Knox v. Ironshore Indemnity Inc.

21-3032
Knox v. Ironshore Indemnity Inc.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held
at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 22nd day of June, two thousand twenty-two.
PRESENT:
AMALYA L. KEARSE,
DENNIS JACOBS,
WILLIAM J. NARDINI,
Circuit Judges.
_____________________________________
TESSA KNOX, PAMELA KASSEN,
LAURENTINA CHAPARRO, HILLARY
CRANDLE, JOY FUSARO, ALYSSA HICKEY,
MARGRET HOLCOMB, MICHELLE ORTIZ,
TRIPTI PANDEY, WIJDAN SHOUBAKI, JENA
TOBAK, CHRISTINA TORRES, ARISSIA
TOSSETTI,
Plaintiffs-Appellants,
v. 21-3032
IRONSHORE INDEMNITY INC.,
Defendant-Appellee.
_____________________________________
FOR PLAINTIFFS-APPELLANTS: WILLIAM DUNNEGAN (Richard Weiss, on the
brief), Dunnegan & Scileppi LLC, New
York, NY
FOR DEFENDANT-APPELLEE: ANTHONY D. GREEN (Luigi Spadafora,
Alexander Truitt, on the brief), Winget,
Spadafora & Schwartzberg, LLP, New
York, NY
Appeal from a December 10, 2021, judgment of the United States District Court for the
Southern District of New York (Denise Cote, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court is AFFIRMED.
On July 26, 2021, Plaintiffs-Appellants Tessa Knox, Pamela Kassen, Laurentina Chaparro,
Hillary Crandle, Joy Fusaro, Alyssa Hickey, Margret Holcomb, Michelle Ortiz, Tripti Pandey,
Wijdan Shoubaki, Jena Tobak, Christina Torres, and Arissia Tossetti (“Appellants”) commenced
this action against Ironshore Indemnity Inc. (“Ironshore”) principally to recover damages awarded
against Ironshore’s insured, John Varvatos Enterprises, Inc. (“Varvatos,” a clothing retailer) in a
separate action. As relevant to this appeal, the complaint presented a claim under New York
Insurance Law § 3420(a)(2), which provides injured parties with a direct cause of action against
the tortfeasor’s insurer. The district court dismissed Appellants’ statutory claim because “the plain
terms of the policy issued by Ironshore make clear that the conduct leading to the Judgment
[against Varvatos] is excluded from coverage under the policy,” Knox v. Ironshore Indem. Inc.,
No. 21CV6321 (DLC), 2021 WL 5910112, at *1 (S.D.N.Y. Dec. 10, 2021). 1 Appellants timely
appealed. We assume the reader’s familiarity with the record. We review de novo a district court’s
dismissal under Rule 12(b)(6). Dane v. UnitedHealthcare Ins. Co., 974 F.3d 183, 188 (2d Cir.
2020).
The judgment in the underlying action is premised on Varvatos’s discriminatory pay
practices. In brief, starting in approximately 2005 through all relevant periods, Varvatos’s male
sales employees, but not its female sales employees, were required to wear Varvatos clothing at
work and were entitled to obtain $12,000 in Varvatos clothes annually (a taxable benefit). In 2015,
Varvatos also began to offer its female sales employees a discount at a related store if they
purchased clothing out of their personal funds (a non-taxable benefit). Based on these and other
facts, Appellants were awarded a judgment of $2,862,407.41 and, because Varvatos filed for
bankruptcy and only satisfied $193,145.53 of that judgment, Appellants seek the balance from
Varvatos’s insurer, Ironshore.
On appeal, Appellants maintain that the judgment is covered by Varvatos’s insurance
policy with Ironshore and that Ironshore’s reservation of rights does not preclude coverage. In
response, Ironshore argues that the district court correctly found that the policy’s exclusion of
certain prior acts from coverage bars Appellants’ claim. We agree with Ironshore.
1
The complaint also pled a claim in the alternative for insurance by estoppel. But that claim fails because
New York’s direct-action statute, N.Y. Ins. Law § 3420(a)(2), allows plaintiffs to maintain an action against the
insurer only “under the terms of the policy or contract,” and not for equitable relief. Accordingly, we need not
consider the merits of Appellants’ insurance by estoppel claim because § 3420(a)(2) does not authorize them to
bring such a claim in the first instance.
2
Varvatos’s insurance policy contains a “Prior Acts Exclusion,” which states:
In consideration of the premium charged, it is hereby understood and agreed that
the Insurer shall not be liable to make any payment for Loss in connection with any
Claim for any Wrongful Act which occurred prior to April 30, 2012. Loss arising
out of the same Wrongful Act or Related Wrongful Acts shall be deemed to arise
from the first such Wrongful Act.
Joint App’x at 93. “Related Wrongful Acts,” in turn, are defined as:
Wrongful Acts which are the same, related or continuous, or Wrongful Acts which
arise from a common nucleus of facts. Claims can allege Related Wrongful Acts
regardless of whether such Claims involve the same or different claimants, Insureds
or legal causes of action.
Id. at 29. Under New York law, which the parties agree governs the interpretation of the insurance
policy, “[w]henever an insurer wishes to exclude certain coverage from its policy obligations, it
must do so in clear and unmistakable language.” Pioneer Tower Owners Ass’n v. State Farm Fire
& Cas. Co., 12 N.Y.3d 302, 307 (2009) (quoting Seaboard Sur. Co. v. Gillette Co., 64 N.Y.2d 304,
311 (1984)). New York courts will enforce a policy exclusion only where the exclusion “ha[s] a
definite and precise meaning, unattended by danger of misconception . . . and concerning which
there is no reasonable basis for a difference of opinion.” Id. (internal quotation marks omitted).
Here, the district court correctly found that the Prior Acts Exclusion unambiguously
excludes coverage for the underlying judgment against Varvatos because Varvatos instituted the
discriminatory clothing allowance prior to April 30, 2012, and maintained it after that date. The
same policy both before and after that date is plainly “the same, related or continuous,” Joint App’x
at 29, under any reasonable interpretation of that phrase. Varvatos’s introduction of the discount
offer to female employees in 2015 does not alter this conclusion because, as the parties
acknowledge, nothing changed about the allowance provided to male employees and, as
Appellants successfully argued in the district court, the discount offered to female employees was
not comparable in value to the male clothing allowance. Ironshore has therefore met its burden to
demonstrate that there is “no reasonable basis,” Pioneer Tower Owners Ass’n, 12 N.Y.3d at 307(internal quotation marks omitted), to conclude that that discount somehow transformed
Varvatos’s discriminatory policy into something not “the same [as], related [to] or continuous
[with],” or that did not “arise from a common nucleus of facts” with, the male clothing allowance
on its own, Joint App’x at 29. See Fed. Ins. Co. v. Am. Home Assur. Co., 639 F.3d 557, 568 (2d
Cir. 2011) (“The New York Court of Appeals has held that the phrase ‘arising out of’ is ‘ordinarily
understood to mean originating from, incident to, or having connection with.’” (quoting Maroney
v. N.Y. Cent. Mut. Fire Ins. Co., 5 N.Y.3d 467, 472 (2005))). Accordingly, the complaint fails to
state a claim under § 3420 because the policy at issue excludes coverage for the judgment against
Varvatos. See N.Y. Ins. Law § 3420(a)(2).
3
We have considered the remainder of Appellants’ arguments and find them to be without
merit. For the foregoing reasons, we affirm the judgment of the district court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
4