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STATE OF NEW YORK COUNTY OF NASSAU
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MICHAEL FLYNN ESQ., PLLC, FLYNN & Index No.: 607655/2021
WIETZKE, P.C., MICHAEL FLYNN, ESQ.,
and MARC WIETZKE, ESQ.,
Plaintiffs, Motion Seq. No. 003
-against-
STARSTONE SPECIALITY INSURANCE COMPANY,
Defendant.
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REPLY MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS’ MOTION FOR
SUMMARY JUDGMENT
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TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT……………………………………………………………………...4
ARGUMENT………………………………………………………………………………………....6
POINT I.
DEFENDANT HAS FAILED TO SATISFY BOTH THE OBJECTIVE AND
SUBJECTIVE PRONGS IN ORDER TO VICIATE COVERAGES OF ITS
INSUREDS…………………………………………………………………………….6
POINT II.
PLAINTIFFS MICHAEL FLYNN ESQ AND MICHAEL FLYNN ESQ PLLC
ARE COVERED UNDER THE SUBJECT POLICY AS “PREDECESSESOR
FIRMS” AND ARE THEREFORE COVERED UNDER THE SUBJECT
POLICY …………………………………………………………………………...…12
CONCLUSION……………………………………………………………………………………….14
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TABLE OF AUTHORITIES
Cases Page
Abreu v. Thomas, No. 17-CV-01312, 2019 WL 11157245, at *1
(N.D.N.Y. July 19, 2019) ………………………………………………………………………………..12
American Medical Alert Corp. v. Evanston Insurance Company,
185 A.D.3d 433 (1st Dept. 2020) ………………………………………………………………………….8
American Medical Alert Corp., v. Evanstan Ins. Co., et al,
Index No. 655974/2016 (Sup. Ct. N. Y. Cnty. May 22, 2019) ……………………………………...…….8
Bernardino v. Barnes & Noble Booksellers, Inc.,
763 F. App'x 101, 103 (2d Cir. 2019) …………………………………………………………………….12
B Five Studio LLP v. Great Am. Ins. Co.,
414 F. Supp. 3d 337, 340 (E.D.N.Y. 2019) ………………………………………………………………..7
ChemTreat, Inc. v. Certain Underwriters at Lloyd's of London,
488 F.Supp.3d 343, 365 (E.D. Va. 2020) ………………………………………………………………….8
Colliers Lanard & Axilbund v. Lloyds of London, 458 F.3d 231, 240 (3d Cir. 2006) ………………..7, 10
Coregis Ins. Co. v. Baratta & Fenerty, Ltd., 264 F.3d 302 (3d Cir. 2001) ……………………………….8
Cushman & Wakefield Inc. v. Illinois National Insurance Company, et al.,
No. 14-8725, N.D. Ill., 2018 U.S. Dist. LEXIS 67523…………………………………………………9,10
Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252 F.3d 608, 620-23 (2d Cir. 2001) ………………………….11
JP Morgan Sec. Inc., v. Vigilant Ins. Co., 2017 NY Slip Op 27127
(Supreme Ct. N.Y. Cnty April 17, 2017) ………………………………………………………………9,11
Point of Rocks Ranch, L.L.C. v. Sun Valley Title Ins. Co.,
143 Idaho 411, 146 P.3d 677 (2006) …………………………………………………………………….14
Schlather, Stumbar, Parks & Salk, LLP, et al. v. One Beacon Ins. Co.,
No. 5:10-cv-0167, 2011 U.S. Dist. LEXIS 147931 (N.D.N.Y. Dec. 22, 2011)
…………………………………………………………………………………………………………….11
Structural Processing Corp. v. The Hartford Steam Boiler Inspection & Ins. Co.,
23 Misc. 3d 131(A), 885 N.Y.S.2d 713 (App. Term 2009) …...……………...…………………..…….14
United Nat. Ins. Co. v. Granoff, Walker & Forlenza, P.C., 598 F.Supp.2d 540 (2009) …...…………….10
Other Authorities
7 COUCH ON INS. § 101:20……………………………………………………………………………14
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PRELIMINARY STATEMENT
It is clear from StarStone’s submission in opposition to Plaintiffs’ motion that it has misconstrued
and/or mischaracterized the “subjective inquiry” prong as it relates to the proof necessary to trigger both
the “prior knowledge” exclusion contained in the 2016 policy issued to Plaintiffs as well as any alleged
material misrepresentations made in the application submitted in connection with the 2018 Policy. While
StarStone on the one hand concedes that it must establish both components of the two-prong test for
determining whether Plaintiffs had “prior knowledge” at the inception of the 2016 Policy or failed to
disclose material information in their procurement of the 2018 Policy, it then attempts to argue that the
Court should look no further than to what it deems to be the “objective” evidence in order to satisfy its
burden of proof. In so doing it has incorrectly claimed that “Plaintiffs’ subjective belief as to whether the
Malpractice Lawsuit might have been filed against them is not controlling.” See StarStone Memo of Law
in Opposition at p.4. While it is true that a myopic subjective belief that a suit will not be filed against it
is insufficient when measured against information or evidence that would suggest to a reasonable attorney
that a claim may be made against it, at bar no such information or evidence existed at the time that either
the 2016 or 2018 policies were being procured by Plaintiffs. As a result, StarStone’s stilted reading of the
caselaw as to its burden of proof comes crumbling down when the undisputed facts “known” to Plaintiffs
in both 2016 and 2018 are examined.
As opposed to the facts of the various cases cited by StarStone in support of its position, at bar
Plaintiffs were not in possession of any correspondence or adverse findings (or even a motion that may
lead to an adverse finding) that would trigger Plaintiffs reporting obligations. Consequently, while the
Memorandum and Order issued in the underlying action suggests that Caminero should not have been
surprised that after years of non-activity her case could be subject to dismissal upon an application by the
MTA for such relief, it is undisputed that up until December 19, 2018, the date that MTA filed such a
motion, its counsel had never suggested that it was adverse to placing the FELA Action back on the calendar
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in an attempt to resolve the claim. Furthermore, while the Memorandum and Order focused on Caminero’s
claims against the MTA (which was the only relevant inquiry), it did not and could not have addressed
whether the blame for such delays were based upon counsel’s conduct or lack of attentiveness or rather,
were the result of her own inactions in failing to cooperate with her counsel. Accordingly, since there were
no communications exchanged or orders issued which, on their face, would have led the Plaintiffs herein
to believe that there existed facts or circumstances which may give rise to a claim against them the Plaintiffs
subjective knowledge of same would have been the only basis to deny Plaintiffs’ demand for defense and
indemnification coverage. Consequently, StarStone’s reliance on the record “facts” as set forth in the
Memorandum and Order is misplaced.
Separately and independently, as to Plaintiffs Law Offices of Michael Flynn, Esq., PLLC and
Michael Flynn, Esq., Defendant’s claim and defense that it does not owe these Plaintiffs coverage because
they failed to meet the definition of a “Predecessor Firm” as defined in the Subject Policy, is neither
supported by the law or the relevant facts. The Subject Policy merely requires that the “successor in
interest” has acquired a majority of the “assets and liabilities” of the predecessor firm. The corporate
documents, combined with the affidavits of Michael Flynn and Marc Wietzke, evidence that Flynn &
Wietzke P.C., is in fact the majority successor in interest of Michael Flynn Esq., PLLC. The status of these
entities as “insureds” under the “Predecessor Firm” provision is further evidenced by the fact that both the
Subject Policy and the 2016 Policy provide a retroactive coverage date for all insureds back to February 2,
1992. Given the undisputed corporate history, there would be no basis to provide a retroactive date back to
1992 if no prior entity qualified for “Predecessor Firm” coverage. Consequently, the only conclusion that
this Court can reach is that Starstone’s failure to provide Plaintiffs Law Offices of Michael Flynn., Esq.,
PLLC and Michael Flynn Esq. defense and indemnity coverage based upon its conclusion that they do not
qualify as “insureds” under the Subject Policy is simply wrong. Accordingly, this Court should grant
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Plaintiffs’ motion for summary judgment in its entirety and grant such further and different relief as the
Court deems just and proper.
ARGUMENT
POINT I
DEFENDANT HAS FAILED TO SATISFY BOTH THEOBJECTIVE AND SUBJECTIVE
PRONGS IN ORDER TO VICIATE COVERAGE OF ITS INSUREDS
In its opposition papers, StarStone maintains that although Plaintiffs may have not expected a claim
to be made against them in connection with their representation of the Caminero in the FELA Action, they
were aware of “relevant facts”, including the facts that there was a delay in reactivating the case, that
Plaintiffs did not provide a written update to the Court while the FELA Action remained on the suspense
calendar, and that the FELA Action was administratively closed. It is these “facts” that they rely upon to
deny coverage to Plaintiffs herein. However, a review of the cases StarStone cites, as detailed below, all
reflect the fact that the “relevant facts” required to establish a prior knowledge exclusion applies, must be
much more direct so as to make it clear to the attorney (or other insured) that issue has been taken with the
insured’s performance or a negative outcome has been received, thus exposing the insured to a potential
claim against them.
Defendant’s reliance on Colliers Lanard & Axilbund v. Lloyds of London, 458 F.3d 231, 240 (3d
Cir. 2006) to suggest some type of dichotomy between knowledge of an expected claim versus knowledge
of “relevant facts” is unavailing at bar. In Colliers, a real estate broker was retained to prepare leases for
several commercial units for its landlord-client. In preparing the leases, the broker incorrectly input the
operating expense on the lease. This error was not discovered until after the parties entered into the leases
prior to July of 2000. Once discovered, the broker issued two letters to the tenants, on July 24, 2000, and
August 25, 2000, attempting to remedy the errors. This attempt was rejected by the tenants and the tenants
directed the broker to their attorney for further discussion. Subsequently thereafter, on August 29, 2000,
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the broker applied for an errors and omission insurance application but did not disclose any potential claims
from prior acts or errors. The policy was then issued on December 18, 2000. Less than a month later the
landlord client sent a letter to the broker stating it would seek legal remedies for the errors made in the
lease agreements. When the complaint was served and a claim was made, the broker’s insurer denied
coverage, relying upon the “prior knowledge” exclusion. See Colliers supra at 234. In denying coverage
to the insured, the Court relied upon the above “relevant facts” in concluding that a reasonable real estate
broker, after (a) admitting to the error, (b) being rebuffed by the tenants and (c) being directed to tenants’
counsel, was in possession of sufficient information so that it could not reasonably claim that it
“subjectively” was not aware of facts or circumstance that could give rise to a claim.
Colliers emphasis of these types of “relevant facts” in relationship to the “subjective knowledge”
prong is consistent with New York law. See B Five Studio LLP v. Great Am. Ins. Co., 414 F. Supp. 3d 337,
340 (E.D.N.Y. 2019) In B Five Studio LLP, a Condominium Association hired B Five to provide design
services to a condo project. The COA provided a demand letter on or before May 9, 2016 to B Five partners
claiming design defects. On or before May 9, 2016, B Five applied for insurance and did not report the
demand letter at the time of the application. A policy was issued thereafter. On August 18, 2016, B Five
reported a claim to its insurer in connection with the COA project and the carrier denied coverage on
grounds of prior knowledge exclusion. The COA commenced suit against B Five alleging a defective
design of the project. In holding that coverage did not exist, based upon the prior knowledge exclusion, the
District Court considered “the insured's knowledge of the relevant facts and made an objective
determination of whether a reasonable person in the insured's position should have expected such facts to
be the basis of a claim. In concluding that coverage was excluded, the District Court concluded that based
upon its receipt of the letter, B Five was aware of relevant facts that may give rise to a claim for design
defects. Thus, a reasonable person, based on the relevant facts, would have understood that its company
could be implicated in a lawsuit based on the services rendered. See B Five supra at p. 341. See also
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American Medical Alert Corp., v. Evanstan Ins. Co., et al, Index No. 655974/2016 (Sup. Ct. N.Y. Co. May
22, 2019) aff’d American Medical Alert Corp. v. Evanston Insurance Company, 185 A.D.3d 433 (1st Dept.
2020) (insured’s admission as to its negligent conduct and knowledge of facts constituting “Wrongful
Conduct” prior to the inception of the subject policy negates coverage based upon the prior knowledge
exclusion) 1; Coregis Ins. Co. v. Baratta & Fenerty, Ltd., 264 F.3d 302 (3d Cir. 2001)(coverage denied
when (a) underlying medical malpractice action was dismissed by the court for lack of activity of over 10
years, (b) the insured’s client expressed dissatisfaction with the handling of the case by the insured law
firm and (c) the court refused to reinstate the matter--all which took place prior to the completion of the
insurance application and inception of the insured’s policy); ChemTreat, Inc. v. Certain Underwriters at
Lloyd's of London, 488 F.Supp.3d 343, 365 (E.D. Va. 2020)(applying New York law, explaining that the
prior knowledge exclusion barred coverage because the insured knew that a pressure vessel in a boiler
system at the Valley Proteins' facility had exploded and that the insured had serviced that same pressure
vessel and that the insured had received two letters putting it on notice of potential claims against it---all
prior to applying for coverage).
In contrast, New York courts have rejected carriers attempt to escape coverage where there is no
clear evidence that the insured or any reasonable insured would suspect that a claim may be filed against
it. For example, in JP Morgan Sec. Inc., v. Vigilant Ins. Co., 2017 NY Slip Op 27127 (Sup. Ct. N.Y. Co.
April 17, 2017), the Court noted "even if the evidence establishes as a matter of law that the insured has
formed a subjective belief that a suit may ensue based upon some . . . misconduct, that does not alone
establish the existence of objective facts which would support the conclusion of a reasonable professional
that the insured will be subjected to professional liability claims". Id. at. 12. The insurers did not point to
any evidence that any of the insured’s officers had knowledge that its clearing brokers were facilitating
1
A copy of the Motion Court’s decision, setting forth the relevant facts review by the Appellate Division, is attached to this
Memorandum of Law.
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deceptive market timing and late trading prior to the effective date of coverage and could not prove a
reasonable basis to foresee a claim based upon this conduct. The First Department also found that an SEC
Order regarding the settlement of violations of securities laws could not be used to evidence prior
knowledge, as the order did not explicitly state that the insured admitted liability and there was no
adjudication of any wrongdoing on the part of the insured.
In Cushman & Wakefield Inc. v. Illinois National Insurance Company, et al., 2018 U.S. Dist. LEXIS
67523 (N.D. Ill. 2018), the insured, a real estate related service company, was sued by its clients for real
estate appraisals made by the insured related to loans which defaulted and resulted into lawsuits against the
insured by certain property owners and shareholders for alleged misleading appraisal-related errors. In
finding that the carrier failed to demonstrate that the prior knowledge exclusion precluded coverage for the
underlying claims, the Court found:
Illinois National argues that Cushman appraisers knew as far back as 2006 that issuing TNV
appraisals was inherently misleading and might result in claims of professional malpractice
or misfeasance, but it submits no persuasive evidence to substantiate its assertion. . . . Illinois
National also contends that Cushman appraisers began taking issue with conducting TNV
appraisals as far back as 2006, pointing to an affidavit by [appraiser Michael] Miller. . . .
True, appraisers may have had concerns, but this does not mean they knew issuing TNV
appraisals was inherently misleading, nor that a reasonable person with knowledge of the
facts surrounding these appraisals might expect such activity to be the basis of a claim.
The court added:
Indeed, ‘mere knowledge of “some consequences” of an act is inconsequential, which,
standing alone, would not provide a reasonable basis [for] the insured to believe that it had
committed a wrongful act that foreseeably will result in a claim.’ . . . Under these facts, the
Prior Knowledge Exclusion does not bar coverage for the Underlying Claims.
See Cushman & Wakefield Inc, supra at 13-14; see also United Nat. Ins. Co. v. Granoff, Walker &
Forlenza, P.C., 598 F.Supp.2d 540 (2009)(clients did not indicate to any member of the law firm that they
planned to file a legal malpractice action and the client continued to use law firm and the alleged failure
did not consist of complying with the statute of limitations, evidence supporting attorney neglect, criticism
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by the court or disciplinary proceeding, or explicit threats of litigation that would trigger the prior
knowledge exclusion.)
As reflected above, the “relevant facts” needed to be established in order for StarStone to satisfy
any subjective inquiry here is substantial, wherein it must rise to the level of an express threat of litigation,
or an admission that litigation is likely as a result of an error or omission. Colliers supra;B Five supra.
Here, StarStone has adduced no such evidence. Rather, it singularly cites to the Memorandum and Order
which at best chronicles a lack of court activity as it relates to the FELA Action, that the case was
administratively closed and that the Plaintiffs did not provide a written update to the Court. However, none
of these “facts” come close to the nature of the facts identified above that would trigger an insured to give
notice to its carrier. At bar, both prior to the inception of the 2016 policy and prior to the submission of the
2018 application, there were no demand letters, threats of litigation or even threats of filing a motion to
dismiss for failure to prosecute in connection with the FELA Action. In fact, counsel for the parties were
discussing settlement during these relevant time periods. See Marc Wietzke’s Affidavit at ¶¶ 23-24.
It is precisely because StarStone cannot point to any objective or publicly available evidence to
satisfy the subjective knowledge requirement that its only legitimate basis upon which it could have ever
denied coverage herein was if it was able to determine that Plaintiffs had knowledge or information, based
upon the statements of others, that would put them on notice that they could have anticipated a potential
claim. Consequently, StarStone’s failure to carry out an investigation so as to attempt to uncover any such
evidence, if any existed is telling.
StarStone argues that Plaintiffs have failed to cite to one single case authority that requires
StarStone to investigate Plaintiffs’ subjective knowledge at the time they filed their application of insurance
in 2016 and in 2018. Indeed, StarStone does not have an “obligation” to investigate the Plaintiffs’ subjective
knowledge in general. However, in order for StarStone to deny Plaintiffs’ claim for coverage and
indemnity, it needed to perform an investigation to determine the “relevant facts” to support its proposition
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for denial, which is in essence, those facts known to Plaintiffs, in connection with the FELA Action at the
time they submitted its application of insurance in 2016 and 2018. Those facts include communications
with their client as well as MTA’s counsel, none of which is reflected in the Memorandum and Order.
StarStone did not conduct any investigation to determine those “relevant facts” and on this record, it was
incumbent on them to do so in order to justify their denial of coverage herein. One can only surmise that the
only reason such an investigation was not carried out was because it did not want to be burdened with supplying
Plaintiffs with a defense while it carried out its investigation. Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252
F.3d 608, 620-23 (2d Cir. 2001) Schlather, Stumbar, Parks & Salk, LLP, et al. v. One Beacon Ins. Co., No.
5:10-cv-0167, 2011 U.S. Dist. LEXIS 147931 (N.D.N.Y. Dec. 22, 2011)( where the allegation in the underlying
complaint give rise to claims that are potentially covered and it cannot be determined “with certainty” based on
those allegations that the prior knowledge exclusion is applicable, it is not up to the insurer to deny the insured
defense coverage until the insurer can establish that the prior knowledge exclusion bars coverage). This tactical
strategy however cannot insulate StarStone from liability.
Defendant has also failed to satisfy the objective prong of the test in order to deny coverage herein.
Just like the facts set forth in JP Morgan, where the SEC Order was not indicative of the insured admission
or liability, the “facts” laid out in the Memorandum and Order was not indicative of fault by Plaintiffs
herein wherein in 2016 or 2018 they would have had knowledge of facts or circumstances giving rise to
such a claim. 2 Additionally, like in Cushman and Wakefield, while there was no written update to the Court
in May of 2005 and the case was administratively closed in April of 2006, ‘mere knowledge of “some
consequences” of an act is inconsequential, especially since those facts were not the “relevant facts” and
does not rise to the level to satisfy any objective inquiry. In fact, StarStone’s reliance on the “administrative
closing” of the case is negated by the fact that the administratively closing of a case is purely for
2
In contrast, when the Court issued the Memorandum and Order on or about August 2, 2019, StarStone acknowledged
Plaintiffs’ notice of a potential claim on or about August 27, 2019. See Marc Wietzke’s Affidavit at ¶ 33 and Ex. V.
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administratively/statistical purposes and not reflective of any wrongdoing of Plaintiffs. Bernardino v.
Barnes & Noble Booksellers, Inc., 763 F. App'x 101, 103 (2d Cir. 2019) (there is “no jurisdictional
significance to [a] docket entry marking [a] case as ‘closed,’ which ... was made for administrative or
statistical convenience.”); Abreu v. Thomas, No. 17-CV-01312, 2019 WL 11157245, at *1 (N.D.N.Y. July
19, 2019) (“Administrative closure is a docket management device which allows the removal of cases from
the court's docket in appropriate situations ... The effect of an administrative closure is the same as a stay”
(internal citations and quotation marks omitted).
POINT II
PLAINTIFFS MICHAEL FLYNN ESQ AND MICHAEL FLYNN ESQ PLLC
ARE COVERED UNDER THE SUBJECT POLICY AS “PREDECESSOR FIRMS”
AND ARE THEREFORE COVERED UNDER THE SUBJECT POLICY
In arguing against a finding of “predecessor firm” coverage, Defendant argues that Plaintiffs (a)
provided “self-serving affidavits” regarding the relationship of the entity plaintiffs, (b) that the corporate
documents do no support the proposition that Plaintiff Michael Flynn Esq is a predecessor firm of Plaintiff
Flynn & Wietzke and that (c) because Flynn and Wietzke is a newly formed corporation it cannot ipso
facto be a majority successor in interest to the Michael Flynn, Esq., PLLC or Michael Flynn, P.C. StarStone
is wrong on all counts.
The relevant documents provided by Plaintiffs reflect the corporate history of the relevant entities,
together with the various name changes of the successor firms and documentation indicating percentage of
ownership interest support the findings that Plaintiff Michael Flynn, Esq., PLLC is a predecessor firm under
the policy. The Law Offices of Michael Flynn P.C. hired Marc Wietzke as an associate attorney who then
became a partner of the Law Offices of Michael Flynn, P.C. in 2009. This resulted in the creation of a
partnership agreement whereby Marc Wietzke owned 49% of the shares and Michael Flynn owned the
remaining 51% of the shares of that PC. See Affidavit of Michael Flynn at ¶ 4. Flynn & Wietzke P.C., was
subsequently created in 2012 after Mr. Flynn retired on December 31, 2011. There is no factual dispute,
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and the documentary evidence clearly establishes that Flynn & Wietzke P.C. became the sole successor in
interest of the assets, liabilities, cases and matters of the Law Offices of Michael Flynn P.C. See Affidavit
of Michael Flynn at ¶ 5, Affidavit of Marc Wietzke at ¶ 4 and the documents annexed thereto. It is therefore
undisputed that the Law Offices of Michael Flynn Esq., PLLC falls within the definition of a "Predecessor
Firm” thereby affording coverage for Michael Flynn and Law Offices of Michael Flynn Esq., PLLC.
While the Subject Policy explicitly provides for “Predecessor Firm” coverage when the named
insured is the majority successor of the “assets and liabilities” of the predecessor firm, Starstone contends
that because Flynn & Wietzke P.C., was a “newly formed corporation” that subsumed an entity named Law
Offices of Michael Flynn P.C., it is not a majority successor in interest of Michael Flynn Esq PLLC. Such
a statement defies logic and is not consistent with the definition of “Predecessor Firm” as provided in the
Subject Policy. As explained by Michael Flynn, when deposed, Michael Flynn PLLC had a name change
in August 25, 2005 to “Michael Flynn, Esq, PLLC” and then the next day, August 26, 2005, the Law
Offices of Michael Flynn P.C., was created and subsumed all the assets and liabilities of Michael Flynn
Esq, PLLC. See Exhibit J, at pp. 17-23. The transition from Michael Flynn Esq, PLLC, to Michael Flynn
P.C., did not involve any changes in the business. Mr. Flynn testified that he remained in charge just as
before the name change/entity formation and the transition was merely a name change. Mr. Flynn further
testified that the Law Offices of Michael Flynn, P.C., subsumed the same cases, and same or similar
business names prior and after the name change. The affidavits of the Plaintiffs expound on the reasoning
as to the entity name changes and what occurred to the assets and liabilities of the firm. There is no
inconsistency between the corporate documents and the testimony and affidavits of the Plaintiffs.
Finally, if StarStone’s hyper technical interpretation of this policy term is accurate, then it provided
the insureds with, and provided them illusory coverage with respect to coverage with a retroactive date to
February 2, 1992, as there would be no “insured” entity doing business at such an earlier time period. As
the courts will not give effect to the interpretations of insurance policy language that would render coverage
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illusory, 7 COUCH ON INS. § 101:20 citing Point of Rocks Ranch, L.L.C. v. Sun Valley Title Ins. Co., 143
Idaho 411, 146 P.3d 677 (2006), Starstone’s interpretation of this coverage must be rejected. "[E]exclusions
must be construed in favor of the insured if doing otherwise would render the coverage illusory." See
Structural Processing Corp. v. The Hartford Steam Boiler Inspection & Ins. Co., 23 Misc. 3d 131(A), 885
N.Y.S.2d 713 (App. Term 2009) (citing ThomasJ. Lipton, Inc. v. Liberty Mut. Ins. Co., 34 N.Y.2d 356, 361
(1974)).
CONCLUSION
For the reasons set forth above, and in Plaintiffs initial moving papers, Plaintiffs respectfully
requests that this Court to grant Plaintiffs’ motion for summary judgment in its entirety and award Plaintiffs
such further and different relief as the Court deems just and proper.
Dated: Rye Brook, New York
December 23, 2022
WEG AND MYERS, P.C.,
/s/ Joshua L. Mallin_____________
Joshua L. Mallin, Esq.
Lisa M. Singh, Esq.
Attorneys for Plaintiffs
800 Westchester Ave, N-513
Rye Brook, New York 10573
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ATTORNEY CERTIFICATION
In accordance with Rule 17 of the Commercial Division Rules, Joshua L. Mallin, Esq., an
attorney duly admitted to practice in the Courts of New York, hereby certifies that the word count of
this Reply Memorandum of Law in Further Support of Plaintiffs’ Motion for Summary Judgement
contains 4036 words.
Dated: December 23, 2022
Rye Brook, New York
WEG AND MYERS, P.C.
Attorneys for Plaintiffs
By: /s/_ Joshua L. Mallin________
Joshua L. Mallin, Esq.
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FILED: NASSAU COUNTY CLERK 12/23/2022 12:37 PM INDEX NO. 607655/2021 NYSCEF DOC. NO. 142 RECEIVED NYSCEF: 12/23/2022 STATE OF NEW YORK COUNTY OF NASSAU -------------------------------------------------------------------------X MICHAEL FLYNN ESQ., PLLC, FLYNN & Index No.: 607655/2021 WIETZKE, P.C., MICHAEL FLYNN, ESQ., and MARC WIETZKE, ESQ., Plaintiffs, Motion Seq. No. 003 -against- STARSTONE SPECIALITY INSURANCE COMPANY, Defendant. -------------------------------------------------------------------------X REPLY MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 1 1 of 15 FILED: NASSAU COUNTY CLERK 12/23/2022 12:37 PM INDEX NO. 607655/2021 NYSCEF DOC. NO. 142 RECEIVED NYSCEF: 12/23/2022 TABLE OF CONTENTS Page PRELIMINARY STATEMENT……………………………………………………………………...4 ARGUMENT………………………………………………………………………………………....6 POINT I. DEFENDANT HAS FAILED TO SATISFY BOTH THE OBJECTIVE AND SUBJECTIVE PRONGS IN ORDER TO VICIATE COVERAGES OF ITS INSUREDS…………………………………………………………………………….6 POINT II. PLAINTIFFS MICHAEL FLYNN ESQ AND MICHAEL FLYNN ESQ PLLC ARE COVERED UNDER THE SUBJECT POLICY AS “PREDECESSESOR FIRMS” AND ARE THEREFORE COVERED UNDER THE SUBJECT POLICY …………………………………………………………………………...…12 CONCLUSION……………………………………………………………………………………….14 2 2 of 15 FILED: NASSAU COUNTY CLERK 12/23/2022 12:37 PM INDEX NO. 607655/2021 NYSCEF DOC. NO. 142 RECEIVED NYSCEF: 12/23/2022 TABLE OF AUTHORITIES Cases Page Abreu v. Thomas, No. 17-CV-01312, 2019 WL 11157245, at *1 (N.D.N.Y. July 19, 2019) ………………………………………………………………………………..12 American Medical Alert Corp. v. Evanston Insurance Company, 185 A.D.3d 433 (1st Dept. 2020) ………………………………………………………………………….8 American Medical Alert Corp., v. Evanstan Ins. Co., et al, Index No. 655974/2016 (Sup. Ct. N. Y. Cnty. May 22, 2019) ……………………………………...…….8 Bernardino v. Barnes & Noble Booksellers, Inc., 763 F. App'x 101, 103 (2d Cir. 2019) …………………………………………………………………….12 B Five Studio LLP v. Great Am. Ins. Co., 414 F. Supp. 3d 337, 340 (E.D.N.Y. 2019) ………………………………………………………………..7 ChemTreat, Inc. v. Certain Underwriters at Lloyd's of London, 488 F.Supp.3d 343, 365 (E.D. Va. 2020) ………………………………………………………………….8 Colliers Lanard & Axilbund v. Lloyds of London, 458 F.3d 231, 240 (3d Cir. 2006) ………………..7, 10 Coregis Ins. Co. v. Baratta & Fenerty, Ltd., 264 F.3d 302 (3d Cir. 2001) ……………………………….8 Cushman & Wakefield Inc. v. Illinois National Insurance Company, et al., No. 14-8725, N.D. Ill., 2018 U.S. Dist. LEXIS 67523…………………………………………………9,10 Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252 F.3d 608, 620-23 (2d Cir. 2001) ………………………….11 JP Morgan Sec. Inc., v. Vigilant Ins. Co., 2017 NY Slip Op 27127 (Supreme Ct. N.Y. Cnty April 17, 2017) ………………………………………………………………9,11 Point of Rocks Ranch, L.L.C. v. Sun Valley Title Ins. Co., 143 Idaho 411, 146 P.3d 677 (2006) …………………………………………………………………….14 Schlather, Stumbar, Parks & Salk, LLP, et al. v. One Beacon Ins. Co., No. 5:10-cv-0167, 2011 U.S. Dist. LEXIS 147931 (N.D.N.Y. Dec. 22, 2011) …………………………………………………………………………………………………………….11 Structural Processing Corp. v. The Hartford Steam Boiler Inspection & Ins. Co., 23 Misc. 3d 131(A), 885 N.Y.S.2d 713 (App. Term 2009) …...……………...…………………..…….14 United Nat. Ins. Co. v. Granoff, Walker & Forlenza, P.C., 598 F.Supp.2d 540 (2009) …...…………….10 Other Authorities 7 COUCH ON INS. § 101:20……………………………………………………………………………14 3 3 of 15 FILED: NASSAU COUNTY CLERK 12/23/2022 12:37 PM INDEX NO. 607655/2021 NYSCEF DOC. NO. 142 RECEIVED NYSCEF: 12/23/2022 PRELIMINARY STATEMENT It is clear from StarStone’s submission in opposition to Plaintiffs’ motion that it has misconstrued and/or mischaracterized the “subjective inquiry” prong as it relates to the proof necessary to trigger both the “prior knowledge” exclusion contained in the 2016 policy issued to Plaintiffs as well as any alleged material misrepresentations made in the application submitted in connection with the 2018 Policy. While StarStone on the one hand concedes that it must establish both components of the two-prong test for determining whether Plaintiffs had “prior knowledge” at the inception of the 2016 Policy or failed to disclose material information in their procurement of the 2018 Policy, it then attempts to argue that the Court should look no further than to what it deems to be the “objective” evidence in order to satisfy its burden of proof. In so doing it has incorrectly claimed that “Plaintiffs’ subjective belief as to whether the Malpractice Lawsuit might have been filed against them is not controlling.” See StarStone Memo of Law in Opposition at p.4. While it is true that a myopic subjective belief that a suit will not be filed against it is insufficient when measured against information or evidence that would suggest to a reasonable attorney that a claim may be made against it, at bar no such information or evidence existed at the time that either the 2016 or 2018 policies were being procured by Plaintiffs. As a result, StarStone’s stilted reading of the caselaw as to its burden of proof comes crumbling down when the undisputed facts “known” to Plaintiffs in both 2016 and 2018 are examined. As opposed to the facts of the various cases cited by StarStone in support of its position, at bar Plaintiffs were not in possession of any correspondence or adverse findings (or even a motion that may lead to an adverse finding) that would trigger Plaintiffs reporting obligations. Consequently, while the Memorandum and Order issued in the underlying action suggests that Caminero should not have been surprised that after years of non-activity her case could be subject to dismissal upon an application by the MTA for such relief, it is undisputed that up until December 19, 2018, the date that MTA filed such a motion, its counsel had never suggested that it was adverse to placing the FELA Action back on the calendar 4 4 of 15 FILED: NASSAU COUNTY CLERK 12/23/2022 12:37 PM INDEX NO. 607655/2021 NYSCEF DOC. NO. 142 RECEIVED NYSCEF: 12/23/2022 in an attempt to resolve the claim. Furthermore, while the Memorandum and Order focused on Caminero’s claims against the MTA (which was the only relevant inquiry), it did not and could not have addressed whether the blame for such delays were based upon counsel’s conduct or lack of attentiveness or rather, were the result of her own inactions in failing to cooperate with her counsel. Accordingly, since there were no communications exchanged or orders issued which, on their face, would have led the Plaintiffs herein to believe that there existed facts or circumstances which may give rise to a claim against them the Plaintiffs subjective knowledge of same would have been the only basis to deny Plaintiffs’ demand for defense and indemnification coverage. Consequently, StarStone’s reliance on the record “facts” as set forth in the Memorandum and Order is misplaced. Separately and independently, as to Plaintiffs Law Offices of Michael Flynn, Esq., PLLC and Michael Flynn, Esq., Defendant’s claim and defense that it does not owe these Plaintiffs coverage because they failed to meet the definition of a “Predecessor Firm” as defined in the Subject Policy, is neither supported by the law or the relevant facts. The Subject Policy merely requires that the “successor in interest” has acquired a majority of the “assets and liabilities” of the predecessor firm. The corporate documents, combined with the affidavits of Michael Flynn and Marc Wietzke, evidence that Flynn & Wietzke P.C., is in fact the majority successor in interest of Michael Flynn Esq., PLLC. The status of these entities as “insureds” under the “Predecessor Firm” provision is further evidenced by the fact that both the Subject Policy and the 2016 Policy provide a retroactive coverage date for all insureds back to February 2, 1992. Given the undisputed corporate history, there would be no basis to provide a retroactive date back to 1992 if no prior entity qualified for “Predecessor Firm” coverage. Consequently, the only conclusion that this Court can reach is that Starstone’s failure to provide Plaintiffs Law Offices of Michael Flynn., Esq., PLLC and Michael Flynn Esq. defense and indemnity coverage based upon its conclusion that they do not qualify as “insureds” under the Subject Policy is simply wrong. Accordingly, this Court should grant 5 5 of 15 FILED: NASSAU COUNTY CLERK 12/23/2022 12:37 PM INDEX NO. 607655/2021 NYSCEF DOC. NO. 142 RECEIVED NYSCEF: 12/23/2022 Plaintiffs’ motion for summary judgment in its entirety and grant such further and different relief as the Court deems just and proper. ARGUMENT POINT I DEFENDANT HAS FAILED TO SATISFY BOTH THEOBJECTIVE AND SUBJECTIVE PRONGS IN ORDER TO VICIATE COVERAGE OF ITS INSUREDS In its opposition papers, StarStone maintains that although Plaintiffs may have not expected a claim to be made against them in connection with their representation of the Caminero in the FELA Action, they were aware of “relevant facts”, including the facts that there was a delay in reactivating the case, that Plaintiffs did not provide a written update to the Court while the FELA Action remained on the suspense calendar, and that the FELA Action was administratively closed. It is these “facts” that they rely upon to deny coverage to Plaintiffs herein. However, a review of the cases StarStone cites, as detailed below, all reflect the fact that the “relevant facts” required to establish a prior knowledge exclusion applies, must be much more direct so as to make it clear to the attorney (or other insured) that issue has been taken with the insured’s performance or a negative outcome has been received, thus exposing the insured to a potential claim against them. Defendant’s reliance on Colliers Lanard & Axilbund v. Lloyds of London, 458 F.3d 231, 240 (3d Cir. 2006) to suggest some type of dichotomy between knowledge of an expected claim versus knowledge of “relevant facts” is unavailing at bar. In Colliers, a real estate broker was retained to prepare leases for several commercial units for its landlord-client. In preparing the leases, the broker incorrectly input the operating expense on the lease. This error was not discovered until after the parties entered into the leases prior to July of 2000. Once discovered, the broker issued two letters to the tenants, on July 24, 2000, and August 25, 2000, attempting to remedy the errors. This attempt was rejected by the tenants and the tenants directed the broker to their attorney for further discussion. Subsequently thereafter, on August 29, 2000, 6 6 of 15 FILED: NASSAU COUNTY CLERK 12/23/2022 12:37 PM INDEX NO. 607655/2021 NYSCEF DOC. NO. 142 RECEIVED NYSCEF: 12/23/2022 the broker applied for an errors and omission insurance application but did not disclose any potential claims from prior acts or errors. The policy was then issued on December 18, 2000. Less than a month later the landlord client sent a letter to the broker stating it would seek legal remedies for the errors made in the lease agreements. When the complaint was served and a claim was made, the broker’s insurer denied coverage, relying upon the “prior knowledge” exclusion. See Colliers supra at 234. In denying coverage to the insured, the Court relied upon the above “relevant facts” in concluding that a reasonable real estate broker, after (a) admitting to the error, (b) being rebuffed by the tenants and (c) being directed to tenants’ counsel, was in possession of sufficient information so that it could not reasonably claim that it “subjectively” was not aware of facts or circumstance that could give rise to a claim. Colliers emphasis of these types of “relevant facts” in relationship to the “subjective knowledge” prong is consistent with New York law. See B Five Studio LLP v. Great Am. Ins. Co., 414 F. Supp. 3d 337, 340 (E.D.N.Y. 2019) In B Five Studio LLP, a Condominium Association hired B Five to provide design services to a condo project. The COA provided a demand letter on or before May 9, 2016 to B Five partners claiming design defects. On or before May 9, 2016, B Five applied for insurance and did not report the demand letter at the time of the application. A policy was issued thereafter. On August 18, 2016, B Five reported a claim to its insurer in connection with the COA project and the carrier denied coverage on grounds of prior knowledge exclusion. The COA commenced suit against B Five alleging a defective design of the project. In holding that coverage did not exist, based upon the prior knowledge exclusion, the District Court considered “the insured's knowledge of the relevant facts and made an objective determination of whether a reasonable person in the insured's position should have expected such facts to be the basis of a claim. In concluding that coverage was excluded, the District Court concluded that based upon its receipt of the letter, B Five was aware of relevant facts that may give rise to a claim for design defects. Thus, a reasonable person, based on the relevant facts, would have understood that its company could be implicated in a lawsuit based on the services rendered. See B Five supra at p. 341. See also 7 7 of 15 FILED: NASSAU COUNTY CLERK 12/23/2022 12:37 PM INDEX NO. 607655/2021 NYSCEF DOC. NO. 142 RECEIVED NYSCEF: 12/23/2022 American Medical Alert Corp., v. Evanstan Ins. Co., et al, Index No. 655974/2016 (Sup. Ct. N.Y. Co. May 22, 2019) aff’d American Medical Alert Corp. v. Evanston Insurance Company, 185 A.D.3d 433 (1st Dept. 2020) (insured’s admission as to its negligent conduct and knowledge of facts constituting “Wrongful Conduct” prior to the inception of the subject policy negates coverage based upon the prior knowledge exclusion) 1; Coregis Ins. Co. v. Baratta & Fenerty, Ltd., 264 F.3d 302 (3d Cir. 2001)(coverage denied when (a) underlying medical malpractice action was dismissed by the court for lack of activity of over 10 years, (b) the insured’s client expressed dissatisfaction with the handling of the case by the insured law firm and (c) the court refused to reinstate the matter--all which took place prior to the completion of the insurance application and inception of the insured’s policy); ChemTreat, Inc. v. Certain Underwriters at Lloyd's of London, 488 F.Supp.3d 343, 365 (E.D. Va. 2020)(applying New York law, explaining that the prior knowledge exclusion barred coverage because the insured knew that a pressure vessel in a boiler system at the Valley Proteins' facility had exploded and that the insured had serviced that same pressure vessel and that the insured had received two letters putting it on notice of potential claims against it---all prior to applying for coverage). In contrast, New York courts have rejected carriers attempt to escape coverage where there is no clear evidence that the insured or any reasonable insured would suspect that a claim may be filed against it. For example, in JP Morgan Sec. Inc., v. Vigilant Ins. Co., 2017 NY Slip Op 27127 (Sup. Ct. N.Y. Co. April 17, 2017), the Court noted "even if the evidence establishes as a matter of law that the insured has formed a subjective belief that a suit may ensue based upon some . . . misconduct, that does not alone establish the existence of objective facts which would support the conclusion of a reasonable professional that the insured will be subjected to professional liability claims". Id. at. 12. The insurers did not point to any evidence that any of the insured’s officers had knowledge that its clearing brokers were facilitating 1 A copy of the Motion Court’s decision, setting forth the relevant facts review by the Appellate Division, is attached to this Memorandum of Law. 8 8 of 15 FILED: NASSAU COUNTY CLERK 12/23/2022 12:37 PM INDEX NO. 607655/2021 NYSCEF DOC. NO. 142 RECEIVED NYSCEF: 12/23/2022 deceptive market timing and late trading prior to the effective date of coverage and could not prove a reasonable basis to foresee a claim based upon this conduct. The First Department also found that an SEC Order regarding the settlement of violations of securities laws could not be used to evidence prior knowledge, as the order did not explicitly state that the insured admitted liability and there was no adjudication of any wrongdoing on the part of the insured. In Cushman & Wakefield Inc. v. Illinois National Insurance Company, et al., 2018 U.S. Dist. LEXIS 67523 (N.D. Ill. 2018), the insured, a real estate related service company, was sued by its clients for real estate appraisals made by the insured related to loans which defaulted and resulted into lawsuits against the insured by certain property owners and shareholders for alleged misleading appraisal-related errors. In finding that the carrier failed to demonstrate that the prior knowledge exclusion precluded coverage for the underlying claims, the Court found: Illinois National argues that Cushman appraisers knew as far back as 2006 that issuing TNV appraisals was inherently misleading and might result in claims of professional malpractice or misfeasance, but it submits no persuasive evidence to substantiate its assertion. . . . Illinois National also contends that Cushman appraisers began taking issue with conducting TNV appraisals as far back as 2006, pointing to an affidavit by [appraiser Michael] Miller. . . . True, appraisers may have had concerns, but this does not mean they knew issuing TNV appraisals was inherently misleading, nor that a reasonable person with knowledge of the facts surrounding these appraisals might expect such activity to be the basis of a claim. The court added: Indeed, ‘mere knowledge of “some consequences” of an act is inconsequential, which, standing alone, would not provide a reasonable basis [for] the insured to believe that it had committed a wrongful act that foreseeably will result in a claim.’ . . . Under these facts, the Prior Knowledge Exclusion does not bar coverage for the Underlying Claims. See Cushman & Wakefield Inc, supra at 13-14; see also United Nat. Ins. Co. v. Granoff, Walker & Forlenza, P.C., 598 F.Supp.2d 540 (2009)(clients did not indicate to any member of the law firm that they planned to file a legal malpractice action and the client continued to use law firm and the alleged failure did not consist of complying with the statute of limitations, evidence supporting attorney neglect, criticism 9 9 of 15 FILED: NASSAU COUNTY CLERK 12/23/2022 12:37 PM INDEX NO. 607655/2021 NYSCEF DOC. NO. 142 RECEIVED NYSCEF: 12/23/2022 by the court or disciplinary proceeding, or explicit threats of litigation that would trigger the prior knowledge exclusion.) As reflected above, the “relevant facts” needed to be established in order for StarStone to satisfy any subjective inquiry here is substantial, wherein it must rise to the level of an express threat of litigation, or an admission that litigation is likely as a result of an error or omission. Colliers supra;B Five supra. Here, StarStone has adduced no such evidence. Rather, it singularly cites to the Memorandum and Order which at best chronicles a lack of court activity as it relates to the FELA Action, that the case was administratively closed and that the Plaintiffs did not provide a written update to the Court. However, none of these “facts” come close to the nature of the facts identified above that would trigger an insured to give notice to its carrier. At bar, both prior to the inception of the 2016 policy and prior to the submission of the 2018 application, there were no demand letters, threats of litigation or even threats of filing a motion to dismiss for failure to prosecute in connection with the FELA Action. In fact, counsel for the parties were discussing settlement during these relevant time periods. See Marc Wietzke’s Affidavit at ¶¶ 23-24. It is precisely because StarStone cannot point to any objective or publicly available evidence to satisfy the subjective knowledge requirement that its only legitimate basis upon which it could have ever denied coverage herein was if it was able to determine that Plaintiffs had knowledge or information, based upon the statements of others, that would put them on notice that they could have anticipated a potential claim. Consequently, StarStone’s failure to carry out an investigation so as to attempt to uncover any such evidence, if any existed is telling. StarStone argues that Plaintiffs have failed to cite to one single case authority that requires StarStone to investigate Plaintiffs’ subjective knowledge at the time they filed their application of insurance in 2016 and in 2018. Indeed, StarStone does not have an “obligation” to investigate the Plaintiffs’ subjective knowledge in general. However, in order for StarStone to deny Plaintiffs’ claim for coverage and indemnity, it needed to perform an investigation to determine the “relevant facts” to support its proposition 10 10 of 15 FILED: NASSAU COUNTY CLERK 12/23/2022 12:37 PM INDEX NO. 607655/2021 NYSCEF DOC. NO. 142 RECEIVED NYSCEF: 12/23/2022 for denial, which is in essence, those facts known to Plaintiffs, in connection with the FELA Action at the time they submitted its application of insurance in 2016 and 2018. Those facts include communications with their client as well as MTA’s counsel, none of which is reflected in the Memorandum and Order. StarStone did not conduct any investigation to determine those “relevant facts” and on this record, it was incumbent on them to do so in order to justify their denial of coverage herein. One can only surmise that the only reason such an investigation was not carried out was because it did not want to be burdened with supplying Plaintiffs with a defense while it carried out its investigation. Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252 F.3d 608, 620-23 (2d Cir. 2001) Schlather, Stumbar, Parks & Salk, LLP, et al. v. One Beacon Ins. Co., No. 5:10-cv-0167, 2011 U.S. Dist. LEXIS 147931 (N.D.N.Y. Dec. 22, 2011)( where the allegation in the underlying complaint give rise to claims that are potentially covered and it cannot be determined “with certainty” based on those allegations that the prior knowledge exclusion is applicable, it is not up to the insurer to deny the insured defense coverage until the insurer can establish that the prior knowledge exclusion bars coverage). This tactical strategy however cannot insulate StarStone from liability. Defendant has also failed to satisfy the objective prong of the test in order to deny coverage herein. Just like the facts set forth in JP Morgan, where the SEC Order was not indicative of the insured admission or liability, the “facts” laid out in the Memorandum and Order was not indicative of fault by Plaintiffs herein wherein in 2016 or 2018 they would have had knowledge of facts or circumstances giving rise to such a claim. 2 Additionally, like in Cushman and Wakefield, while there was no written update to the Court in May of 2005 and the case was administratively closed in April of 2006, ‘mere knowledge of “some consequences” of an act is inconsequential, especially since those facts were not the “relevant facts” and does not rise to the level to satisfy any objective inquiry. In fact, StarStone’s reliance on the “administrative closing” of the case is negated by the fact that the administratively closing of a case is purely for 2 In contrast, when the Court issued the Memorandum and Order on or about August 2, 2019, StarStone acknowledged Plaintiffs’ notice of a potential claim on or about August 27, 2019. See Marc Wietzke’s Affidavit at ¶ 33 and Ex. V. 11 11 of 15 FILED: NASSAU COUNTY CLERK 12/23/2022 12:37 PM INDEX NO. 607655/2021 NYSCEF DOC. NO. 142 RECEIVED NYSCEF: 12/23/2022 administratively/statistical purposes and not reflective of any wrongdoing of Plaintiffs. Bernardino v. Barnes & Noble Booksellers, Inc., 763 F. App'x 101, 103 (2d Cir. 2019) (there is “no jurisdictional significance to [a] docket entry marking [a] case as ‘closed,’ which ... was made for administrative or statistical convenience.”); Abreu v. Thomas, No. 17-CV-01312, 2019 WL 11157245, at *1 (N.D.N.Y. July 19, 2019) (“Administrative closure is a docket management device which allows the removal of cases from the court's docket in appropriate situations ... The effect of an administrative closure is the same as a stay” (internal citations and quotation marks omitted). POINT II PLAINTIFFS MICHAEL FLYNN ESQ AND MICHAEL FLYNN ESQ PLLC ARE COVERED UNDER THE SUBJECT POLICY AS “PREDECESSOR FIRMS” AND ARE THEREFORE COVERED UNDER THE SUBJECT POLICY In arguing against a finding of “predecessor firm” coverage, Defendant argues that Plaintiffs (a) provided “self-serving affidavits” regarding the relationship of the entity plaintiffs, (b) that the corporate documents do no support the proposition that Plaintiff Michael Flynn Esq is a predecessor firm of Plaintiff Flynn & Wietzke and that (c) because Flynn and Wietzke is a newly formed corporation it cannot ipso facto be a majority successor in interest to the Michael Flynn, Esq., PLLC or Michael Flynn, P.C. StarStone is wrong on all counts. The relevant documents provided by Plaintiffs reflect the corporate history of the relevant entities, together with the various name changes of the successor firms and documentation indicating percentage of ownership interest support the findings that Plaintiff Michael Flynn, Esq., PLLC is a predecessor firm under the policy. The Law Offices of Michael Flynn P.C. hired Marc Wietzke as an associate attorney who then became a partner of the Law Offices of Michael Flynn, P.C. in 2009. This resulted in the creation of a partnership agreement whereby Marc Wietzke owned 49% of the shares and Michael Flynn owned the remaining 51% of the shares of that PC. See Affidavit of Michael Flynn at ¶ 4. Flynn & Wietzke P.C., was subsequently created in 2012 after Mr. Flynn retired on December 31, 2011. There is no factual dispute, 12 12 of 15 FILED: NASSAU COUNTY CLERK 12/23/2022 12:37 PM INDEX NO. 607655/2021 NYSCEF DOC. NO. 142 RECEIVED NYSCEF: 12/23/2022 and the documentary evidence clearly establishes that Flynn & Wietzke P.C. became the sole successor in interest of the assets, liabilities, cases and matters of the Law Offices of Michael Flynn P.C. See Affidavit of Michael Flynn at ¶ 5, Affidavit of Marc Wietzke at ¶ 4 and the documents annexed thereto. It is therefore undisputed that the Law Offices of Michael Flynn Esq., PLLC falls within the definition of a "Predecessor Firm” thereby affording coverage for Michael Flynn and Law Offices of Michael Flynn Esq., PLLC. While the Subject Policy explicitly provides for “Predecessor Firm” coverage when the named insured is the majority successor of the “assets and liabilities” of the predecessor firm, Starstone contends that because Flynn & Wietzke P.C., was a “newly formed corporation” that subsumed an entity named Law Offices of Michael Flynn P.C., it is not a majority successor in interest of Michael Flynn Esq PLLC. Such a statement defies logic and is not consistent with the definition of “Predecessor Firm” as provided in the Subject Policy. As explained by Michael Flynn, when deposed, Michael Flynn PLLC had a name change in August 25, 2005 to “Michael Flynn, Esq, PLLC” and then the next day, August 26, 2005, the Law Offices of Michael Flynn P.C., was created and subsumed all the assets and liabilities of Michael Flynn Esq, PLLC. See Exhibit J, at pp. 17-23. The transition from Michael Flynn Esq, PLLC, to Michael Flynn P.C., did not involve any changes in the business. Mr. Flynn testified that he remained in charge just as before the name change/entity formation and the transition was merely a name change. Mr. Flynn further testified that the Law Offices of Michael Flynn, P.C., subsumed the same cases, and same or similar business names prior and after the name change. The affidavits of the Plaintiffs expound on the reasoning as to the entity name changes and what occurred to the assets and liabilities of the firm. There is no inconsistency between the corporate documents and the testimony and affidavits of the Plaintiffs. Finally, if StarStone’s hyper technical interpretation of this policy term is accurate, then it provided the insureds with, and provided them illusory coverage with respect to coverage with a retroactive date to February 2, 1992, as there would be no “insured” entity doing business at such an earlier time period. As the courts will not give effect to the interpretations of insurance policy language that would render coverage 13 13 of 15 FILED: NASSAU COUNTY CLERK 12/23/2022 12:37 PM INDEX NO. 607655/2021 NYSCEF DOC. NO. 142 RECEIVED NYSCEF: 12/23/2022 illusory, 7 COUCH ON INS. § 101:20 citing Point of Rocks Ranch, L.L.C. v. Sun Valley Title Ins. Co., 143 Idaho 411, 146 P.3d 677 (2006), Starstone’s interpretation of this coverage must be rejected. "[E]exclusions must be construed in favor of the insured if doing otherwise would render the coverage illusory." See Structural Processing Corp. v. The Hartford Steam Boiler Inspection & Ins. Co., 23 Misc. 3d 131(A), 885 N.Y.S.2d 713 (App. Term 2009) (citing ThomasJ. Lipton, Inc. v. Liberty Mut. Ins. Co., 34 N.Y.2d 356, 361 (1974)). CONCLUSION For the reasons set forth above, and in Plaintiffs initial moving papers, Plaintiffs respectfully requests that this Court to grant Plaintiffs’ motion for summary judgment in its entirety and award Plaintiffs such further and different relief as the Court deems just and proper. Dated: Rye Brook, New York December 23, 2022 WEG AND MYERS, P.C., /s/ Joshua L. Mallin_____________ Joshua L. Mallin, Esq. Lisa M. Singh, Esq. Attorneys for Plaintiffs 800 Westchester Ave, N-513 Rye Brook, New York 10573 14 14 of 15 FILED: NASSAU COUNTY CLERK 12/23/2022 12:37 PM INDEX NO. 607655/2021 NYSCEF DOC. NO. 142 RECEIVED NYSCEF: 12/23/2022 ATTORNEY CERTIFICATION In accordance with Rule 17 of the Commercial Division Rules, Joshua L. Mallin, Esq., an attorney duly admitted to practice in the Courts of New York, hereby certifies that the word count of this Reply Memorandum of Law in Further Support of Plaintiffs’ Motion for Summary Judgement contains 4036 words. Dated: December 23, 2022 Rye Brook, New York WEG AND MYERS, P.C. Attorneys for Plaintiffs By: /s/_ Joshua L. Mallin________ Joshua L. Mallin, Esq. 15 15 of 15