FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT April 18, 2017
_________________________________
Elisabeth A. Shumaker
Clerk of Court
BRECEK & YOUNG ADVISORS, INC.,
Plaintiff - Appellee,
v. No. 16-3245
(D.C. No. 2:09-CV-02516-JAR)
LLOYDS OF LONDON SYNDICATE (D. Kan.)
2003,
Defendant - Appellant.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before KELLY, BALDOCK, and MORITZ, Circuit Judges.
_________________________________
Lloyds of London Syndicate 2003 (“Lloyds”) appeals the district court’s
judgment following a bench trial. The court held that Lloyds is equitably estopped
from denying coverage, under a professional liability policy, of claims brought
against Brecek & Young Advisors, Inc. (“BYA”) in an arbitration. Exercising
jurisdiction under 28 U.S.C. § 1291, we affirm.
*
After examining the briefs and appellate record, this panel has determined
unanimously to honor the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
submitted without oral argument. This order and judgment is not binding precedent,
except under the doctrines of law of the case, res judicata, and collateral estoppel. It
may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1
and 10th Cir. R. 32.1.
I. Background
This case comes to us after a previous appeal in which we reversed the district
court’s grant of summary judgment in favor of BYA and remanded for further
proceedings. See Brecek & Young Advisors, Inc. v. Lloyds of London Syndicate
2003, 715 F.3d 1231, 1243 (10th Cir. 2013) (“BYA I”). Lloyds had issued a
professional liability policy (“Policy”) to BYA covering claims made and reported
during the period December 1, 2006, to December 1, 2007. Id. at 1233. Lloyds
agreed to defend BYA in an arbitration filed by 26 claimants in 2007 (“Wahl
Arbitration”), subject to a reservation of rights. Id. at 1234-35, 1236-37.
After receiving notice of the Wahl Arbitration, Lloyds asserted two positions
as to coverage of that claim, both of which were based on a provision in the Policy
addressing claims that arise out of “Interrelated Wrongful Acts.” Id. at 1233 (internal
quotation marks omitted). Under the Policy, such interrelated claims are “considered
a single Claim,” id. (internal quotation marks omitted), and “Lloyds is not
responsible for indemnifying or defending BYA for claims made during the policy
period which are interrelated with claims made prior to the policy period,” id. at
1234. BYA had reported a previous arbitration claim (“Colaner Arbitration”) to a
different insurer, Fireman’s Fund, seeking coverage under a prior professional
liability policy that was effective from December 1, 2005, through December 1,
2006. Lloyds’ agent notified BYA by email on November 20, 2007, that coverage
counsel for Lloyds and Fireman’s Fund had each determined that the Wahl and
Colaner Arbitrations were not interrelated. Id. at 1236. Lloyds also took the positon
2
that the 26 claims within the Wahl Arbitration were not interrelated and were
therefore subject to separate $50,000 retentions under the Policy. Id. BYA disputed
Lloyds’ position on the interrelatedness of the claims in the Wahl Arbitration. Id.
Lloyds proceeded to defend BYA in the Wahl Arbitration under its stated
positions regarding coverage. The parties settled the arbitration in March 2009, with
Lloyds indemnifying BYA on the individual claims to the extent they exceeded the
separate $50,000 retentions. Lloyds and BYA ultimately paid approximately
$385,000 and $932,000, respectively, to defend and settle the Wahl Arbitration. Id.
In the settlement, BYA reserved its right to challenge Lloyds’ position that the
26 Wahl claims were not interrelated.
BYA then filed this action seeking damages for Lloyds’ failure to defend and
indemnify it for the amount it incurred in the Wahl Arbitration above a single
$50,000 retention. Id. at 1236-37. The parties filed cross-motions for summary
judgment. In its motion, Lloyds suggested for the first time, in a footnote, an
alternative position regarding coverage of the Wahl Arbitration. Id. at 1237. Lloyds
contended that, if the Wahl claims arose from interrelated wrongful acts, then all of
the Wahl claims also related back to the claims made in the Colaner Arbitration and
the claims made in a third arbitration previously filed against BYA (“Knotts
Arbitration”). Id. Under Lloyds’ new relation-back defense, there would be no
coverage at all under the Policy for the Wahl Arbitration. See id.
The district court granted BYA summary judgment, holding that the 26 Wahl
claims were interrelated. Id. Over BYA’s objection, however, the court also granted
3
Lloyds leave to submit supplemental briefing on its new coverage defense. Id.
Lloyds then asserted its relation-back defense, asking the district court to order BYA
to reimburse it for all sums paid in defending and indemnifying BYA in the Wahl
Arbitration. Id. BYA responded that Lloyds was barred by waiver and/or estoppel
from raising its new coverage defense and, alternatively, that the Wahl, Knotts, and
Colaner Arbitrations did not arise from Interrelated Wrongful Acts. Id. The district
court ultimately denied Lloyds’ second summary judgment motion, rejecting BYA’s
waiver and estoppel arguments, but holding that the Wahl Arbitration was not
interrelated with the Knotts and Colaner Arbitrations. The court entered judgment in
favor of BYA for $1,155,541.73. Id.
On appeal in BYA I, Lloyds abandoned its previous position that the 26 Wahl
Arbitration claims were not interrelated and argued solely that the Wahl claims
related back to the claims in the Knotts and Colaner Arbitrations. Id. We agreed
with Lloyds, holding that the three arbitrations all arose from Interrelated Wrongful
Acts, as defined in the Policy. Id. at 1239. After rejecting BYA’s waiver contention,
we took up its estoppel argument. Id. at 1240. Applying New York law, we
concluded that the district court abused its discretion in holding that BYA failed to
make an adequate showing of prejudice in support of its estoppel defense to Lloyds’
claim for reimbursement. Id. at 1243 (“Certainly, BYA has established prejudice as
to Lloyds’ attempt to recoup the approximately $385,000 it has already paid—at the
time BYA settled the Wahl Arbitration Lloyds had expressly promised to provide
4
coverage up to that amount.”). In reversing and remanding for further proceedings,
we said:
Although the district court erred in concluding the defense of
equitable estoppel was unavailable to BYA, it does not necessarily follow
that BYA is entitled to recover the same damages awarded by the district
court on the (erroneous) basis that the Wahl claims did not relate back to
the Knotts and Colaner claims. . . . In determining whether BYA is entitled
to any additional recovery . . . the district court must consider the extent to
which BYA detrimentally relied on Lloyds’ representations, if at all. Thus,
the court must consider whether Lloyds’ erroneous representation that the
twenty-six Wahl claims were not interrelated under the Policy negates any
additional claim of detrimental reliance on the part of BYA.
Id. On remand, after a bench trial, the district court held that BYA detrimentally
relied on Lloyds’ representations regarding coverage of the Wahl Arbitration, causing
BYA to forgo other available coverage from Fireman’s Fund. It held that Lloyds was
therefore estopped from denying full coverage of the Wahl Arbitration as a single
claim. The court entered judgment in favor of BYA for $931,859.59, plus
prejudgment interest. It also denied Lloyds’ motions filed under Fed. R. Civ. P.
52(b) and 59 for amended or additional findings or a new trial.
II. Standards of Review
After a bench trial, the district court entered findings of fact and conclusions
of law, holding that Lloyds was equitably estopped from denying full coverage of the
Wahl Arbitration. “We review the district court’s exercise of its equitable powers for
abuse of discretion.” Clark v. State Farm Mut. Auto. Ins. Co., 433 F.3d 703, 709
(10th Cir. 2005). “A district court abuses its discretion where it commits a legal
error or relies on clearly erroneous factual findings, or where there is no rational
5
basis in the evidence for its ruling.” Id. (internal quotation marks omitted); see also
United States v. Estate of St. Clair, 819 F.3d 1254, 1264 (10th Cir. 2016) (after bench
trial, reviewing district court’s legal conclusions de novo and its factual conclusions
for clear error).
A factual finding “is clearly erroneous when the reviewing court has a definite
and firm conviction that it is mistaken, even though there may be some evidence to
support it.” Estate of St. Clair, 819 F.3d at 1264 (internal quotation marks omitted).
The clearly-erroneous review standard applies to both subsidiary and ultimate facts.
See Doelle v. Mountain States Tel. & Tel., 872 F.2d 942, 944 (10th Cir. 1989).1
We review the district court’s denials of post-judgment relief under Rules 52
and 59 for an abuse of discretion. See Lyons v. Jefferson Bank & Trust, 994 F.2d
716, 719 (10th Cir. 1993) (noting district court’s discretion under Rules 52 and 59).
III. Discussion
“Under New York law, ‘where an insurer defends an action on behalf of an
insured, with knowledge of a defense to the coverage of the policy, it thereafter is
estopped from asserting that the policy does not cover the claim.’” BYA I, 715 F.3d
at 1240 (brackets omitted) (quoting Hartford Ins. Grp. v. Mello, 437 N.Y.S.2d 433,
1
Lloyds contends that our review is de novo to the extent that it challenges
“the sufficiency of the evidence” under Rule 52(a)(5). But the cases it cites for this
proposition are inapposite, as they relate to review of a district court’s denial of a
motion under Fed. R. Civ. P. 50(a) after a jury trial. See Nieto v. Kapoor, 268 F.3d
1208, 1217 (10th Cir. 2001) (holding Rule 50 is inapplicable in a case involving a
bench trial). Rather, we have said that “[t]he clearly erroneous rule governs the
sufficiency of the evidence to support the findings” after a trial to the court. Davis v.
Cities Serv. Oil Co., 420 F.2d 1278, 1279 (10th Cir. 1970); see also Willner v. Univ.
of Kan., 848 F.2d 1023, 1030 (10th Cir. 1988) (same).
6
434 (N.Y. App. Div. 1981)). With regard to BYA’s claim for additional recovery
under the Policy, we directed the district court on remand to determine “the extent to
which BYA detrimentally relied on Lloyds’ representations, if at all,” and more
specifically, “whether Lloyds’ erroneous representation that the twenty-six Wahl
claims were not interrelated under the Policy negates any additional claim of
detrimental reliance on the part of BYA.” Id. at 1243.
A. District Court’s Findings and Conclusions on Remand
On remand, the district court cited the testimony of Natalie Haag, BYA’s
in-house counsel, in support of its finding that BYA was entitled to additional
recovery under the Policy because it had relied, to its detriment, on Lloyds’
representations regarding coverage of the Wahl Arbitration. The court held that BYA
reasonably relied on Lloyds’ representation that the Wahl Arbitration was covered
under the Policy, subject only to a dispute about the number of applicable retentions.
Ms. Haag testified that she relied on Lloyds’ written agreement in August 2007 to
defend BYA in the Wahl Arbitration. Aplt. App., Vol. 2 at 536-38. She also relied
on an email from Lloyds’ agent dated November 20, 2007, informing BYA that
coverage counsel for Lloyds and Farmers had each concluded that the claims in the
Wahl and Colaner Arbitrations were not interrelated. Id. at 542-43; id., Vol. 4 at
1122. Lloyds maintained that coverage position throughout its defense of the Wahl
Arbitration, raising a relation-back defense for the first time eighteen months after
that arbitration was settled.
7
The court also found that BYA’s reliance was reasonable and not negated by
Lloyds’ erroneous representation that the 26 claims in the Wahl Arbitration were not
interrelated. The court reached this conclusion because, according to Ms. Haag,
Lloyds’ position regarding the 26 separate retentions was consistent with its
representation that the Wahl and Colaner Arbitrations were not interrelated and
further solidified BYA’s understanding that Lloyds, rather than Fireman’s Fund,
would provide coverage for the Wahl Arbitration. See id., Vol. 2 at 544, 546-50.
Lastly, the court found that BYA’s reliance on Lloyds’ representations
regarding coverage of the Wahl Arbitration was detrimental. Ms. Haag testified that,
had Lloyds raised a relation-back defense while the Wahl Arbitration was pending—
thereby denying all coverage for that arbitration under the Policy—BYA would have
pursued coverage under its preceding policy with Fireman’s Fund. Id. at 537, 551,
587-88, 594. The court found that Lloyds’ consistent coverage representations
during the pendency of the Wahl Arbitration caused BYA to forgo other available
coverage under the Fireman’s Fund policy, which prejudiced BYA because it had
back-to-back claims-made policies; consequently, the court reasoned that either the
Lloyds Policy or the Fireman’s Fund policy would provide coverage for the Wahl
Arbitration, but not both policies. Ms. Haag further testified that coverage of the
Wahl Arbitration under the Fireman’s Fund policy would have been beneficial
because BYA had already satisfied the $50,000 deductible in the previous
arbitrations. Id. at 541. The district court found that “[o]nce Lloyds settled the Wahl
Arbitration, . . . BYA was prejudiced because it could not reverse the character and
8
strategy of the defense to allow Fireman’s Fund to defend it and participate in the
Settlement.” Id. at 453.
Lloyds argues that BYA’s reliance on its representations regarding coverage of
the Wahl Arbitration was not reasonable and that BYA failed to demonstrate
prejudice.
B. Reasonable Reliance
Lloyds challenges the district court’s finding that BYA reasonably relied on
Lloyds’ representations regarding coverage of the Wahl Arbitration. Lloyds first
asserts that “mere silence” is insufficient to invoke estoppel, and argues there is no
evidence of any affirmative representation by Lloyds regarding the interrelatedness
of the claims in the Wahl, Knotts, and Colaner Arbitrations—at least not after the
November 2007 email from Lloyds’ agent. But the district court found that Lloyds
was not silent: it informed BYA in November 2007 of its determination that the
Wahl and Colaner Arbitrations were not interrelated, and Lloyds maintained that
position throughout the Wahl Arbitration proceedings, at all times agreeing to defend
and provide coverage for BYA in that arbitration.
Lloyds also argues that BYA failed to show that Lloyds’ representations
prevented it from pursuing coverage from Fireman’s Fund. Lloyds cites nothing to
support its proposition that BYA must show obstruction or coercion rather than
reasonable reliance. Lloyds maintains, however, that BYA made a considered
decision not to pursue coverage with Fireman’s Fund, independent of any reliance on
Lloyds’ representations. More specifically, Lloyds argues that once BYA challenged
9
Lloyds’ position that the 26 claims in the Wahl Arbitration were not interrelated,
BYA should have also determined that Wahl related back to Knotts and Colaner,
thereby leading to the conclusion that the Wahl Arbitration should have been covered
by the previous policy issued by Fireman’s Fund.
The district could held otherwise. It found that Lloyds clearly had knowledge
of the potential relation-back defense when it accepted coverage and settled the Wahl
Arbitration, yet Lloyds did not assert that defense. The court pointed to Ms. Haag’s
testimony that she relied on Lloyds’ stated position that the Wahl and Colaner
Arbitrations were not interrelated—a position that did not waver even after BYA
objected to Lloyds’ stance that Wahl involved 26 separate, unrelated claims. See id.
at 543, 548-49. The court rejected Lloyds’ argument that BYA should have known,
after doing its own analysis, that if the claims in the Wahl Arbitration were
interrelated, then Wahl necessarily related back to Knotts and Colaner. Ms. Haag
testified that she thought there were factual distinctions between the claims in the
Wahl Arbitration and those in the previous arbitrations, id. at 547, although she
realized that Lloyds might assert a relation-back defense in response to BYA’s
contention regarding the interrelatedness of the claims in the Wahl Arbitration, id. at
590. She did not do a legal analysis of the relation-back issue, however, because
Lloyds’ position on coverage had remained unchanged. Id. at 547, 572-73, 586-87.
As further evidence of the reasonableness of BYA’s reliance, the district court
noted that all parties involved—Lloyds and Fireman’s Fund and their respective
coverage counsel, as well as the district court up until this court’s decision in
10
BYA I—had considered the issue and agreed that the Wahl Arbitration did not relate
back to the previous arbitrations. As the court observed, “[I]t was not until Lloyds
abandoned on appeal the issue of whether the twenty-six Wahl claims were
interrelated and instead pursued the relation-back defense that the argument was
given any credence.” Id. at 451. The district court also credited Ms. Haag’s
testimony that, if Lloyds had asserted a relation-back defense prior to settlement of
the Wahl Arbitration, she would have insisted that Fireman’s Fund participate in the
defense and settlement. See id. at 537, 551, 587-88.
Lloyds argues that BYA nevertheless unreasonably relied on Lloyds’ coverage
representation rather than pursuing coverage from Fireman’s Fund. But Ms. Haag
explained that, in light of Lloyds accepting coverage of the Wahl Arbitration, and
Fireman’s Fund denying coverage—with both insurers in agreement that the claims
in Wahl did not relate back—she believed that BYA did not have grounds for a claim
against Fireman’s Fund. Id. at 551-52, 591-92. She testified it was not until Lloyds
asserted its relation-back defense that BYA had a non-frivolous claim against
Fireman’s Fund. Id. at 591. And Lloyds’ own expert testified that he did not recall
any instance in his long career in which an insured had brought suit to determine
which of two insurance companies was responsible for a claim where, as here, the
insurance companies agreed as to which policy applied. Id. at 634.
On the issue of reasonable reliance, we conclude that although Lloyds offers a
different analysis of the evidence, it fails to demonstrate that the district court’s
findings are clearly erroneous. This is so because “[w]here there are two permissible
11
views of the evidence, the factfinder’s choice between them cannot be clearly
erroneous.” Keys Youth Serv., Inc. v. City of Olathe, 248 F.3d 1267, 1275 (10th Cir.
2001) (internal quotation marks omitted); see also Rosenfield v. Kay Jewelry Stores,
Inc., 384 F.2d 98, 100 (10th Cir. 1967) (same regarding a reasonableness
determination in a bench trial).
C. Prejudice
Lloyds argues that BYA failed to demonstrate that it was prejudiced by its
reliance on Lloyds’ representations regarding coverage of the Wahl Arbitration. In
BYA I, we noted that, under New York law, “‘[p]rejudice is established only where
the insurer’s control of the defense is such that the character and strategy of the
lawsuit can no longer be altered.’” 715 F.3d at 1242 (quoting Federated Dep’t
Stores, Inc. v. Twin City Fire Ins. Co., 807 N.Y.S.2d 62, 68 (N.Y. App. Div. 2006)).
We held that “[h]ere, it is axiomatic that the character and strategy of the Wahl
Arbitration can no longer be altered because it was settled. Courts have found
prejudice for purposes of estoppel in circumstances in which the insurer’s control of
the insured’s defense has been significantly less extensive.” Id.
BYA contends that this court previously determined in BYA I that it was
prejudiced by Lloyds’ representations. But BYA’s contention mischaracterizes our
previous decision, in which we held that “[c]ertainly, BYA has established prejudice
as to Lloyds’ attempt to recoup the approximately $385,000 it has already paid—at
the time BYA settled the Wahl Arbitration Lloyds had expressly promised to provide
coverage up to that amount.” Id. at 1243. We remanded for the district court to
12
determine the extent to which BYA detrimentally relied on Lloyds’ representations
such that it was entitled to additional recovery. Id. On remand, the district court
correctly construed BYA I as holding that Lloyds’ control of the defense of Wahl and
its contribution to the settlement “was more than adequate to show prejudice under
New York law, at least with respect to the $385,000 already paid by Lloyds as part of
the Wahl Settlement.” Aplt. App., Vol. 2 at 446. We therefore address Lloyds’
contentions regarding prejudice.
Lloyds first argues that there was no evidence that BYA suffered any prejudice
or damage to its interests from the manner in which appointed counsel defended the
Wahl Arbitration. Lloyds points to evidence that, on BYA’s recommendation,
Lloyds retained the same attorney who had defended BYA in the Knotts and Colaner
Arbitrations. Per Ms. Haag, Lloyds did not hinder or affect appointed counsel’s
defense of the Wahl Arbitration. And the district court found that “BYA has no issue
with the manner in which [counsel] defended the Knotts, Colaner, and Wahl claims.
BYA does not contend that Lloyds’s representations caused it to instruct [counsel] to
alter his defense strategies with regard to the Wahl claim.” Id. at 436 (footnote
omitted). Based upon this evidence, Lloyds argues that BYA failed to demonstrate
that the character and strategy of the defense of the Wahl Arbitration would have
been different had Lloyds asserted its relation-back defense before the settlement.
The district court rejected Lloyds’ contention, holding that BYA’s reliance
was detrimental. First, the court pointed to Ms. Haag’s testimony that she would not
have authorized settlement of the Wahl Arbitration on behalf of BYA and would have
13
pursued coverage from Fireman’s Fund, if Lloyds had reversed its coverage position
before the settlement. The court continued:
Because BYA had back-to-back claims-made policies, either the Lloyds
Policy or the [Fireman’s Fund policy] would provide coverage for the Wahl
Arbitration, but not both. [Ms.] Haag testified that it would have been to
BYA’s advantage if Wahl had been covered under the [Fireman’s Fund
policy], because that would have saved BYA from paying the $50,000 each
claim deductible. Once Lloyds settled the Wahl Arbitration, however,
BYA was prejudiced because it could not reverse the character and strategy
of the defense to allow Fireman’s Fund to defend it and participate in the
Settlement.
Id. at 453. The court reasoned further that settlement of the Wahl Arbitration
“created coverage defenses that otherwise would not have existed under the
[Fireman’s Fund policy], specifically, voluntary payments and failure to obtain
consent to settlement provisions under the [policy], as well as laches, statute of
limitations, and other defenses related to the delay in pursuing the coverage claim.”
Id.
Lloyds argues that BYA’s evidence was nonetheless insufficient to
demonstrate prejudice under New York law. It maintains that BYA could not
establish prejudice based on evidence that the defense and settlement of the Wahl
Arbitration would have been controlled by a different carrier. Lloyds thus attempts
to sharply limit the type of prejudice necessary to create estoppel under New York
law. But it cites nothing to support its proposition that BYA’s satisfaction with
appointed counsel’s defense and settlement of the Wahl Arbitration precludes a
finding of prejudice. In fact, New York case law does not support Lloyds’
contention. In particular, courts have recognized that hindering an insured’s interest
14
in seeking coverage or indemnification from another source may be sufficient to
show prejudice resulting from an insurance company’s untimely disclaimer of
coverage. See Yoda, LLC v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa.,
931 N.Y.S.2d 18, 20-21 (N.Y. App. Div. 2011) (finding prejudice where insurer’s
untimely disclaimer of coverage impeded the ability to implead another party);
Federated Dep’t Stores, 807 N.Y.S.2d at 68 (finding no prejudice where insurer’s
assumption of defense did not impede the ability to assert a cross claim); Nat’l
Indem. Co. v. Ryder Truck Rental, Inc., 646 N.Y.S.2d 169, 170 (N.Y. App. Div.
1996) (affirming denial of summary judgment where fact issues regarding prejudice
remained, including the viability of the insured’s claim against a third party before its
discharge in bankruptcy); Martini v. Lafayette Studios Corp., 676 N.Y.S.2d 808,
812-13 (N.Y. Sup. Ct. 1998) (finding prejudice where the insurer’s delayed
disclaimer “lulled [the insured] into not being concerned about the need for any other
coverage,” id. at 813).2 While these cases did not address the precise prejudice
question raised here, they show that New York courts have not construed the
requisite detrimental effect on the “character and strategy” of the insured’s defense of
an underlying action as narrowly as Lloyds asserts on appeal.
Finally, Lloyds contends that BYA failed to establish prejudice because it
presented no evidence “that Fireman’s Fund actually would have covered the Wahl
2
The appeals court reversed the trial court’s declaration in Martini that the
insurer was estopped from denying coverage because, unlike in this case, the insurer
had not represented that the underlying action was covered and had not taken control
of the defense. See Martini v. Lafayette Studios Corp., 710 N.Y.S.2d 39, 40-41
(N.Y. App. Div. 2000).
15
claims under its policy.” Aplt. Opening Br. at 49. Lloyds argues that the district
court simply assumed that Fireman’s Fund would have covered the Wahl Arbitration
based on (1) this court’s finding in BYA I that the Wahl, Knotts, and Colaner claims
are all interrelated, see 715 F.3d at 1239; (2) the Fireman’s Fund policy language
regarding interrelated claims; (3) Fireman’s Fund’s coverage of the Knotts and
Colaner Arbitrations; and (4) the district court’s finding regarding the available limits
under the Fireman’s Fund policy. In rejecting this contention, as raised in Lloyds’
Rule 52(b) motion, the district court held that the issue whether coverage existed
under the Fireman’s Fund policy was a question of law that had been decided by this
court in BYA I, as well as by the district court.
Lloyds contends that the district court’s reasoning fails to show that BYA
presented any evidence that Fireman’s Fund would have, in fact, provided coverage
for the Wahl Arbitration. Lloyds points to the two grounds for denying coverage that
Fireman’s Fund noted in its letter to BYA in November 2007, as well as Ms. Haag’s
testimony that she did not know whether BYA would have been successful had it
sought coverage from Fireman’s Fund before the Wahl Arbitration settlement. Once
again, however, Lloyds cites nothing to support its legal proposition that BYA was
required to establish as a matter of fact that Fireman’s Fund would have agreed to
cover the Wahl Arbitration. And our review of New York case law indicates that
prejudice can be demonstrated based on a lost opportunity. See Tide Water Oil Co. v.
Am. S.S. Owners Mut. Prot. & Indem. Ass’n, 281 N.Y.S. 729, 737, 751 (N.Y. Sup. Ct.
1935) (finding prejudice based on loss of opportunity to defend against claim in
16
underlying action); Gen. Accident, Fire & Life Assur. Corp. v. Reggiani,
152 N.Y.S.2d 680, 682-83 (N.Y. Sup. Ct. 1956) (finding no prejudice absent proof of
lost opportunity to settle the underlying case); see also Boston Old Colony Ins. Co. v.
Lumbermens Mut. Cas. Co., 889 F.2d 1245, 1248 (2d Cir. 1989) (applying New York
law and finding that a threat of exposure to additional liability “was prejudicial even
though it never ripened into economic harm”).
We therefore reject Lloyds’ contention that the district court misapplied
New York law in finding that BYA was prejudiced by Lloyds’ coverage
representations because BYA could not reverse the character and strategy of the
defense of the Wahl Arbitration to allow Fireman’s Fund to defend it and participate
in the settlement.
IV. Conclusion
The judgment of the district court is affirmed.
Entered for the Court
Nancy L. Moritz
Circuit Judge
17