“retention of separate, independent counsel fulfill[s] defendant’s initial obligation to its mutually antagonistic insureds . . . where as here the insured is also asserting an affirmative claim against his codefendants insured by the same insurer”
How later courts described this case
- “retention of separate, independent counsel fulfill[s] defendant’s initial obligation to its mutually antagonistic insureds . . . where as here the insured is also asserting an affirmative claim against his codefendants insured by the same insurer”
- finding a plausible GBL § 349 claim where the insurer failed to inform the insured that they had the right to select independent counsel at defendant’s expense because of a potential conflict of interest
- no tolling of limitations periods for breach of fiduciary duty claim because “continuing damages, not the wrongs themselves, . . . do not qualify for application of the continuous wrong doctrine”
- discovery rule does not apply to GBL § 349 claim
Written by the judges who cited it.
The opinion
UNITED STATES DISTRICT COURT 8/12/2022 4: 11 pm
EASTERN DISTRICT OF NEW YORK U.S. DISTRICT COURT
X EASTERN DISTRICT OF NEW YORK
LONG ISLAND OFFICE
EDWARD MURPHY,
MEMORANDUM AND
Plaintiff, ORDER
20-CV-2793 (GRB)(ST)
-against-
COMMONWEALTH LAND TITLE
INSURANCE COMPANY,
FIDELITY NATIONAL FINANCE, INC.,
Defendants.
X
GARY R. BROWN, United States District Judge:
Plaintiff brings this action against his insurance company Commonwealth Land Title
Insurance Company (“Commonwealth”) and its affiliate, Fidelity National Financial, Inc.
(“FNF”),1 alleging that they breached their fiduciary duty and engaged in deceptive business
practices under New York General Business Law (“GBL”) § 349 by funding the defense of an
adversary in a state court quiet title action. Defendants now move for summary judgment, arguing
that plaintiff fails to set forth a meritorious claim and that his claims are time-barred. For the
reasons stated herein, defendants’ motion for summary judgment is GRANTED.
Facts
In June 2002, plaintiff Edward Murphy (“Murphy”) purchased a home located at 1492
Millstone Road, Sag Harbor, New York (the “Property”). DE 71-7, R56.1 Counterstatement, ¶ 1.
To finance the purchase, Murphy executed a mortgage with Washington Mutual Bank (“WAMU”)
in the amount $1,496,000.00. Id., ¶ 2. In connection with his purchase of the Property,
Commonwealth issued Murphy a title policy, subject to the following exclusions: (1) a provision
1 The Complaint misnames Fidelity National Financial, Inc. as “Fidelity National Finance.”
which expressly excepts from coverage loss or damage arising “by reason of” the mortgage; (2)
an express exclusion applicable to all encumbrances “attaching or created subsequent to Date of
Policy [June 4, 2002],” and (3) an exclusion for all matters “created, suffered, assumed or agreed
to” by the Insured. Id., ¶ 3.
After Murphy failed to pay his mortgage, WAMU commenced a foreclosure action against
Murphy in Suffolk County Supreme Court. Id., ¶¶ 4-5. In August 2008, a foreclosure judgment
was entered, and in November 2008 the Property was sold to JPMorgan Chase Bank (“JPMC”),
the successor to WAMU. Id., ¶¶ 6-7. Subsequently, in October 2009, JPMC sold the Property to
Paul Luciano (“Luciano”). Id., ¶ 9. In conjunction with Luciano’s purchase of the Property,
Fidelity National Title Insurance Company (“FNTIC”) issued Luciano a title insurance policy. Id.,
¶ 11. FNTIC and defendant Commonwealth are wholly-owned subsidiaries of defendant FNF.
DE 1-1, Compl., ¶ 8. In April 2015, the Second Department, Appellate Division ordered the
vacatur of the foreclosure order because service of process had been improperly executed at the
Property because Murphy had elected to receive notice at his primary residency in Manhattan. DE
71-7, ¶ 13; see Washington Mut. Bank v. Murphy, 127 A.D.3d 1167, 1175, 10 N.Y.S.3d 95 (App.
Div. 2d Dep’t 2015).
In July 2016, Murphy sued JPMC and Luciano in Suffolk County Supreme Court seeking,
inter alia, damages for waste, wrongful foreclosure, violations of GBL§ 349, and an order vacating
Luciano’s deed to the Property (the “2016 Action”). DE 71-7, ¶ 14. That month, Luciano filed a
claim with FNTIC, which accepted the claim and afforded coverage for the 2016 Action. Id., ¶¶
15-16. Subject to a reservation of rights, FNTIC funded Luciano’s defense in the 2016 Action.
DE 71-8, Decl. of Colin R. Hagan, ¶ 14. In September 2016, Murphy submitted a claim with
Commonwealth for coverage in the 2016 Action. DE 71-7, ¶ 17. Murphy’s claim was denied.
Id., ¶ 19. As the denial letter explained, Commonwealth denied Murphy’s claim because the suit
arose out of his default on the mortgage in 2007 and, “[a]s such, the matter underlying the Lawsuit
did not commence until after the Date of Policy of June 4, 2002, and therefore, attached or were
created subsequent to the Date of Policy.” DE 71-5 at 7.
Through discovery in the 2016 Action, on February 16, 2017 Murphy obtained a copy of
Luciano’s FNTIC Title Insurance Policy. DE 71-8, ¶ 5. This was the first time that Murphy
became aware that Luciano’s insurer was an affiliate of the defendants. Id., ¶ 6. Plaintiff
alleges that FNF “pit[] two of its insureds against each other,” and, instead of “reconcil[ing] this
conflict of interest and their loyalties by defending Mr. Murphy, or by indemnifying him . . . picked
winners and losers and engaged in a conflict of interest by defending Mr. Luciano’s title and
possession against Mr. Murphy’s title and right of possession and access.” DE 1-1, Compl., ¶¶
47-48. In February 2019, the Suffolk County Supreme Court dismissed Murphy’s claim for
wrongful foreclosure and granted Luciano’s motion for summary judgment, finding he was a bona
fide purchaser. Edward Murphy v. JPMorgan Chase Bank, et. al., Index No. 609995/2016 (N.Y.
Sup. Ct. 2016); DE 71-3 at 5.
Procedural History
On May 27, 2020, plaintiff filed suit against defendants in Kings County Supreme Court.
DE 1-1; Edward Murphy v. Commonwealth Land Title Insurance Company and Fidelity National
Finance, Inc., Index No.: 508239/2020 (N.Y. Sup. Ct. 2020). Defendants timely removed the
action to federal court on June 23, 2020 on the basis of diversity jurisdiction. See DE 1. The
Complaint brought claims against Commonwealth for declaratory judgment (Count I), breach of
contract (Count II), breach of the covenant of good faith and fair dealing (Count III), violations of
GBL § 349 (Count IV), and breach of fiduciary duty (Count V); and against FNF, violations of
GBL § 349 (Count IV) and tortious interference with contract (Count VI).
At a pre-motion conference held on July 28, 2020, the undersigned dismissed Counts I-III
and VI because plaintiff failed to state a plausible contract claim. DE 16, Tr. at 25-27. As the
undersigned explained, “[W]ith regard to the breach of contract claims, . . . the complaint does not
state a plausible claim because of the existence of three exclusions in the policy, any one of which
. . . would effectively bar the claims here.” Tr. at 25:1-11. As to the GBL § 349 and breach of
fiduciary duty claims, however, plaintiff was entitled to discovery. Tr. at 26:1-5.
Defendants now move for summary judgment, arguing that the remaining GBL § 349 and
breach of fiduciary duty claims are barred by the statute of limitations and, in any event, plaintiff
fails to present a meritorious claim. Plaintiff opposes, and cross-moves for reconsideration of the
dismissal of Counts I-III and VI.
Legal Standards
This motion for summary judgment is decided under the oft-repeated and well-understood
standard for review for these matters, as discussed in Bartels v. Inc. Vill. of Lloyd Harbor, 97 F.
Supp. 3d 198, 211 (E.D.N.Y. 2015), aff’d, 643 F. App’x 54 (2d Cir. 2016), which discussion is
incorporated by reference herein. In sum, the question before the Court is whether, based upon
the undisputed or improperly disputed facts, the defendants are entitled to judgment. It is with this
standard in mind that the Court turns to the motions at bar.
“A plaintiff under section 349 must prove three elements: first, that the challenged act or
practice was consumer-oriented; second, that it was misleading in a material way; and third, that
the plaintiff suffered injury as a result of the deceptive act.” Stutman v. Chem. Bank, 95 N.Y.2d
24, 29, 731 N.E.2d 608, 611 (N.Y. 2000). “Actions brought pursuant to Section 349 must be
commenced within three years of the date of accrual.” Statler v. Dell, Inc., 775 F. Supp. 2d 474,
484 (E.D.N.Y. 2011) (citations omitted). “Accrual occurs when plaintiff is injured by the
deceptive act or practice that violated the statute. Such injury occurs when [] all of the factual
circumstances necessary to establish a right of action have occurred, so that the plaintiff would be
entitled to relief.” Id. “Accrual is not dependent upon any later date when discovery of the alleged
deceptive practice is said to occur.” Id.; see also Wender v. Gilberg Agency, 276 A.D.2d 311, 312,
716 N.Y.S.2d 40, 41–42 (App. Div. 1st Dep’t 2000) (discovery rule does not apply to GBL § 349
claim). However, under the “‘continuing violation’ doctrine . . . a series of continuing wrongs,
effectively toll[s] the limitations period until the date of the commission of the last wrongful act.”
Harvey v. Metro. Life Ins. Co., 21 Misc. 3d 1142(A) (N.Y. Sup. Ct. 2005), aff’d, 34 A.D.3d 364,
827 N.Y.S.2d 6 (App. Div. 1st Dep’t 2006).
“The elements of a cause of action to recover damages for breach of fiduciary duty are (1)
the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly
caused by the defendant's misconduct.” Rut v. Young Adult Inst., Inc., 74 A.D.3d 776, 777, 901
N.Y.S.2d 715, 717 (N.Y. 2010) (citation omitted). “Normally, insurance companies do not owe a
fiduciary duty to their insureds, absent a showing of some special relationship.” Edelman v.
O’Toole-Ewald Art Assocs., Inc., 28 A.D.3d 250, 251, 814 N.Y.S.2d 98, 98–99 (App. Div. 1st
Dep’t 2006); see also Rabouin v. Metro. Life Ins. Co., 182 Misc. 2d 632, 634, 699 N.Y.S.2d 655,
657 (N.Y. Sup. Ct. 1999), aff’d, 282 A.D.2d 381, 723 N.Y.S.2d 651 (2001). “[T]he choice of the
applicable limitations period [for breach of fiduciary duty] depends on the substantive remedy that
the plaintiff seeks. Where the remedy sought is purely monetary in nature . . . a three-year
limitations period [applies] . . . [but w]here, however, the relief sought is equitable in nature, the
six-year limitations period [applies].” IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d
132, 139, 907 N.E.2d 268 (N.Y. 2009) (citations omitted). “Moreover, where an allegation of
fraud is essential to a breach of fiduciary duty claim, courts have applied a six-year statute of
limitations under CPLR 213 (8).” Id. The continuing violation doctrine may also apply to breach
of fiduciary duty claims. See, e.g., Henry v. Bank of Am., 147 A.D.3d 599, 602 48 N.Y.S.3d 67
(App. Div. 1st Dep’t 2017) (no tolling of limitations periods for breach of fiduciary duty claim
because “continuing damages, not the wrongs themselves, . . . do not qualify for application of the
continuous wrong doctrine”).
Discussion
1. GBL § 349
“It is . . . well-established that when the insurer and the insured have a potential conflict of
interest, the duty to defend includes a duty to provide independent defense counsel to the insured,
whose reasonable fee is to be paid by the insurer but who is to be appointed by the insured.”
Golotrade Shipping & Chartering, Inc. v. Travelers Indem. Co., 706 F. Supp. 214, 219 (S.D.N.Y.
1989). In addition, if there exists a conflict of interest between two of an insurer’s policyholders
in an action – and the insurer has an obligation to provide both with a defense – then the conflict
is resolved by providing separate counsel of their choice for each policyholder. See Goldberg v.
Am. Home Assur. Co., 80 A.D.2d 409, 412, 439 N.Y.S.2d 2 (App. Div. 1st Dep’t 1981) (“retention
of separate, independent counsel fulfill[s] defendant’s initial obligation to its mutually antagonistic
insureds . . . where as here the insured is also asserting an affirmative claim against his
codefendants insured by the same insurer”). Failure to advise of a duty to provide an independent
defense may give rise to a GBL § 349 claim. See, e.g., Elacqua v. Physicians’ Reciprocal Insurers,
52 A.D.3d 886, 889, 860 N.Y.S.2d 229 (App. Div. 3d Dep’t 2008) (finding a plausible GBL § 349
claim where the insurer failed to inform the insured that they had the right to select independent
counsel at defendant’s expense because of a potential conflict of interest).
As this Court previously ruled, Commonwealth properly denied plaintiff’s claim because
it fell under three exclusions in plaintiff’s title policy. Tr. at 25:1-11. Thus, no conflict of interest
necessitating the appointment of independent counsel arose because Commonwealth had no
obligation to defend plaintiff in the 2016 Action to begin with. Instead, plaintiff retained his own
independent counsel to defend himself in the 2016 Action. Palmeri v. Willkie Farr & Gallagher
LLP, 156 A.D.3d 564, 565, 69 N.Y.S.3d 267 (App. Div. 1st Dep’t 2017), relied upon by plaintiff,
is wholly inapposite because it concerns a law firm’s duty of loyalty toward its former client when
it is representing that client’s employer in a manner adverse to the former client’s interest. Plaintiff
cites no authority holding that the obligations of an attorney toward their former client apply
analogously in the insurance context. For these reasons, plaintiff’s GBL § 349 claim fails as a
matter of law.
2. Fiduciary Duty
It is well established that insurance companies normally do not owe a fiduciary duty to
their insureds, absent “some special relationship.” Edelman, 28 A.D.3d at 251; see also Rabouin,
182 Misc. 2d at 634. “Although a fiduciary relationship may exist between an insurance company
and its insured once the insurer is called upon to provide a defense to its insured in the context of
a liability claim, in general, a contract of insurance does not otherwise create a fiduciary
relationship between the parties.” Goshen v. Mut. Life Ins. Co. of New York, No. 600466, 1997
WL 710669, at *8 (N.Y. Sup. Ct. Oct. 21, 1997) (citation omitted), aff’d, 259 A.D.2d 360, 684
N.Y.S.2d 791 (App. Div. 1st Dep’t 1999), aff’d as modified sub nom. Gaidon v. Guardian Life Ins.
Co. of Am., 94 N.Y.2d 330, 725 N.E.2d 598 (App. Div. 1st Dep’t 1999). Although “[t]he basis for
the fiduciary obligation is quite clear in the litigation context . . . [w]hether the recognition of a
fiduciary obligation [exists] . . . in other contexts is not eminently clear.” Dornberger v. Metro.
Life Ins. Co., 961 F. Supp. 506, 546 (S.D.N.Y. 1997). “[U]nder the right circumstances, the
relationship between insurer and insured may be imbued with elements of trust and confidence
which render the relationship more than a mere arm’s-length association.” Id. In Dornberger, for
example, the court found a plausible fiduciary duty claim where plaintiffs alleged that an American
insurance company sought out American customers in Europe although it knew its policies were
illegal under European law. Id. at 514.
Plaintiff has failed to allege any facts giving rise to a “special relationship” between
Commonwealth and Murphy. As the Complaint alleges, “[a]n insurance company owes fiduciary
duties to its policyholders when the insurance company is called upon to defend the insured.”
Compl., ¶ 83 (emphasis added). As this Court has already ruled, Commonwealth properly denied
plaintiff’s claim because it fell under three exclusions in plaintiff’s title policy. Tr. at 25:1-11.
Because Commonwealth properly denied plaintiff’s claim, it had no obligation to defend plaintiff
in the 2016 Action, and thus it had no fiduciary duty toward plaintiff on that basis. See Goshen,
1997 WL 710669, at *8. Plaintiff has failed to cite, and this Court has failed to locate, any New
York law suggesting that an insurer has an obligation to not defend an insured’s proper claim
where the opposing insured party lacks a proper claim. Because Commonwealth had no obligation
to defend plaintiff in the 2016 Action and plaintiff fails to allege any special circumstances giving
rise to a relationship of trust and confidence between the parties, plaintiff’s breach of fiduciary
duty claim fails as a matter of law.
For these reasons, the Court finds that, even after drawing all reasonable inferences in the
light most favorable to the non-moving party, defendants are entitled to summary judgment as a
matter of law on the GBL § 349 and fiduciary duty claims.
Motion for Reconsideration
In opposition to defendants’ motion for summary judgment, plaintiff purports to make a
renewed2 cross-motion for reconsideration of this Court’s dismissal of the contract-based claims,
Counts I-III and VI. See DE 71-6 at 16-23. Plaintiff’s motion for reconsideration is procedurally
and substantively improper on numerous grounds. First, Local Civil Rule 7.1(a) requires that all
motions include “(1) A notice of motion, or an order to show cause signed by the Court, which
shall specify the applicable rules or statutes pursuant to which the motion is brought, and shall
specify the relief sought by the motion[.]” Second, under Local Civil Rule 6.3 “a notice of motion
for reconsideration or reargument of a court order determining a motion shall be served within
fourteen (14) days after the entry of the Court’s determination of the original motion.” Here,
plaintiff never filed a notice of motion and, moreover, filed his motion for reconsideration in
January of 2022 – well over a year after the Court dismissed the underlying claims in July 2020.
See DEs 16, 71-6. Moreover, plaintiff’s motion for reconsideration must be denied because he has
failed to identify any intervening change of controlling law, the availability of new evidence, or
the need to correct a clear error or prevent manifest injustice. See Virgin Atl. Airways, Ltd. v. Nat’l
Mediation Bd., 956 F.2d 1245, 1255 (2d Cir.1992) (quoting 18 C. Wright, et al., Federal Practice
& Procedure § 4478 at 790). Thus, plaintiff’s motion for reconsideration of the Court’s dismissal
of Counts I-III and VI is denied.
2 This Court already denied plaintiff’s initial motion for reconsideration last year. See Electronic Order dated
03/18/2021.
Conclusion
For the reasons stated herein, defendants’ motion for summary judgment is GRANTED in
its entirety. The Clerk of Court is directed to enter judgment and close the case.
Dated: Central Islip, New York
August 12, 2022
/s/ Gary R. Brown__________
Gary R. Brown
United States District Judge