Citations
- 130 F. Supp. 2d 596
Full opinion text
OPINION and ORDER
STANTON, District Judge.
Plaintiff AB Recur Finans (“ABRF”), a Swedish corporation and finance company, brings this action against defendant AXA Nordstern Art Insurance Corporation of North America, a New York corporation (successor to named defendant Nordstern Insurance Company of North America) (“Nordstern”) for payment, up to Nordst-ern’s million dollar policy limit, of a judgment entered in ABRF’s favor against Nordstern’s insured, Judson Art Warehouse, Inc. (“Judson”).
Nordstern seeks summary judgment dismissing the, complaint, and ABRF cross-moves for, summary judgment in its favor. No material facts are in dispute.
Background
1. Undisputed Facts
Judson Art Warehouse, now defunct, operated a warehouse facility where it cat-alogued, stored, shipped and displayed antiques and works of art for private collectors, dealers and others.
Up until 1991, it was covered by successive insurance policies for warehouseman’s legal liability issued by Nordstern (the “Policy”).
In 1989 Lennart Andersson (a Swedish art dealer) bought a Cy Twombly painting from Peder Bonnier by borrowing $2,000,000 from Fortune Finans AB (“Fortune”), the plaintiff ABRF’s predecessor in interest.
When Andersson received title to the painting he granted Fortune a security interest in it. Judson (in whose warehouse the painting was stored for Andersson) signed an agreement (the “Notification Agreement”) in which Judson acknowledged Fortune’s security interest in the painting and agreed not to release the painting to any party, including Anders-son, without Fortune’s prior consent.
Andersson soon defaulted on his loan repayments to Fortune. Bonnier, unpaid, asked Judson to return the painting to him, which it did, unfortunately without informing Fortune or obtaining Fortune’s consent. When Bonnier received the painting, he resold it to a third party.
This left Fortune unpaid, the painting gone, Andersson in default (his whereabouts unknown), and Judson liable to Fortune for its erroneous delivery of the painting. Predictably, Fortune sued Judson for $2,000,000 in the Supreme Court of the State of New York, New York County . Judson notified its insurance carrier, Nordstern, which defended Judson while reserving its rights to contest coverage and to claim indemnity under the Policy.
During the lawsuit, ABRF acquired Fortune’s assets and was substituted as successor in interest to Fortune’s claims.
On July 7, 1995, following a non-jury trial, Justice Edward Greenfield held that Judson was liable for breach of its agreement not to release the painting without Fortune’s consent, and that ABRF was entitled to recover $2,000,000 plus accrued prejudgment interest. Justice Greenfield rejected Judson’s cross-claims against Bonnier for fraud and conversion.
On July 31, 1995, Nordstern wrote Judson denying coverage for Judson’s liability, advising that it would cease paying Judson’s defense costs in the action, and for the first time raising a defense to coverage based on Sections 2(A) and 3(C) of the Policy, which limit its liability to 30