
We conclude that (1) the district court correctly interpreted the Policy to exclude coverage only for losses known to the insured as of the original inception date of the Policy; (2) assuming that the fortuity and known loss doctrines operate independently of specific policy provisions, they do not bar coverage in the present case; (3) neither Stroh nor Heileman breached the Policy’s due diligence, cooperation, or disclosure provisions; and (4) Stroh’s claim is subject to a single deductible. We therefore affirm the district court’s grant of summary judgment for Stroh as to all of National Union’s claims.
BACKGROUND
On May 12, 1995, National Union issued a “Contaminated Products Insurance” policy to Stroh and its “subsidiary and affiliated companies or entities.” The Policy requires National to reimburse Stroh for “Loss[es],” a defined term that includes costs incurred by Stroh in the course of recalls of Stroh products resulting from “Accidental Contamination.” The Policy excludes coverage of “Loss[es]” that the insured, “as of the inception date of [the] [P]olicy,” knew or should have known had occurred or were likely to occur.
The original policy period ran from May 12, 1995 to May 12, 1996. In April 1996, Stroh, through its insurance broker Aon Risk Services, contacted National Union, through its underwriting manager American International Underwriters, regarding possible renewal of the policy. On May 1, 1996, Stroh completed an application for an extension of the policy, and on May 10, 1996, the parties executed Endorsement No. 4, which “extended” the policy period for the period from May 12, 1996 to May 12, 1997.
At the time of the extension, Stroh was in negotiations with Heileman regarding Stroh’s possible acquisition of Heileman’s assets. Sometime early that month, Stroh asked National Union whether it would be willing to extend the Policy’s coverage to Heileman after the acquisition was complete. On May 3, 1996, National Union asked Stroh for information relating to, *102 among other things, Heileman’s revenues, “[production facilities location,” and other information “concerning ‘Heileman’ inclusion [sic] under the [Policy].” Stroh complied. On May 21 and May 28, National Union offered either to “[i]nclude Heile-man under the existing policy with no changes to terms” for an additional premium, or to “[c]ancel the existing policy” and issue a “new policy for Stroh & Heileman” with revised terms. Stroh chose the former, and National Union agreed.
On July 1, 1996, Stroh completed its acquisition of Heileman’s assets and liabilities. On August 5, 1996, Stroh and National Union executed Endorsement No. 5 to the Policy, which extended coverage to Heileman and its рroducts under the existing Policy effective July 1, 1996. National Union agreed to the Endorsement without requiring a new application or asking Stroh to disclose specific risks carried by Heileman or its products.
Among the Heileman assets acquired by Stroh was a plant in Perry, Georgia, which bottled “Arizona Iced Tea” brand beverages pursuant to a contract with the manufacturer of the product, Hornell Brewing Companies (“Hornell”). The disputed insurance claim in this case involves a recall of “Arizona Iced Tea” products ordered by Stroh after glass shards were discovered in several bottles filled at the Perry plant. It is undisputed that these euphemistically termed “glass inclusions” were caused by a defect in the Perry plant’s “hot-fill” procedure, which caused hot liquids to be poured into glass bottles that had been allowed to cool to too low a temperature. The resulting “thermal shock” apparently caused occasional breakage in the bottles.
The principal factual issue in this case concerns what Stroh and Heileman knew about this glass breakagе problem and when they knew it. National Union asserts that Heileman knew and Stroh knew or should have known of the problem before July 1, 1996, the date as of which Heileman was added to the Policy. Stroh, on the other hand, contends that it first learned of the problem in August 1996, and that although Heileman was aware of some instances of glass breakage, it did not know the extent of the problem until sometime after Heileman had been added to the Policy.
On August 12, 1996, Stroh began an investigation of the problem and halted production at the Perry facility. On August 20, 1996, Stroh notified National Union that it had initiated a recall and would be seeking coverage under the Policy. National Union then began what turned out to be a seventeen-month investigation of Stroh’s claim. On February 24, 1998, after the investigation was completed, National Union formally disclaimed coverage.
National Union followed up its disclaimer by initiating the present diversity action on November 30, 1998 seeking declaratory judgment on six issues: that Stroh’s recall costs are not covered under the Policy because the defendants knew of the broken glass contamination problem before Heileman was added to the Policy (Count I); that Stroh failed to exercise due diligence, in breach of Condition 0 of the Policy (Count II); that Stroh breached Conditions Q and R by failing to cooperate with National Union’s claims investigation (Count III); that Stroh breached Condition W by failing to disclose material information regarding the Heileman risks (Count IV); that Stroh breached Condition J by failing to investigate the glass inclusion problems (Count V); and that Stroh’s claim, if covered, is subject to more than one deductible (Count VI).
In May 1999, Stroh filed a motion pursuant to Fed.R.Civ.P. 9(b) and 12(e) to require plaintiff to replead any allegations of fraud with greater particularity. The dis
*103
trict court dismissed the motion as moot because National Union had stated its intention not “to prove or rely upon a theory of fraud in its case at trial.”
National Union Fire Ins. Co. v. Stroh Companies, Inc.,
No. 98 CIV. 8428(DLC),
Prior to the completion of discovery, Stroh moved for summary judgment on all six counts. While that motion was pending, National Union moved pursuant to Fed.R.Civ.P. 56(f) for leave to conduct additional discovery.
In December 1999, the district court granted summary judgment for Stroh on Counts I, III, IV, and V, but denied summary judgment as to Counts II and VI.
See National Union Fire Ins. Co. v. The Stroh Companies, Inc.,
No. 98 CIV. 8428(DLC),
National Union subsequently moved for reconsideration of
National Union II,
and the district court granted both parties leave to file supplemental briefs as to Counts II and VI. In a thoughtful and thorough opinion dated March 8, 2000, the district court granted summary judgment to Stroh on Counts II and VI and denied National Union’s motion for reconsideration on the other counts.
See National Union Fire Ins. Co. v. The Stroh Companies, Inc.,
No. 98 CIV. 8428(DLC),
DISCUSSION
I. Standard of Review.
We review the district court’s grant of summary judgment
de novo,
construing the evidence in the light most favorable to the non-moving party.
See Tenenbaum v. Williams,
The parties agree that the Policy is to be interpreted according to New York law, under which insurance policies, like other contracts, are to be construed so as to give effect to “the intent of the parties as expressed by their words and purposes.”
In re Prudential Lines Inc.,
II. Whether the Recall Was a Covered “Loss”
A. Overview
Count I of National Union’s amended complaint seeks a declaration that the Policy does not cover Stroh’s claim because Stroh “knew or could have reasonably been expected to know that a Loss had occurred or was likely to occur on or before July 1, 1996,” the effective date of Heileman’s inclusion under the Policy. The alleged cause of action is based on paragraph I of the Policy, which requires National Union to reimburse Stroh for
its Loss ... caused by or resulting from any of the following Insured Events, discovered during the Policy Period '... provided that the Insured as of the inception date of this policy did not know nor could have reasonably been expected to know that such Loss had occurred or might likely occur.
(Emphasis added). An “Insured Event” is defined to include an accidental contamination of covered products, and a “Loss” includes recall costs incurred as a result of an “Accidental Contamination.”
The Policy does not explicitly define the term “inception date.” But a set of “declarations” on National Union letterhead accompanying the original Policy states that the “Policy Period” runs from May 12, 1995 to May 12, 1996, and it is undisputed that May 12, 1995 was the Policy’s original “inception date.” National Union contends, however, that this date was later altered by either Endorsement No. 4, which extended the policy period from May 12, 1996 to May 12, 1997, or Endorsement No. 5, which extended coverаge to Heileman as of July 1,1996, or both.
The district court rejected this argument, concluding that the Policy provides for only one inception date, and that date was May 12, 1995.
See National Union II,
On appeal, National Union contends (1) that the district court misconstrued the Policy in determining the “inception date,” and (2) that the insurance-law concepts of “known loss” and “fortuity” bar coverage of Stroh’s claim irrespective of the specific Policy language.
B. Inception Date
We agree with the district court’s conclusion that the Policy’s “inception date” was May 12, 1995. As the court noted, “[t]he term ‘inception date’ [in the Policy] refers to a singular event,” and that term is used “in conjunction with the phrase ‘this policy.’ ”
National Union II,
Neither of the Endorsements on which National Union relies alters this *105 conclusion. Endorsement No. 4 is a “Coverage Continuation Endorsement” which reads in pertinent part:
Item II “Policy Period” of “Declaration” [sic] page has been extended to read: Item II Policy Period From: May 12,1996 To: May 12,1997.
(Emphasis added).
The district court contrasted this language with the parties’ use of the word “amended” — within the same endorsement as well as Endorsements Nos. 1, 2, and 3' — - to alter the substance of provisions of the Policy. The court thus held that Endorsement No. 4 “extended” the duration of the Policy, the inception of which was May 12, 1995, rather than “amending” the Policy to create a new “inception date.”
Even if Endorsement No. 4 amended the terms of the original Policy, as National Union asserts, it did so only with respect to the “Policy Period” and not the “inception date.” It is undisputed that when the parties executed Endorsement No. 4, they did not create a new policy. Rather, the endorsement “form[ed] a part of’ the original Policy and “extended” coverage under that policy for an additional year, while specifying that “[a]ll other terms, conditions and exclusion [sic] of the original policy will remain unchanged.” Thus, the original Policy exists over multiple “Policy Period[s].” Had the parties wished to achieve the result now urged by National Union, they could have drafted Paragraph I to exclude coverage for losses known or suspected as of the beginning or inception of the current “Policy Period.” Paragraph I of the Policy, however, refers to “the inception date of this policy,” making it clear that the inception date is defined in relation to the Policy as a whole rather than in relation to any particular “Policy Period.” Therefore, an extension of the “Policy Period” in an endorsement cannot change the inception date of the Policy as a whole, which was May 12, 1995.
Endorsement No. 5 likewise states that “effective July 1, 1996, the coverage provided under [the Policy] has been extended” to include Heileman, and that “[a]ll оther terms, conditions and exclusions of the original policy will remain unchanged.” The endorsement thus leaves intact the language creating a single inception date for the Policy and setting May 12, 1995 as that date.
Cf. St. Paul Fire & Marine Ins. Co. v. MetPath, Inc.,
National Union contends that Endorsement No. 5 creates a separate inception date “with respect to th[e] specific risk” at issue in this ease. Appellant’s Br. at 18. But nothing in the Policy or any of the subsequent endorsements supports the view that each insured risk was given its own “inception date.”
National Union further contends that any interpretation of the Policy that requires coverage of risks that the parties did not contemplate when the Policy first took effect is unreasonable. Yet National Union has been exposed to no risks beyond those contemplated by the plain language of the Policy and subsequent endorsements, inсluding those pertaining to the loss for which National Union now seeks to avoid liability. See MetPath, 38 F.Supp.2d at 1094 (rejecting argument that policy interpretation that “expos[ed] [the insurer] to risks that it did not intend in issuing the policy” is unreasonable). National Union could have avoided exposure to risks known to Heileman or Stroh *106 at the time Heileman was added to the Policy by asking Stroh about them, or by specifically excluding such risks in the Policy or Endorsement No. 5. See id. (noting that if the insurer meant to exclude risks known at the time coverage was extended to after-acquired companies, “it should have clearly worded the language of the Policy to say this”).
The district court thus correctly held that the “inception date” of the Policy was May 12, 1995, and correctly concluded that the “known or suspected Loss” provision of Paragraph I therefore did not bar coverage for the recall at issue.
C. Known Loss and Non-Fortuity Doctrines
National Union next argues that even if the district court properly construed the Policy, the “fortuity” and “known loss” doctrines bar coverage of Stroh’s claim as a matter of law.
Broadly stated, the fortuity doctrine holds that “insurance is not available for losses that the policyholder knows of, planned, intended, or is aware are substantially certain to occur.” Barry R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage Disputes § 8.02, at 248 (5th ed.1991) (collecting cases). New York has codified a somewhat narrower version of the doctrine under which an “insurance contract” is defined as an agreement by one party to pay another “upon the happening of a fortuitous event,” meaning “any occurrence or failure to occur which is, or is assumed by the parties to be, to a substantial extent beyond the control of either party.” N.Y. Ins. Law § 1101(a)(1)-(2).
The “known loss” defense is a variation on the fortuity theme. It holds that “an insured may not obtain insurance to cover a loss that is known before the policy takes effect.”
Stonewall Ins. Co. v. Asbestos Claims Mgt. Corp.,
1. Impact of Policy Language.
The district court concluded that the Policy itself defeats a “known loss” defense here by excluding coverage only for losses known by the insured as of the “inception date.”
See National Union III,
Like the district court, we have found no specific authority — the parties have cited none — for or against the proposition that New York law would bar coverage for known losses covered by an insurance policy by means of amendments made to the policy after the inception date, even where the policy itself bars coverage only for losses known on the “inception date.” We also share the district court’s reluctance to announce such a rule in the absence of clear guidance from state courts. “Our role as a federal court sitting in diversity is ... not to adopt innovative theories that may distort established state law.”
City of Johnstown v. Bankers Std. Ins. Co.,
New York law does not leave us entirely without guidance on this issue, however. As noted, a variation of the fortuity principle is incorporated by statute into the very definition of an insurance contract.
See
N.Y. Ins. Law § 1101(a)(l)-(2). New York courts have accordingly applied this principle to deny coverage without reference to
*107
specific contract language,
see Henry Modell & Co.,
It is but a short leap from these formulations to a more specific rule, articulated in other jurisdictions, that fortuity and known loss principles are integral to the nature of insurance and thus apply as a matter of public policy, irrespective of specific policy terms.
See, e.g., Koppers Co., Inc. v. Aetna Cas. & Sur. Co.,
Applying these principles, at least two courts in other jurisdictions have held that coverage would be barred where an existing policy is extended to cover new parties which then file claims for damages if the evidence showed that the insured parties had sustained and were aware of the damages before being added to the policy.
See Certain Underwriters at Lloyd’s v. Oryx Energy Co. .,
The district court thus may have erred in tying National Union’s known loss defense strictly to the Policy’s language. We need not predict nor ask the New York Court of Appeals what New York law is on this subject, however, because we сonclude that even if the fortuity and known loss doctrines override specific policy language in New York, they are inapplicable on the facts of this case.
2. Known Risk. National Union argues that there is at least a triable issue of fact as to whether the Loss was known before July 1, 1996 because Heileman and Stroh knew or should have known on that date that the recall was likely. We disagree.
We begin with the obvious and apparently undisputed conclusion that a “Loss” as defined in the Policy — which includes expenses incurred in connection with a recall — is a “loss” for purposes of the known loss doctrine. The loss in question in this case — i.e., the cost of the Perry recall — undoubtedly occurred after Heileman was added to the Policy. If, on July 1, Stroh or Heileman knew of a broken
*108
glass problem that made a recall likely, it does not follow that the recall, and therefore the expenses in connection with the recall, were known on July 1. In other words, National Union seems to argue that the fortuity doctrine bars coverage not only for known losses but for
likely
losses, 1.e., known enhanced risks. We have expressly rejected the existence of such a “known risk” doctrine under New York law.
See City of Johnstown,
In
City of Johnstown,
an insured landowner sought coverage under a liability policy for cleanup costs associated with contaminated land. The landowner allegedly knew of the contamination when it purchased insurance, but did not know whether and to what extent it would be held liable for the contamination. We noted that New York law bars coverage for known losses but does not recognize the “broader proposition that a risk, once ‘known’ is uninsurable.”
Id.
at 1153;
see also Stonewall,
In Stroh’s case, similarly, there had been no “Loss” at the time Heileman was added to the policy; there was only the risk of a “Loss.” Even if the risk was known, and known to be high, at that time — a question hotly in dispute — the known loss doctrine does not bar coverage.
The rule announced in
City of Johns-town
does not leave insurers unprotected under New York law when insuring such risks. It simply makes clear that such protection lies not in a “known risk” rule but in narrower and better-established doctrines, such as rules barring recovery (1) where the insured fraudulently conceals or misrepresents a loss, imminent loss, or other material fact, and (2) for “damages that are ‘expected’ or ‘intended’ by the insured” where the policy so provides.
City of Johnstown,
Neither of these narrower doctrines is applicable here. National Union has disclaimed any allegation that the defendants fraudulently concealed or withheld material information.
See National Union I,
3. Knowledge of Inevitable Loss. National Union argues, however, that at the time Heileman was added to the Policy, even though the “Loss” in question had not occurred, it was not merely a risk but a certainty. National Union makes two separate arguments in this regard: that because Stroh and Heileman knew that a recall was necessary but delayed initiating one until Heileman was covered under the Policy, the Loss was (1) “known” for purposes of the known loss doctrine, and (2) non-fortuitous under New York law since it was not “beyond the control of either party.” N.Y. Ins. Law § 1101(a)(2). 2 We *109 consider the first of these theories here, and the second in Part II.C.4, below.
National Union’s notion that the known loss doctrine bars coverage not merely for losses that the insured knows have already occurred at the time insurance is purchased, but also for losses that have not occurred but the prospective insured knows inevitably will occur is not without support.
See, e.g., City of Johnstown,
The initial burden of showing that the loss in question was fortuitous' — here meaning that the inevitably of such loss was not known to the insured before coverage took effect — is on the insured party.
See In re Balfour MacLaine Int’l, Ltd.,
Stroh’s initial burden is satisfied by evidence showing that it did not take the first steps toward a recall until after *110 August 12, 1996, some weeks after coverage of Heileman products was added to the Policy. In early August, Stroh learned of several specific consumer complaints of broken glass in bottles filled at the Perry plant, most of which were received by Hornell in July and August 1996. Stroh ceased production at the Perry plant, examined about 30,000 bottles of “Arizona Iced Tea” produced, at thе plant, convened its “Recall Committee,” and consulted with Hornell. Only then, on or after August 20, 1996, was a recall decision made. Had Stroh begun these steps toward a recall prior to the date the Policy was extended to cover Heileman products, there might have been a basis for a reasonable jury to find that Stroh knew then that a recall was inevitable. But these events and the knowledge of inevitability of loss that they might have imparted did not occur until long after coverage of the recall was in place.
Stroh thus having adduced evidence that neither it nor Heileman had knowledge of an inevitable loss, the burden fell on National Union to rebut this evidence and show that the loss was in fact known by either insured to be inevitable. It did not do so.
In support of its assertion that Stroh or Heileman knew the recall was inevitable before July 1, 1996, the date on which coverage of a recall of Heileman products was added to the Policy, National Union relies on two categories of evidence: alleged statements by employees or agents of Stroh and Heilеman regarding what the insureds knew in April and May 1996 about problems at the Perry plant, and evidence purporting to show that the insureds were aware before July 1, 1996 of glass inclusion complaints by consumers regarding bottles filled at the plant. Neither category of evidence would permit a reasonable jury to draw the inference urged by National Union.
Included in the first category is an alleged statement by an employee of Stroh’s insurance broker to National Union’s claims attorney in September 1996, as the dispute over Stroh’s claim for the recall was beginning to take shape, that Heile-man “had begun to notice glass breakage in March or April of 1996.” Similarly, National Union claims that Stroh’s quality control inspector said that he noticed the production line flaw at the Perry plant in March or April of 1996, while conducting a due diligence inspection in preparation for Stroh’s acquisition of Heileman’s assets.
Both employees deny having made the statements attributed to them by National Union. But even if the statements were made, they do not support an inference that Stroh оr Heileman knew that a recall was inevitable before July 1, 1996. Neither person is alleged to have indicated that Stroh or Heileman suspected in March or April 1996 that contaminated bottles had reached or would reach the public or to have known that a recall would ultimately be necessary. To the contrary, both are alleged to have indicated that Stroh and Heileman believed that any risk of glass breakage was sufficiently contained by quality controls in place at the Perry plant.
The proof with respect to consumer complaints also fails to support an inference of known inevitability of loss. There is, to be sure, substantial evidence that Heileman, and perhaps Stroh, knew that there had been some consumer complaints regarding broken glass in bottles produced at the Perry plant. But knowledge of such complaints does not, without more, support the inference that Heileman or Stroh knew that a recall was inevitable. Indeed, such an inference is flatly contradicted by the undisputed evidence on the issue: The *111 plant manаger of the Perry plant during the relevant period testified by declaration that “[a] small amount of glass complaints is typical of any bottling facility.”
Viewed separately, then, neither the evidence of Stroh’s knowledge of a flaw in the Perry production line nor the evidence of its knowledge of consumer complaints support an inference that Stroh or Heileman knew a recall was inevitable. The same is true when this evidence is considered together. There is nothing from which a reasonable jury could properly find that either Stroh, which thought that there were “controls to respond to” the risk of thermal shock breakage in Perry, or Heile-man, which similarly believed that despite occasional complaints, “its production process at the Perry plant was safe and free of any contamination in the finished products,” knew that that risk had manifested itself in the particular glass inclusions that were giving rise to the consumer complaints. There was thus no factual basis for a finding that Stroh or Heileman knew in March 1996 that a flaw at the Perry plant was sending bottles of iced tea with glass inclusions into the distribution stream. Moreover, even had National Union proffered evidence that Stroh or Heile-man knew that there was a connection between the flaw in the Perry process and the complaints, National Union has offered no basis for a jury to infer from such knowledge that Stroh or Heileman knew a recall, rather than some other remedial but uninsured measure, was therefore inevitable.
L Loss with,in the Control of the Insured. Our conclusion that National Union has failed to adduce facts sufficient to defeat the motion for summary judgment on the known-loss defense is also applicable to National Union’s other variation on the fortuity argument: that because Stroh and Heileman deliberately delayed the recall until Heileman had been added to the Policy, the Loss was non-fortuitous under New York law because it was not “beyond the control of either party.” N.Y. Ins. Law § 1102(a)(2).
National Union relies on several decisions barring coverage for damages caused by intentional acts on the part of insureds.
See Univ. of Cincinnati,
These decisions would be applicable only if an intentional act by Stroh or Heileman led directly to the accidental contamination. National Union makes no such allegation. Of course, the recall was “intentional” in the sense that it was a purposeful and willful act, and the resulting “Loss” was in that limited sense non-fortuitous. But the “Loss” was nevertheless “fortuitous” in the sense that it resulted from an accidental or unintended event: the glass inclusion problem at the Perry plant.
Cf. Univ. of Cincinnati,
National Union also appears to contend, without citation to New York authority, that the timing of the Loss at issue was non-fortuitous because Stroh and Heile-man postponed the inevitable recall until it was covered by the Policy. But, as we have noted, there is no basis in this record on which a jury could properly conclude that Stroh or Heileman knew the recall was inevitable when the Policy was extended to cover that risk.
National Union warns that requiring coverage under these circumstances will leave insurers vulnerable to misconduct, offering the hypothetical example of a building owner that adds a building it knows to be structurally unsound to an existing insurance policy and then files a claim for the cost of repairing the building. But the insurer in National Union’s example may protect itself by requiring the insured to disclose any problems with buildings added to the policy after the original inception date, just as National Union was free to ask Stroh of any known or potential problems associated with Heileman’s assets prior to adding Heileman’s assets to Policy coverage. As discussed in more detail below, an insured’s failure to respond accurately to such questions may render the policy subject to rescission by the insurer.
See, e.g., Vella v. Equitable Life Assurance Soc’y,
III. Due Diligence
Count II of the amended complaint alleges that Stroh and Heileman breached Condition 0, the Policy’s due diligence clause. 4 Condition 0 reads:
DUE DILIGENCE: The Insured will exercise due diligence to do all things reasonable and practical to avoid any happening or circumstance covered by this policy and to make all reasonable efforts to mitigate any Loss arising as a result of an Insured Event.
National Union offers several interpretations of this provision and the manner of its breach, none of which we find persuasive. First, it argues that Stroh and Heileman breached Condition 0 by failing to “discover[ ] (and advis[e] underwriters)” of the contamination problem at the Perry plant. There is no factual support for the assertion that the defendants failed to “discover ” the problem. Indeed, National Union vigorously argues in connection with other claims that Stroh and Heileman successfully “discovered” the problem before July 1, 1996. Furthermore, there is no evidentiary basis for a claim that had Stroh or Heileman learned of the contamination at the earliest possible time, they could have mitigated or *113 avoided the “Loss” through an exercise of due diligence.
We also do not understand how a failure to “advise underwriters” of the problem amounts to a lack of due diligence as defined by Condition 0. That provision addresses the need to avoid “any happening or circumstance covered by this policy”; it says nothing about disclosure of the risk of such covered events. Moreover, because the Policy explicitly addresses the insureds’ duty to disclose material facts in Condition W, discussed below, National Union’s proposed interpretation of Condition 0 would render that more specific requirement surplusage.
National Union also contends that the defendants breached the due diligence clause by delaying the recall until Heile-man was covered under the Policy. In addition to lacking a sufficient factual basis, this argument is premised on a misinterpretation of the Policy. Condition 0 requires Stroh to exercise due diligence in order to avoid a covered “happening or circumstance,” not to avoid having it happen during the policy period.
National Union further undercuts its own argument by asserting, persuasively, that the happening or circumstance to be avoided under Condition 0 is “an accidental contamination.” Under this definition, the recall was not a “happening or circumstance” within the meaning of Condition 0, and Stroh’s alleged failure to initiate the recall before it fell within the Policy’s coverage, even if proven, could not be considered a lack of due diligence.
IV. Duty to Cooperate
Count III of the amended complaint alleges that Stroh breached Conditions Q and R of the Policy by failing to provide National Union with financial information it requested in the course of its investigation of the disputed claim. Condition Q requires Stroh to cooperate with National Union “in all matters relating to this insurance.” Condition R gives National Union the right to “examine and audit the Insured’s business documents relating to the subject matter of this insurance.”
The district court concluded (1) that National Union failed to raise a triable issue as to whether Stroh in fact breached these provisions; and (2) that National Union forfeited this defense to coverage by failing to cite it in its denial of the claim.
See National Union II,
National Union first requested the financial information on November 21, 1997, more than fifteen months after it was notified of Stroh’s claim. In response, on November 25, 1997, Stroh requested that National Union “take a position on coverage” 5 before requiring Stroh to undertake a “time consuming and costly accounting exercise,” noting that National Union had already conducted a fifteen-month investigation of the claim that included the review of “hundreds of documents and numerous personal interviews.” On December 16, 1997, National Union acknоwledged that “coverage is still at issue,” but stated that the purpose of the accountant’s investigation “is to expedite *114 the adjustment process should coverage he accepted ” (emphasis added) and again requested access to financial information. It is undisputed that Stroh’s duty to cooperate ended on February 24, 1998, when National Union officially disclaimed coverage.
The district court correctly concluded that Stroh did not breach the cooperation clause. National Union alleges only that Stroh refused to compile and divulge information that was needed in the event that National Union accepted coverage. It did not accept coverage. Therefore, whether or not National Union had some abstract right to the information, it cannot complain that it was in any way prejudiced by Stroh’s failure to provide it.
Cf. Thrasher v. United States Liab. Ins. Co.,
V. Failure to Disclose
Count IV of the amended complaint alleges that Stroh violated Condition W of the Policy by failing to disclose to National Union material information regarding the risk of contamination at the Perry plant. Condition W states:
This policy is null and void in case of concealment, misrepresentation, non-disclosure, or fraud by any Insured of a material fact concerning:
1. this insurance or the procurement thereof; or
2. the Insured’s Product(s), or the Insured’s interest in the Insured’s Pr'oduet(s); or
3.any Insured Event, or any Loss or claim under this policy.
“Under New York law, ‘nondisclosure of a fact concerning which the applicant has not been asked does not ordinarily void an insurance policy absent an intent to defraud.’ ”
First Fin. Ins. Co. v. Allstate Interior Demolition Corp.,
As we have noted repeatedly, National Union has specifically disclaimed any allegation that Stroh engaged in fraud.
National Union I,
National Union contends that non-disclosure may render an insurance policy void even in the absence of fraudulent intent on the part of the insured or a specific inquiry by the insurer. But all of the decisions on which it relies involved either incomplete
*115
or misleading answers to specific questions from the insurer, see Vella,
On the May 1, 1996 renewal application that led to the extension of the Policy in Endorsement No. 4, National Union did ask whether Stroli knew of "any actual or suspected accidental contaminations involving any of [Stroh'sJ products during the last twenty-four . . . months," and Stroh denied any such knowledge. But Strоh's statements were indisputably truthful when made. Stroh was then seeking extension of insurance coverage for costs associated with contamination of Stroh's products. Not until later that month did Stroh's broker contact National Union to ask about the possibility of adding to the Policy coverage with respect to contamination of Heileman products, and not until May 21 did National Union make a proposal to add Heileman to the Policy. National Union did not then or thereafter ask Stroh about contamination involving Heileman products.
National Union argues, however, that the renewal application put Stroh on notice that it considered information about known or potential contaminations to be material, and asserts that New York law requires an applicant for insurance to disclose facts it knows to be material even in the absence of specific inquiry. Therefore, National Union asserts, when Stroh sought to extend the Policy's coverage to Heilernan products, it was required to disclose what it knew about actual or potential Heileman contamination.
National Union first raised this argument in connection with its motion for reconsideration under Rule 6.3 of the Local Civil Rules of the United States District Courts for the Southern and Eastern Districts of New York. The district court thus rejected the argument as untimely. See National Union III,
The district court ruled in the alternative that National Union's argument failed on the merits. Although we are inclined to agree, 6 we need not reach this issue *116 which, since it was not properly raised in the district court, is not properly before us.
VI. Number of Deductibles
Count VI of the amended complaint seeks a declaration that Stroh’s claim for the recall of bottles filled at the Perry plant is subject to more than one deductible.
The “declarations” accompanying the original Policy provide for a $250,000 deductible for “each Accidental Contamination.” The Policy itself, however, states in Declaration C of the General Conditions that the “deductible(s) stated in Item IV of the declarations will apply separately to each and every Loss.” As noted, a “Loss” includes certain costs “incurred by the Insured directly and solely as the result of a covered Insured Event,” including “Recall Costs incurred ... as a result of an Accidental Contamination.” And an “Accidental Contamination” is “any accidental or unintentional contamination ... of an Insured’s Product(s) which occurs during or as a result of its production, preparation, manufacture or packaging.”
National Union originally contended that a separate deductible would apply to each contaminated bottle, a reading that would effectively have wiped out all insurance coverage. It subsequently modified its position to argue that a separate deductible applies to each “proximate, uninterrupted, and continuоus cause” of contamination, a position with which the district court generally agreed.
See National Union III,
The district court concluded that a separate deductible applied to each “Loss,” with “Loss” defined not as the full cost of a given recall but as the recall costs attributable to a specific “Accidental Contamination.”
See id.,
In applying this standard, the district court decided that the “unсontested record” demonstrates that all of the instances of glass inclusion that led to the recall were attributable to a single cause: the production line flaw.
Id.
On appeal, National Union does not contest the district court’s interpretation of the relevant provisions of the Poli *117 cy. It also concedes that “the record thus far does point to a flaw in the production line as the root cause of the problem.” National Union points to nothing in the record overlooked or misinterpreted by the district court that indicates more than one “prоximate, uninterrupted, and continuous cause,” to use its own definition, of contamination.
National Union’s remaining argument is that the district court improperly denied its request pursuant to Fed. R.Civ.P. 56(f) for additional discovery on the cause or causes of glass contaminations at the Perry plant. A party seeking additional discovery under Fed.R.Civ.P. 56(f) to justify its opposition to a summary judgment motion must submit an affidavit explaining, among other things, “what facts are sought and how they are to be obtained; ... what efforts the affiant has made to obtain those facts; and ... why those efforts were unsuccessful.”
Burlington Coat Factory Warehouse Corp. v. Esprit De Corp.,
Before initiating this litigation, National Union conducted a seventeen-month investigation that included interviews with key Stroh personnel and a visit to the Perry plant. This was followed by eleven months of formal documеnt discovery preceding Stroh’s motion for summary judgment. Only depositions under Fed. R.Civ.P. 30 remained. National Union nonetheless failed to produce any evidence that the glass inclusion problem at the Perry plant was attributable to anything . other than the single production line flaw. Nor did National Union submit the requisite affidavit describing the nature of the uncompleted discovery that it sought.
7
Instead, it asserted in its opposition papers, as it does on appeal, that it should have been given the opportunity to explore the possibility that variations in individual production runs at the Perry plant may have exacerbated the risk of contamination created by the production line flaw. The district court declined to grant time for additional discovery solely on the basis of “[s]uch speculation at this late date.”
National Union III,
CONCLUSION
For the foregoing reasons, the judgment of the district court is affirmed.
Notes
. National Union does not appeal from the district courts dismissal of Count V.
. The district court did not reach the factual or legal basis of these arguments because it
*109
concluded that the Policy language subsumed National Union’s fortuity and known loss defenses. Because we assume for purposes of this opinion that that conclusion was in error, we consider the merits of those defenses for the first time on appeal.
Cf. Name.Space, Inc. v. Network Solutions, Inc.,
.
But see Koppers Co.,
. Stroh moved for summary judgment on this claim on the ground that Heileman had waived Condition O as a basis for avoiding coverage by failing to mention it in its letter declining coverage. The district court found, however, that the declination letter expressly mentioned Condition O and denied summary judgment.
See National Union II, 1999
WL 1267461, at *4-*5,
. The bulk of National Union's argument on appeal is that it was entitled to the financial information at issue befоre conceding liability. We need not determine the parameters of National Union's right to the information, because we conclude that Stroh’s failure to supply it under the circumstances of this case did not amount to a breach of its duty to cooperate.
. The decisions cited by National Union in support of its argument hold only that an insured's failure to disclose information it knows to be material will void the policy if it amounts to fraud or a failure to answer specific inquiries from the insurer. See Sebring,
. National Union did submit an affirmation in support of its Rule 56(f) motion. But the district court apparently did not consider this a proper Rule 56(f) affidavit, perhaps because it fails to identify the discovery it seeks or explain with any specificiLy how such discovery may justify its opposition to summary judgment.
National Union III,