# ECB USA, Inc. v. Chubb Insurance Company of New Jersey

> District Court, S.D. Florida · December 17, 2021

URL: https://www.frixlaw.com/law-library/cases/10119983

## Case

- **Court:** District Court, S.D. Florida
- **Decided:** December 17, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10119983

## How later opinions describe it (automated extraction)

- rejecting the proposition that a renewal policy cannot have a substantial change in terms
- noting that while “commas at the end of series can avoid ambiguity,” the “use of such commas is discretionary”

## Opinion text

United States District Court
for the
Southern District of Florida

ECB USA, Inc. and others, )
Plaintiffs, )
)
v. )
Civil Action No. 20-20569-Civ-Scola
)
Chubb Insurance Company of New )
Jersey and Executive Risk )
Indemnity, Inc., Defendants. )

Omnibus Order
The Defendants—insurance providers—move for summary judgment on
all claims asserted by the Plaintiffs—assignees of certain insurance-related
claims. (ECF No. 161.) The Plaintiffs also move for partial summary judgment
on two specified issues. (ECF No. 154.) The parties filed oppositions in
response to each motion (ECF Nos. 186, 187), and each filed a reply in support
of their respective motions (ECF Nos. 193, 195). Resolution of these cross
motions for summary judgment also entails review and consideration of the
Defendants’ motion to dismiss Count One (ECF No. 143) and the Plaintiffs’
motion to substitute (ECF No. 215), both of which were fully briefed. After
careful consideration of the briefing, the record, and the relevant legal
authorities, the Court grants in part and denies in part the Defendants’
motion for summary judgment (ECF No. 161) and grants in part and denies
in part the Plaintiffs’ motion for partial summary judgment (ECF No. 154).
Moreover, the Court denies the Defendants’ motion to dismiss (ECF No. 143)
and grants the Plaintiffs’ motion to substitute (ECF No. 215).
1. Background
As a general matter, insurance policies and insurance salesmen have
long been the butt of jokes. The former are not known for beautiful prose nor
the latter for exciting conversation. But insurance contracts can provide fodder
for scores of attorneys, grammarians, and logophiles, where, as here, the
meaning of one phrase and the placement (or omission) of one comma can
make the difference between coverage and nothing.
On December 17, 2019, ECB USA, Inc, Atlantic Ventures Corp., and
G.I.E. C2B (the “Plaintiffs”) sued Chubb Insurance Company of New Jersey
(“Chubb”) in the Circuit Court of the Eleventh Judicial Circuit for various relief
associated with Chubb’s denial of insurance coverage in an earlier litigation.
(ECF No. 1.) On February 7, 2020, Chubb removed the case to federal court on
the basis of diversity jurisdiction. (Id.) On February 26, 2021, the Plaintiffs and
Constantin Associates, LLP (“Constantin”) filed the operative pleading, the
Fourth Amended Complaint, which brings seven claims against Chubb and
Executive Risk Indemnity, Inc. (“ERI”). (ECF No. 79.)
Before addressing the merits of each claim, the Court will briefly provide
the relevant factual background. In an insurance dispute such as this, the
Court will focus this discussion on: (1) the relevant actors, (2) the terms and
negotiations of the relevant insurance policies, (3) the entities that are provided
coverage under the relevant insurance policies, (4) the extent of coverage
provided under the policies, and (5) the underlying lawsuit that is the subject
of the alleged failure to defend and indemnify.
A. The Actors
Control Associates/Constantin Group L.P. (“Control Group”) is a limited
partnership registered in Delaware that provides professional and consulting
services. (ECF No. 156 at ¶ 5; ECF No. 184 at ¶ 5; ECF No. 155-51.)
Constantin, a New York limited liability partnership, provides accounting and
auditing services. (ECF No. 155 at ¶ 106; ECF No. 156 at ¶ 6; ECF No. 184 at
¶ 6.)
ERI, a Delaware-based corporation, issues professional liability
insurance policies in New Jersey. (ECF No. 156 at ¶ 1; ECF No. 184 at ¶ 1.)
Chubb is a New Jersey-based entity that also provides professional liability
insurance policies in New Jersey. (ECF No. 156 at ¶ 2; ECF No. 184 at ¶ 2.)
Both Chubb and ERI are subsidiaries of Chubb Limited. (ECF No. 156 at ¶ 3;
ECF No. 184 at ¶ 3.) Sometimes, Chubb and ERI share underwriters, claims
staff, and policies and procedures for underwriting and claims processing.
(ECF No. 156 at ¶ 4; ECF No. 184 at ¶ 4.) From 2002 to 2019, either Chubb or
ERI issued professional liability insurance policies to Control Group. (ECF
No. 156 at ¶ 7; ECF No. 184 at ¶ 7.)
B. The Policies
This dispute primarily centers around the terms and negotiations of one
policy—the 2017-18 Policy. In 2017, Control Group obtained this professional
liability insurance policy, number 8168-4190, from Chubb. (ECF No. 156 at
¶ 9; ECF No. 184 at ¶ 9; ECF No. 156-7.) The policy covered the period from
December 12, 2017 to December 12, 2018. (ECF No. 156-7 at 5.)
The parties dispute whether the 2017-18 Policy was a renewal of the
prior policy. Control Group had filed previous renewal applications, and the
parties agree that the 2016-17 Policy was a renewal of the 2015-16 Policy.
(ECF No. 156 at ¶¶ 23–24, 26; ECF No. 184 at ¶¶ 23–24, 26.) The 2017-18
Policy process began around September 2017 when Chubb sent Control Group,
through a third party, a “non-renewal letter,” indicating that Chubb did not yet
have adequate information to underwrite Control Group’s “upcoming renewal.”
(ECF No. 155-40; ECF No. 185 at ¶¶ 166–167; ECF No. 196 at ¶¶ 166–167.) In
October 2017, Control Group, through a third party, requested a renewal
application. (ECF No. 156-24; ECF No. 185 at ¶ 157; ECF No. 196 at ¶ 157.)
One month later, Sean Murray, an underwriter for the Defendants, sent “the
renewal app.” (ECF No. 185 at ¶ 158; ECF No. 196 at ¶ 158; ECF No. 185-21.)
And on December 6, 2017, Control Group submitted a “Professional Error and
Omission Insurance Renewal Application.” (ECF No. 196 at ¶ 159; ECF
No. 196-5.) Indeed, the application form was labeled “Chubb Pro E&O Renewal
Application,” and, above the signature line, the application is referred to as the
“Renewal Application.” (ECF No. 196-5.) A week later, Chubb sent a binder
letter for the 2017-18 Policy, stating “thank you again for the renewal business
for [Control Group].” (ECF No. 185-24.)
C. The Insureds
Control Group’s policies from 2003 to 2017 were all under the applicant
name “[Control Group] and Subsidiaries.” (ECF No. 155 at ¶ 76; ECF No. 185
at ¶ 76.) But the entities provided coverage under the policies (the Insureds)
were not necessarily limited to Control Group’s subsidiaries. For example, the
2016-17 Policy covered any Insured, which was defined, in relevant part, as
“the person or entity stated in Item 1 of the Declarations.” (ECF No. 155-16 at
9.) Item 1 of the Declarations was amended by an endorsement—Endorsement
No. 5—within the 2016-17 Policy, which provided a list of additional “Named
Insured[s],” including Constantin. (ECF No. 93-3; ECF No. 155 at ¶ 79; ECF
No. 155-16 at 6, 22; ECF No. 185 at ¶ 79.) Control Group first added
Constantin to the “Named Insured list” in the 2015-16 Policy. (ECF No. 155 at
¶ 78; ECF No. 155-15 at 6; ECF No. 155-39; ECF No. 185 at ¶ 78.)
The 2017-18 Policy did not include Endorsement No. 5. (ECF No. 155 at
¶¶ 92, 94; ECF No. 185 at ¶¶ 92, 94.) Nevertheless, Control Group states that
it intended that Constantin remain an Insured. (ECF No. 156 at ¶ 35.) Indeed,
on December 12, 2017, before the completed binder letter was sent, Control
Group was asked to confirm the “list of named insured” for the 2017-18
Policy—the list as proposed included Constantin. (ECF No. 155-43; ECF
No. 156-31.)
But the definition of an “Insured” was different in the 2017-18 Policy. To
determine who was an Insured, one must wade through multiple definitions:
• “Insured” was defined as “any Organization and any Insured
Person.”1 (ECF No. 156-7 at 8; ECF No. 155-43 at 22.)
• “Organization” was defined as the “Parent Organization and any
Subsidiary.” (ECF No. 155-43 at 13.)
• The Parent Organization was defined as Control Group. (ECF
No. 185-1.)
• Subsidiary was defined, in relevant part, as an entity for which
Control Group, directly or indirectly, owns or controls the majority
of the “outstanding securities representing the present right to vote
for election of or to appoint” management. (Id.)
While the definition of Insured changed from the 2016-17 Policy to the
2017-18 Policy, the parties dispute whether Control Group received adequate
notice of this change. (ECF No. 156 at ¶ 36; ECF No. 184 at ¶ 36.) The
Defendants did not explicitly communicate to Control Group that there was a
different definition of Insured and Subsidiary. The Defendants point to an e-
mail dated December 4, 2017, in which Mr. Murray explained that the parties
could “either keep [the 2017-18 Policy] on the current form or move it to the
new form.” (ECF No. 155-42.) Mr. Murray then explained that the “new form”
had “a lot of enhancements to it”; Mr. Murray did not identify a change in the
list of Insureds or a change in the definition of Insured. (Id.; ECF No. 185 at
¶ 85.) On January 9, 2018, Control Group was asked to review the 2017-18
Policy, and the Policy was on the “new form” that Mr. Murray had addressed
earlier. (ECF No. 155-46.)
D. The Coverage
In relevant part, the 2017-18 Policy provided coverage for claims related
to “Management consulting services,” which are defined as “services directed
toward expertise in banking finance, accounting, risk and systems analysis,
design and implementation, asset recovery and strategy planning for financial
institutions.” (ECF No. 155-37 at 23; ECF No. 185 at ¶ 1.) That definition
remained the same from 2002 to 2017. (ECF No. 155 at ¶ 15; ECF No. 185 at
¶ 15.)
Beginning in 2001, when applying for coverage, Control Group identified
that all of its revenues were derived from either “management consulting” or
“consulting.” (ECF No. 155 at ¶¶ 16–20; ECF No. 185 at ¶¶ 16–20.) It was not
until 2016 and 2017 that Control Group also identified “accounting” as
included in its services. (ECF No. 155 at ¶¶ 22–23; ECF No. 185 at ¶¶ 22–23.)

1 “Insured Person,” the definition of which is not relevant here, was defined as “any Executive
or Employee of an Organization acting in his or her capacity as such.” (ECF No. 155-43 at 22.)
E. The Litigation
In 2018, the Plaintiffs sued Constantin in the Eleventh Judicial Circuit in
Miami-Dade County for its alleged wrongdoing in connection with the provision
of a professional audit (the “Underlying Litigation”). (ECF No. 156 at ¶ 40; ECF
No. 184 at ¶ 40.) Constantin gave notice of the lawsuit to Chubb. (ECF No. 156
at ¶¶ 41–42; ECF No. 184 at ¶¶ 41–42.) But Chubb later issued two claim
denial letters, denying coverage to Constantin for the sole reason that auditing
services were not covered under the 2017-18 Policy. (ECF No. 156 at ¶¶ 43, 46;
ECF No. 184 at ¶¶ 43, 46.) Chubb did not indicate in the claim denial letters
that Constantin was not an Insured. (ECF No. 156 at ¶ 47; ECF No. 184 at
¶ 47.)
In November 2019, Constantin settled with the Plaintiffs, agreeing to
judgment in favor of the Plaintiffs for $4,850,000 and agreeing to assign all
rights against Chubb and ERI to the Plaintiffs. (ECF No. 156 at ¶ 48; ECF
No. 184 at ¶ 48; ECF No. 156-38.) This current action was initiated
approximately one month later. (ECF No. 1.)
2. Legal Standard
Summary judgment is proper if, following discovery, the pleadings,
depositions, answers to interrogatories, affidavits, and admissions on file show
that there is no genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986); Fed. R. Civ. P. 56. “An issue of fact is ‘material’ if, under the
applicable substantive law, it might affect the outcome of the case.” Hickson
Corp. v. N. Crossarm Co., 357 F.3d 1256, 1259–60 (11th Cir. 2004). “An issue
of fact is ‘genuine’ if the record taken as a whole could lead a rational trier of
fact to find for the nonmoving party.” Id. at 1260. All the evidence and factual
inferences reasonably drawn from the evidence must be viewed in the light
most favorable to the nonmoving party. See Adickes v. S.H. Kress & Co., 398
U.S. 144, 157 (1970); Jackson v. BellSouth Telecomms., 372 F.3d 1250, 1280
(11th Cir. 2004).
Once a party properly makes a summary judgment motion by
demonstrating the absence of a genuine issue of material fact, the nonmoving
party must go beyond the pleadings through the use of affidavits, depositions,
answers to interrogatories, and admissions on file and designate specific facts
showing that there is a genuine issue for trial. See Celotex, 477 U.S. at 323–24.
The nonmovant’s evidence must be significantly probative to support the
claims. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). The
Court will not weigh the evidence or make findings of fact. See Anderson, 477
U.S. at 249; Morrison v. Amway Corp., 323 F.3d 920, 924 (11th Cir. 2003).
Rather, the Court’s role is limited to deciding whether there is sufficient
evidence upon which a reasonable juror could find for the nonmoving party.
See id.
3. Analysis
The Defendants move for summary judgment on all counts (ECF
No. 161), while the Plaintiffs only seek summary judgment on two issues,
namely, that auditing services are covered under the 2017-18 Policy and that
Constantin is an Insured under the 2017-18 Policy (ECF No. 154). The Court
will address each.
As a preliminary matter, the Plaintiffs argue that New Jersey law applies
to all claims. (ECF No. 154 at 3.) The Defendants did not contest this, but
rather argue that there is a “false conflict” between New Jersey law and Florida
law and that the laws of those states are, in relevant part, the same. (ECF
No. 161 at 6 n.3.)
As the parties largely do not dispute the applicable law, the Court will
apply New Jersey law. As to the contractual claims, Florida applies the doctrine
of lex loci contractus, which holds that the law of the jurisdiction where the
contract was executed governs. See State Farm Mut. Auto. Ins. Co. v. Roach, 945
So.2d 1160, 1163 (Fla. 2006). This occurred in New Jersey, so New Jersey law
applies. (ECF No. 156 at ¶¶ 2, 51; ECF No. 184 at ¶¶ 2, 51.) As to the tort
claims, Florida applies the “most significant relationship” test. See Trumpet
Vine Invs., N.V. v. Union Cap. Partners I, Inc., 92 F.3d 1110, 1115 (11th Cir.
1996). For the reasons laid out by the Plaintiffs, the Court finds that New
Jersey has the most significant relationship to the facts of this case. (ECF
No. 154 at 3.)
A. Count 1: Breach of Contract
The Plaintiffs allege that Chubb breached the 2017-18 Policy by failing to
defend and indemnify Constantin in the Underlying Litigation. An insurer has a
duty to defend where a plaintiff “alleges facts that fairly and potentially bring
the suit within policy coverage.” Rosario v. Haywood v. Haywood, 799 A.2d 32,
40 (N.J. App. Div. 2002); Evanston Ins. Co. v. Heeder, 490 F. App’x 215, 216
(11th Cir. 2012) (citing Jones v. Fla. Ins. Guar. Ass’n, 908 So.2d 435, 442–43
(Fla. 2005)). Moreover, an insurer has a duty to indemnify where the party
seeking indemnification is actually covered under the policy. See Hartford
Accident & Indem. Co. v. Aetna Life & Cas. Ins. Co., 483 A.2d 402, 405 (N.J.
1984); Regions Bank v. Commonwealth Land Title Ins. Co., 977 F. Supp. 2d
1237, 1261–62 (S.D. Fla. 2013) (Scola, J.). It is the insured’s burden to
establish the duty to defend and the duty to indemnify. See State Nat. Ins. Co.
v. Cnty. of Camden, No. 08-5128(NLH)(AMD), 2012 WL 6652819, at *2 (D.N.J.
Dec. 19, 2012). Insurance contracts must be interpreted liberally in favor of
coverage “to the full extent that any fair interpretation will allow.” State Nat.
Ins. Co., 2012 WL 6652819, at *2; see also Colony Ins. Co. v. Ramon, No. 08-
21812-CIV, 2009 WL 10699122, at *3 (S.D. Fla. July 30, 2009) (Seitz, J.).
The 2017-18 Policy provided coverage for claims related to “Management
consulting services,” which are defined as “[1] services directed toward
expertise [2] in banking finance, accounting, risk and systems analysis, design
and implementation, asset recovery and strategy planning [3] for financial
institutions.” (ECF No. 155-37 at 23; ECF No. 185 at ¶ 1.)
First, the parties argue whether the auditing of financial statements (the
provision of which was the basis for the Underlying Lawsuit) constitutes
“services directed toward expertise in . . . accounting[.]” The interpretation of
an insurance contract is a question of law, and the Court must give the
contract its plain and ordinary meaning. See Princeton Inv. Partners, Ltd. v. RLI
Ins. Co., CV171120KMMAH, 2018 WL 846917, at *5 (D.N.J. Feb. 9, 2018); CPS
MedManagement LLC v. Bergen Reg’l Med. Ctr., L.P., 940 F. Supp. 2d 141, 154
(D.N.J. 2013). An insurance contract is ambiguous if “the phrasing of the
policy is so confusing that the average policyholder cannot make out the
boundaries of coverage,” and courts may look to extrinsic evidence to
determine whether an ambiguity exists and to resolve the ambiguity. See
Princeton Inv. Partners, 2018 WL 846917, at *5 (quoting State Nat. Ins., 10 F.
Supp. 3d at 574–75); CPS MedManagement, 940 F. Supp. 3d at 154. However,
courts must resolve any ambiguity in favor of coverage if a fair reading permits.
See Princeton Inv. Partners, 2018 WL 846917, at *5 (“[I]f the controlling
language of the policy will support two meanings, one favorable to the insurer
and one favorable to the insured, the interpretation supporting coverage will be
applied.”).
The parties have spilt much ink on the proper interpretation of the
clause “services directed toward expertise in . . . accounting,” filing multiple
motions for judicial notice and devoting much of their respective briefs to these
arguments. Notwithstanding these other sources, the Court will start with the
definition provided in the Policy.
Doing so, the Court finds that the auditing of financial statements falls
within the contractual term “services directed toward expertise in . . .
accounting.” This provision is hardly ambiguous—auditing of financial
statements is a widely recognized accounting service. See N.J.S.A 2A:53A-25
(“‘Professional accounting services’ includes, but is not limited to, the . . . audit
of . . . a financial statement[.]”); Fla. Stat. § 473.302(8)(a) (defining services that
fall within “public accounting”). And conducting an audit requires expertise, as
the materials to which the Defendants point explain. (See ECF No. 175 at 6
(“[F]orensic accounting services . . . involve the application of . . . special skills
in accounting, auditing, finance, quantitative methods . . . and research[.]”)
(quoting Code of Professional Conduct, 1.295.140, Forensic Accounting).)
The Defendants disagree, arguing that the term “services directed toward
expertise in . . . accounting” must be interpreted in light of the usage of the
term that it is defining—“management consulting services.” (ECF No. 161 at 5–
6.) The Defendants point to, among other things, various business dictionaries,
certain standards promulgated by the American Institute of Certified Public
Accountants, professional standards for public accountants, SEC guidance, as
well as writings by the late Justice Scalia. (Id. at 6; ECF No. 195 at 4.) The
Defendants argue that these extrinsic sources establish that “management
consulting” does not include auditing, as consulting generally involves the
analysis of management problems and the provision of recommendations, while
auditing generally involves the attestation to financial statements. (ECF
No. 161 at 6–8.)
However, the principles to which the Defendants point only apply where
the contract is ambiguous. See A. Scalia & B. Garner, Reading Law: The
Interpretation of Legal Texts, at 228 (2012) (noting that the principle that a
definition is interpreted in light of the definiendum’s context applies only where
“a definition itself contains a term that is not clear”); see also Stenberg v.
Carhart, 530 U.S. 914, 942 (2000) (“When a [text] includes an explicit
definition, [a court] must follow that definition, even if it varies from that term’s
ordinary meaning.”). As held above, the definition of “management consulting
services” is not “so confusing[ly]” ambiguous to warrant extensive resort to
extrinsic evidence. See Princeton Inv. Partners, 2018 WL 846917, at *5. If the
parties wished to limit coverage to “consulting” services in a way that
comported with certain trade usage, the parties could have done so. But the
parties contracted to an expansive definition of “management consulting
services,” which must be interpreted in favor of coverage if a fair reading
permits. See State Nat. Ins. Co., 2012 WL 6652819, at *2. The Court must
apply this plain meaning.2
Second, however, the Underlying Lawsuit did not concern the provision
of accounting services to a “financial institution.” This is undisputed. (ECF
No. 155 at ¶ 72; ECF No. 185 at ¶ 72.) The Plaintiffs’ only argument in

2 As the Court holds that auditing is a covered service under the 2017-18 Policy, the Court
need not address the Plaintiffs’ contention that the Defendants were estopped from arguing
that auditing was not a covered service. (ECF No. 154 at 10.)
opposition comes down to a comma. (ECF No. 186 at 6.) Recall the clause at
issue: “[1] services directed toward expertise [2] in banking finance, accounting,
risk and systems analysis, design and implementation, asset recovery and
strategy planning [3] for financial institutions.” (ECF No. 155-37 at 23; ECF
No. 185 at ¶ 1.) The Defendants argue that covered accounting services must
be provided to a financial institution, pointing to the series-qualifier canon,
which holds that a modifier (here, “for financial institutions”) at the end of a
series of nouns or verbs “normally applies to the entire series.” (ECF No. 161
at 13); see Facebook, Inc. v. Duguid, 141 S. Ct. 1163, 1169 (2021). The
Plaintiffs argue that the series-qualifier canon only applies where there is a
comma before the modifier—therefore, as there is no comma before “for
financial institutions,” the Plaintiffs argue that clause only qualifies the phrase
immediately preceding it (namely, “asset recovery and strategy planning”). (ECF
No. 186 at 6); see Facebook, 141 S. Ct. at 1170.
The Court finds that the phrase “for financial institutions” modifies the
entire series, meaning that “management consulting services” is defined as the
provision of “services directed towards expertise in . . . accounting . . . for
financial institutions.” See United States v. Bass, 404 U.S. 336, 340 n.6 (1971)
(noting that while “commas at the end of series can avoid ambiguity,” the “use
of such commas is discretionary”).
In total, a plain reading of the 2017-18 Policy establishes that Chubb
had no duty to defend or duty to indemnify in connection with the Underlying
Litigation, as the services at issue in the Underlying Litigation were not
provided to a financial institution, as required for coverage. Therefore, the
Court grants summary judgment in favor of Chubb on Count One.3
B. Count 2: Breach of Contract
Count Two states a breach of contract for Chubb’s alleged failure to
defend and indemnify Constantin, on the theory that the 2017-18 Policy was a
renewal of the 2016-17 Policy. However, the definition of “management
consulting services” was the same in the 2016-17 Policy as it was in the 2017-
18 Policy. (See ECF No. 155 at ¶ 15; ECF No. 185 at ¶ 15.) Therefore, the Court
grants summary judgment on Count Two in favor of Chubb for the same
reasons laid out above.

3 The Defendants represented that resolution of Count One in their favor would render their
Counterclaim (ECF No. 93) moot. (See ECF No. 210 at 2 n.2.) Therefore, the Court dismisses
the Defendants’ Counterclaim as moot. The Defendants also argue that resolution of Count
One in their favor would moot the remainder of the Plaintiffs’ claims. (Id.) While the Plaintiffs
do not appear to specifically address this contention, the Court will continue to address all of
the Plaintiffs’ claims.
C. Count 3: Reformation of Contract
The Plaintiffs seek to reform the 2017-18 Policy, arguing that the
Defendants failed to apprise Control Group of any change in terms of the
renewal policy—namely, the removal of Constantin as an Insured.
The Defendants move for summary judgment on this claim primarily
under two theories: (1) the 2017-18 Policy was not a renewal policy subject to
the strict requirements for notice of changes in terms and (2) in any event, the
Defendants gave adequate notice of a change in terms. (ECF No. 161 at 18–20.)
First, the Court holds that the 2017-18 Policy was a renewal policy.
From 2011 to 2017, the Defendants sent a “notice of non-renewal” to Control
Group, which gave Control Group notice that action was needed to renew its
policy. (ECF No. 184 at ¶ 55; ECF No. 192 at ¶ 55.) This notice does not, as the
Defendants appear to argue, definitively resolve the issue of whether the 2017-
18 Policy was a renewal. Rather, after the notice was sent in September 2017,
Control Group, through a third party, requested a “renewal application” from
Chubb. (ECF No. 156 at ¶ 28; ECF No. 184 at ¶ 28; ECF No. 156-24.) From
that point, the parties consistently referred to the Policy as a renewal. In
November 2017, Chubb forwarded “the renewal app.” (ECF No. 156 at ¶ 29;
ECF No. 184 at ¶ 29.) In early December 2017, Control Group sent a signed
“Renewal Application,” which had a heading that read “Chubb Pro E&O
Renewal Application.” (ECF No. 196-5; ECF No. 185 at ¶ 159; ECF No. 196 at
¶ 159.) After the 2017-18 Policy was bound, the Defendant’s underwriter
thanked Control Group for “the renewal business.” (ECF No. 185 at ¶ 161; ECF
No. 196 at ¶ 161.)
To argue that the 2017-18 Policy was not a renewal, the Defendants
maintain that the 2017-18 Policy was on a different form than the previous
policy, and therefore it could not have been a simple renewal. (ECF No. 187
at 18.) Moreover, the Defendants explain that the term “renewal” was only used
at the time of drafting in order to “accurately record progress [internally]
toward underwriting goals.” (Id.) But the Defendants do not argue that Control
Group was aware of these internal underwriting goals or that Control Group
was privy to the Defendants’ internal understanding of the term “renewal.”
The Defendants plainly referred to the 2017-18 Policy as a renewal at the
time of drafting and binding. An undisclosed internal definition that departed
from the common meaning of “renewal” has no bearing on whether the 2017-
18 Policy was a renewal. And while the final 2017-18 Policy was on a different
form than the previous policy, the parties still referred to it as a renewal. The
mere presence of different terms or a different form alone does not change a
renewal into something else. See Am. Cas. Co. of Reading, Pa. v. Continisio, 819
F. Supp. 385, 400 (D.N.J. 1993) (rejecting the proposition that a renewal policy
cannot have a substantial change in terms).
Second, the Court holds that the Defendants did not give adequate
notice of any change in the renewed Policy’s definition of Insured. Under New
Jersey law, “[a]bsent notification that there have been changes in the
restrictions, conditions or limitations of [a renewed insurance] policy, the
insured is justly entitled to assume that they remain the same.” Bauman v.
Royal Indem. Co., 174 A.2d 585, 592 (N.J. 1961). If the insured is not
“specifically and clearly informed of [a] change, the renewal will be ineffective.”
See McClellan v. Feit, 870 A.2d 644, 649 (N.J. App. Div. 2005) (emphasis
added).
The Defendants never gave Control Group clear and specific notice of a
change in the definition of Insured or of any change in what entities were
provided coverage under the Policy. (ECF No. 156 at ¶¶ 37–39; ECF No. 184 at
¶¶ 36–39.) The Defendants primarily argue that adequate notice was given
(1) when Mr. Murray listed some of the “enhancements” of the “new form” and
(2) when the Defendants delivered the bound policy and asked Control Group
to review it. (ECF No. 161 at 19.) Any suggestion that Control Group need only
have read the 2017-18 Policy to learn of changes flies in the face of Bauman,
which explicitly puts the burden on the insurer to give clear and specific notice
of a change. See Bauman, 174 A.2d at 592. Moreover, while Mr. Murray noted
some “enhancements” in the new form, he did not notify Control Group of any
change in the definition of Insured or a change in the determination of what
entities were covered. (ECF No. 155-42; ECF No. 185 at ¶ 85.)
As the 2017-18 Policy was a renewal and as the Defendants did not give
Control Group adequate notice of a change in the definition of Insured or what
entities were covered under the Policy,4 the Court denies the Defendants’

4 The Defendants also argue that Count Three, as well as Counts Two through Seven, cannot
be sustained under the theories of in pari delicto and unclean hands. (ECF No. 161 at 25.) The
Defendants reason that Control Group falsely represented that Constantin was its subsidiary,
thereby wrongfully obtaining coverage for Constantin prior to 2017. (Id.) The only example that
the Defendants provide of Control Group representing that Constantin was its subsidiary was
that the applicant on the 2016-17 Policy was named as “[Control Group] and Subsidiaries.”
(Id.) However, it is unclear whether this statement refers to Constantin at all. And it is
undisputed that Constantin was insured under the 2016-17 Policy, not because it was a
subsidiary but because it was listed by endorsement. (ECF No. 156 at ¶ 27; ECF No. 184 at
¶ 27.) While the Defendants refer to this as a “subsidiary list,” there is no indication in the
record that the entities covered by endorsement in the 2016-17 Policy had to be Control
Group’s subsidiaries. Rather, the 2016-17 Policy defined Insured as “the person or entity
stated in Item 1 of the Declarations,” and the endorsement amended Item 1 of the Declaration
to add additional Insureds. (ECF No. 155-16.) Therefore, there is no undisputed record
evidence permitting the Court to conclude that Control Group wrongfully represented that
Constantin was its subsidiary in order to obtain coverage for Constantin.
motion for summary judgment on Count Three and grants the Plaintiffs’
motion.5
D. Count 4: Breach of Contract
In Count Four, the Plaintiffs allege that ERI breached the 2017-18 Policy
by failing to defend and indemnify Constantin in the Underlying Litigation. As
the Court holds that there was no duty to defend or indemnify in connection
with the Underlying Litigation, the Court grants summary judgment in ERI’s
favor on Count Four.
E. Counts 5–7
Before reaching the merits of Counts Five through Seven, the Court must
determine what entity has brought these claims. Constantin previously pled
these claims, although the Court later held that Constantin had no standing to
do so. (ECF No. 212.) The Plaintiffs subsequently brought a motion to
substitute, seeking to substitute the Plaintiffs for Constantin as to Counts Five
through Seven. (ECF No. 215.) Courts will generally permit substitution under
Rule 17(a)(3) where (1) there was an honest or understandable mistake in
determining the proper party to bring suit and (2) the substitution “will not
alter the substance of the action.” Cifuentes v. Regions Bank, No.11-23455-CIV,
2012 WL 2339317, at *7 (S.D. Fla. June 19, 2012) (Moreno, J.) (quoting Park B.
Smith v. CHF Indus., Inc., 811 F. Supp. 2d 766, 773–74 (S.D.N.Y. 2011)).
Here, the decision for Constantin to bring Counts Five through Seven
was an honest and understandable mistake, and substitution will not alter this
case. By their own admission, the Defendants undertook months of discovery
to determine who could bring these claims (ECF No. 219 at 13), and the parties
resorted to motions practice to determine whether Constantin had standing to
bring these claims. Moreover, the relief sought will not change the nature of the
claims—only the party bringing the claims. Therefore, substitution will not
alter this action or cause prejudice to the Defendants. In all, the Court grants
the Plaintiffs’ motion to substitute (ECF No. 215) and finds that (1) there was
an honest and understandable mistake in determining the appropriate party to
bring Counts Five through Seven, (2) the substitution will not alter the

5 As the Court holds that Control Group was not adequately notified of a change in terms
concerning the Insureds in the 2017-18 Policy, the Court need not address the Plaintiffs’
argument that the Defendants are estopped from arguing that Constantin was not an Insured.
(ECF No. 186 at 20–21.) Moreover, as the Court holds that the Defendants did not satisfy the
notice requirements set out in Bauman, the Court need not address whether the Defendants
satisfied or were subject to the notice requirements set out in N.J.A.C. § 11:1-20.2.
substance of this action, (3) the motion to substitute was brought in a
reasonable time after the Court issued its order on the Defendants’ motion to
dismiss, and (4) there is no prejudice to the Defendants, as they have been
aware of these claims for months and had ample opportunity to develop their
legal strategy.
Nonetheless, Counts Five through Seven fail. In these Counts, the
Plaintiffs allege that the Defendants made false representations concerning
whether the 2017-18 Policy was a renewal. In particular, Count Five alleges
fraud,6 Count Six negligent misrepresentation, and Count Seven violation of
the New Jersey Consumer Fraud Act. As the Plaintiffs explained, these theories
are brought in the alternative—either the 2017-18 Policy truly is a renewal or
the Defendants fraudulently misrepresented that it was a renewal. (ECF
No. 154 at 6.) As the Court held that the 2017-18 Policy is a renewal and
reformed it, the Court finds that Counts Five through Seven fail. Therefore, the
Court will grant summary judgment in the Defendants’ favor as to Counts Five
through Seven.
4. Conclusion
In total, the Court grants in part and denies in part the Defendants’
motion for summary judgment (ECF No. 161) and grants in part and denies
in part the Plaintiffs’ partial motion for summary judgment (ECF No. 154). In
particular, the Court grants summary judgment in the Defendants’ favor as to
Counts 1, 2, 4, 5, 6, and 7, while granting summary judgment in the Plaintiffs’
favor as to Count 3. As the Court reformed the 2017-18 Policy and found that
Constantin is an Insured, the Court denies the Defendants’ motion to dismiss
Count 1.7 (ECF No. 143.) Moreover, the Court grants the Plaintiffs’ motion to
substitute (ECF No. 215) for the reasons set out above. Last, the Court denies
the parties’ requests for oral argument.
As set out above, all claims and counterclaims have been adjudicated.
The Court enters judgment as follows. Judgment is entered in favor of the
Plaintiffs and against the Defendants on Count 3. Judgment is entered in favor
of the Defendants on all other claims. The Court directs the Clerk to close this
case. All remaining pending motions are denied as moot.

6 In Count Five, the Plaintiffs also sought punitive damages, which the Defendants argued
could not be obtained. As the Court grants summary judgment and dismisses Counts Five
through Seven, the Court also dismisses the Plaintiffs’ request for punitive damages.

7 On November 15, 2021, the Court construed the Defendants’ motion to dismiss Count 1 as
part of the Defendants’ motion for summary judgment. (ECF No. 209.)
Done and ordered, in Miami, Florida, on December 17, 2021.

Rotlert N. Scola, Jr.
United States District Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10119983. Public record. Not legal advice.