     06-4738-cv, 06-4741-cv
     Fid. & Guaranty v. Jasam Realty Corp.



1                         UNITED STATES COURT OF APPEALS

2                             FOR THE SECOND CIRCUIT

3                                August Term, 2007

4    (Argued: February 27, 2008              Decided: August 26, 2008)
5                                            Errata Filed: September 30, 2008)
6
7                      Docket Nos. 06-4738-cv, 06-4741-cv

8                    -------------------------------------

9           FIDELITY AND GUARANTY INSURANCE UNDERWRITERS, INC.,

10                              Plaintiff-Appellee,

11                                      - v. -


12             JASAM REALTY CORP. and CROTONA PROPERTIES, INC.,

13                   Defendants-Cross-Claimants-Appellants,

14                SURRE, GOLDBERG & HENRY ASSOCIATES, INC.,

15                    Defendant-Cross-Defendant-Appellant,

16                     JOSE RODRIGUEZ and ALICE RODRIGUEZ,

17                            Defendants-Appellants.

18                   -------------------------------------

19   Before:     CABRANES, POOLER, and SACK, Circuit Judges.

20               Appeal from a judgment of the United States District

21   Court for the Eastern District of New York (Leonard D. Wexler,

22   Judge), following a jury trial, declaring, inter alia: 1) that

23   plaintiff insurer has no duty to defend or indemnify the

24   defendant insureds in a personal injury lawsuit because the jury

25   found that the insureds had made material misrepresentations or

26   fraudulently concealed facts in connection with their requests
1    for insurance coverage; and 2) that defendant broker was not

2    liable to the insureds for failing to procure the insurance in

3    question.    The district court also awarded costs to plaintiff

4    insurer.    Because the district court's special verdict form

5    permitted the jury to consider incorrect dates on which the

6    veracity of the alleged misrepresentations could be judged and

7    the court did not correct the error when invited by the jury to

8    clarify the matter, the judgment is:

9                Vacated and remanded.

10                              NORMAN KAPLAN, Great Neck, NY, for
11                              Defendants-Cross-Claimants-Appellants.

12                              HOWARD COHEN, Saretsky Katz Dranoff &
13                              Glass LLP (Patrick J. Dellay, of
14                              counsel), New York, NY, for
15                              Defendant-Cross-Defendant-Appellant.

16                              LORIN DONNELLY, Milber Makris Plousadis
17                              & Seiden LLP, Woodbury, NY, for
18                              Defendants-Appellants.

19                              MEGAN VESELY, DLA Piper US LLP (Robin C.
20                              Tarr, Joseph G. Finnerty, Jr., of
21                              counsel), New York, NY, for Plaintiff-
22                              Appellee.

23   SACK, Circuit Judge:

24               This is an appeal from a judgment of the United States

25   District Court for the Eastern District of New York (Leonard D.

26   Wexler, Judge), following a jury trial, declaring, among other

27   things, that plaintiff-appellee Fidelity and Guaranty Insurance

28   Underwriters, Inc., ("Fidelity") has no duty to defend or

29   indemnify defendants-appellants Jasam Realty Corp. ("Jasam") and

30   Crotona Properties Inc. ("Crotona") in connection with a personal


                                         2
1    injury lawsuit that had been brought against Jasam and Crotona,

2    and awarding Fidelity its costs arising out of its provision of a

3    legal defense in that lawsuit.    Defendant-appellant Surre,

4    Goldberg & Henry Associates, Inc. ("Surre") served as the

5    insurance broker in connection with the issuance of the policy in

6    question.    The district court's judgment was based on the jury's

7    finding that both Jasam and Crotona had made material

8    misrepresentations or fraudulently concealed information in

9    connection with their requests for insurance coverage by

10   Fidelity.    On appeal, the defendants argue that they are entitled

11   to judgment in their favor as a matter of law and, in the

12   alternative, that the district court erred in formulating its

13   special verdict form and committed various other errors in the

14   course of conducting the trial.    We agree with the latter

15   argument, and therefore vacate the judgment and remand.

16                                BACKGROUND

17               "When an appeal comes to us after a jury verdict, we

18   view the facts of the case in the light most favorable to the

19   prevailing party."    Kosmynka v. Polaris Indus., Inc., 462 F.3d

20   74, 77 (2d Cir. 2006).    We recite the facts underlying this

21   appeal in accordance with that principle.

22               On July 17, 1997, Fidelity issued a general commercial

23   liability insurance policy to Jasam.      The policy was renewed

24   annually until Fidelity cancelled it on April 26, 2001.      Jasam

25   had been incorporated some two weeks before the policy issued, on



                                       3
1    July 2, 1997, for the purpose of purchasing and then operating a

2    shopping center.1

3               On May 25, 1999, Jasam's principal, Jacob Rad,

4    incorporated Crotona as a vehicle for purchasing land in the

5    Bronx.    Shortly thereafter, in June or July 1999, Crotona

6    purchased the land.    At that time, the land was vacant.

7               On August 4, 1999, Rad sent a telecopy to Surre,

8    Jasam's insurance broker, requesting that properties owned by

9    Crotona be added to the coverage provided by Jasam's liability

10   policy.   Surre then completed a "binder" form on its own

11   letterhead, dated August 5, 1999, that referenced the insurance

12   policy Jasam had held with Fidelity since 1997.    It purported to

13   add to that policy the Crotona properties as well as the Crotona

14   entity itself as an additional named insured.    It listed an

15   effective date of August 5, 1999, but no expiration date.     It

16   stated:

17              The Company [Fidelity] accepting this risk
18              acknowledges itself bound by terms,
19              conditions and limitations of the
20              policy . . . of the insurance in current use
21              by the Company for the kind . . . of
22              insurance specifically ordered on this Binder
23              from the effective date and hour specified
24              therein . . . . Unless previously cancelled
25              as hereinafter provided, this Binder shall
26              terminate upon acceptance by the insured of a
27              policy . . . as ordered herein. This Binder
28              may be cancelled at any time by the Insured
29              or by the broker or agent who placed the risk


          1
            Jasam initially procured this policy from Fidelity through
     KGK Agency Inc., an insurance broker. But in July 1998, Jasam
     requested that Fidelity recognize Surre rather than KGK as its
     broker of record with respect to the Fidelity insurance policies
     that it held.
                                     4
 1               by notice to the Company . . . . This Binder
 2               may be cancelled by the Company by written
 3               notice to the Insured and to the agent or
 4               broker who placed the risk stating when, not
 5               before 12:00 o'clock noon of the fifth
 6               business day following the date of mailing,
 7               such cancellation shall be effective. A
 8               premium charge at the rates and in compliance
 9               with the rules . . . in use by the Company
10               when this Binder becomes effective will be
11               made for the time this Binder is in effect if
12               no policy of insurance in place hereof is
13               issued and accepted by the Insured.

14   Binder, Plaintiff's Trial Exhibit 10, at 1.2   Fidelity neither

15   disputes nor concedes the authenticity of this document or the

16   date, if any, on which it was delivered to Jasam.

17               The relationship between Fidelity and Surre was

18   established, in part, by an "Agency Agreement" to which both

19   companies were parties, a version of which was executed on April

20   27, 1998.    Addenda to the agreement were executed at later dates,

21   all of which were prior to the date of the binder at issue in

22   this lawsuit.    The Agency Agreement stated, among other things,

23   that Surre had the authority, on behalf of Fidelity and related

24   companies:

25               1.   To accept applications for insurance; to
26                    bind the Company on coverages; and to
27                    issue, endorse, provide certificates of
28                    insurance and cancel contracts of
29                    insurance; all subject to the letter of
30                    authority and subject to the
31                    underwriting rules and requirements of
32                    the Company[; and]

33               2.   To pay claims within the specific
34                    authority granted by the Company.


          2
             References to "Exhibit" in this opinion refer to exhibits
     introduced as evidence during the district court's proceedings
     held May 30, 2006, through June 1, 2006.
                                     5
1    Agency Agreement, Plaintiff's Trial Exhibit 21, at 1.     The

2    boundaries of this authority were described in an attached

3    "General Letter of Authority," in which Fidelity granted Surre

4    "[a]uthority to bind coverage . . . on acceptable risks for

5    coverages filed and written by the company subject to

6    [Fidelity's] normal rules, guidelines and underwriting

7    standards," id. at 6, but, with respect to commercial liability

8    insurance of the sort held by Jasam, limited this authority to

9    incurring a maximum risk of $1,000,000.    Binders issued by Surre

10   were to conform to certain requirements:

11               Binders must refer to the standard applicable
12               coverage form being bound, the term of
13               binder, the limits of liability, the name and
14               address of insured, the property covered and
15               the location of risk. The binder must be
16               received by the company in writing within
17               three (3) working days of the inception date
18               of said coverage. No back dating of coverage
19               is allowed. Binders are not to exceed 30
20               days in length. If coverage is needed for a
21               longer period of time, the policy should be
22               issued.

23   Id. at 7.

24               The Agency Agreement also imposed a variety of related

25   responsibilities on Surre:

26               [Surre] agrees . . . to promptly report all
27               claims and deliver all relevant claims
28               information involving coverages placed with
29               the Company . . . ; to provide reliable
30               underwriting information; and to submit
31               written binders to the Company within three
32               working days of coverage inception.

33   Id. at 1.



                                       6
1                The parties dispute when Surre notified Fidelity of the

2    binder it issued to Jasam for Crotona.    Surre asserts that it did

3    so on August 5, 1999, immediately after receiving Jasam's

4    request, and that it did so again on December 14, 1999, and once

5    again on August 22, 2000.    Fidelity maintains that it received no

6    notice of the binder nor any request for insurance related to

7    Crotona until the latter date, August 22, 2000.

8                In late 1999, several months after Crotona purchased

9    the properties in question, and after August 5, 1999, the date of

10   the "binder" form, Jasam began building residences on the Crotona

11   properties.    On January 10, 2000, defendant Jose Rodriguez was

12   injured while working on the construction site.    On July 5, 2000,

13   Rodriguez filed a lawsuit against Jasam related to this injury.

14   On August 15, 2000, Jasam notified Surre of Rodriguez's action.

15   Eight days later, on August 23, 2000, Surre forwarded Jasam's

16   claim to Fidelity, which Fidelity received.

17               Fidelity did not itself issue an endorsement3 for

18   Crotona or the Crotona properties until August 22, 2000, well

19   after Rodriguez was injured.    At Surre's request, however,

20   Fidelity back-dated this coverage to August 5, 1999, the same day

21   that Surre stated that it received Jasam's request for insurance

22   for Crotona and the effective date shown on the Surre binder

23   form.




             3
            An "endorsement" is "[a]n amendment to an insurance
     policy; a rider." Black's Law Dictionary 569 (8th ed. 2004).
                                     7
1              Some seven months later, in April 2001, Fidelity sent a

2    "Notice of Cancellation of Insurance," notifying Surre that it

3    was cancelling Jasam's general liability insurance policy based

4    on "MATERIAL MISREPRESENTATION OF EXPOSURES."     Cancellation

5    Notice, Plaintiff's Trial Exhibit 38, at 2.    Fidelity explained

6    that the policy covered only vacant land and not "construction

7    sites for building new dwellings."    Id. at 1.   The cancellation

8    was to be effective April 26, 2001.

9              District Court Proceedings

10             In December 2001, Fidelity filed a complaint in the

11   district court that, as amended in October 2002, sought: 1) a

12   declaration that it owed "no duty to defend or indemnify [Jasam

13   or Crotona] in the underlying action" brought by Rodriguez; 2) a

14   judgment rescinding Jasam's insurance policy; and 3) an award of

15   damages for the cost of defending Jasam and Crotona in the

16   underlying action.   In the alternative, Fidelity sought

17   indemnification from Surre.

18             The district court conducted a jury trial that

19   concluded on June 2, 2006.4   The jury answered a special verdict

20   form provided by the court that included the following

21   interrogatories: 1) "Did Jasam make any material

22   misrepresentation in connection with the request for coverage of

23   the Crotona Properties?"; and 2) "Did Jasam engage in fraudulent


          4
             This case had previously been tried before a jury in
     2003. On appeal, the district court's judgment following that
     trial was vacated based on ambiguity in the court's special
     verdict form. Fidelity and Guar. Ins. Underwriters, Inc. v.
     Rodriguez, 141 F. App'x 11 (2d Cir. 2005) (summary order).
                                     8
1    concealment in connection with the request for coverage of the

2    Crotona Properties?"   Analogous questions were also posed with

3    respect to Crotona.

4              While the jury was deliberating, it submitted a written

5    query to the district court:   "Having problem with 1st question.

6    If we consider 8/5/99 as date to consider misrepresentation or

7    8/22/2000, answers to questions will possibly differ.    Which date

8    should we consider when answering?"    The district court

9    responded:   "I will not help you much.   Consider both dates.

10   Consider August 5, [19]99, consider [August] 22, 2000, consider

11   one date or both.   It's up to you."

12             After completing its deliberations, the jury answered

13   "YES" to both the material misrepresentation and fraudulent

14   concealment questions, and as to both Jasam and Crotona.    On the

15   special verdict form, the jury indicated that the following

16   statements were material misrepresentations: 1) "misstatement as

17   to the true nature of Jasam's business"; and 2) "misstatement as

18   to the use of the land to be insured."    The jury also determined

19   that the information that had been fraudulently concealed by both

20   Jasam and Crotona included all of the options included in the

21   special verdict form: 1) "failure to advise of the true nature of

22   Jasam's [or Crotona's] business"; 2) "failure to advise that the

23   land to be insured was a construction site"; and 3) "failure to

24   advise Fidelity about the Rodrigue[z] lawsuit."

25             Separately, the jury indicated on the special verdict

26   form that: 1) "Surre breach[ed] its contract with Fidelity"; 2)

                                      9
1    "Surre [was not] negligent in its dealings with Jasam with

2    respect to the Crotona properties"; and 3) "Surre [was not]

3    negligent in its dealings with Crotona with respect to the

4    Crotona properties."

5                Based on the jury's findings, the district court issued

6    a judgment declaring that Fidelity had properly cancelled the

7    insurance policies at issue, that Fidelity had no duty to defend

8    or indemnify Jasam or Crotona with respect to the Rodriguez

9    lawsuit, and that Jasam and Crotona were liable to Fidelity for

10   the stipulated costs it had already expended in the Rodriguez

11   litigation.      The court also declared that Surre had no liability

12   to Jasam or Crotona for the resulting absence of insurance

13   coverage.

14               The defendants appeal.

15                                  DISCUSSION

16               I.     Special Verdict Form

17               The defendants argue that the district court abused its

18   discretion by, among other things, failing to specify in its

19   special verdict form the correct date on which the veracity of

20   Jasam's statements was to be judged.        We agree that the district

21   court erred in this regard and that we must therefore vacate the

22   judgment.

23               The formulation of special verdict questions
24               rests in the discretion of the trial judge,
25               and therefore our review is confined to
26               inquiring whether the trial court's
27               submission of the issues in the form of these
28               questions constituted an abuse of discretion.
29               We will reverse a judgment entered upon
30               answers to questions which mislead and
                                       10
1              confuse the jury or which inaccurately frame
2              the issues to be resolved by the jury.

3    Cann v. Ford Motor Co., 658 F.2d 54, 58 (2d Cir. 1981) (citations

4    omitted), cert. denied, 456 U.S. 960 (1982).   In other words,

5    "[a] new trial is warranted if, taken as a whole, the jury

6    instructions gave a misleading impression or inadequate

7    understanding of the law."   BAII Banking Corp. v. UPG, Inc., 985

8    F.2d 685, 696 (2d Cir. 1993) (citation and internal quotation

9    marks omitted).   We therefore begin our analysis with the law

10   relevant to Fidelity's claims of misrepresentation and fraudulent

11   concealment.

12             Under New York law,5 an insurer may rescind an

13   insurance policy if it was issued in reliance on material

14   misrepresentations.    Republic Ins. Co. v. Masters, Mates & Pilots

15   Pension Plan, 77 F.3d 48, 52 (2d Cir. 1996); Process Plants Corp.

16   v. Beneficial Nat'l Life Ins. Co., 53 A.D.2d 214, 216, 385

17   N.Y.S.2d 308, 310 (1st Dep't 1976) (per curiam), aff'd on the

18   opinion below, 42 N.Y.2d 928, 366 N.E.2d 1361, 397 N.Y.S.2d 1007

19   (1977); see also N.Y. Ins. Law § 3105.   A misrepresentation in an

20   application for insurance is defined as a false "statement as to

21   past or present fact, made to the insurer by, or by the authority

22   of, the applicant for insurance or the prospective insured, at or

23   before the making of the insurance contract as an inducement to

24   the making thereof."   N.Y. Ins. Law § 3105(a).   A policy may also

25   be rescinded by the insurer "if the insured fraudulently


          5
            The parties do not dispute that New York substantive law
     applies to the legal issues raised by this lawsuit.
                                     11
1    concealed from or misrepresented a material fact to the insurer

2    at the time the policy was issued."   City of Johnstown v. Bankers

3    Standard Ins. Co., 877 F.2d 1146, 1153 (2d Cir. 1989).

4                The special verdict form identified three facts alleged

5    by Fidelity to be material and to have been misrepresented or

6    fraudulently concealed by Jasam: 1) that the Crotona properties

7    were construction sites; 2) that Jasam was a general contractor;

8    and 3) that Rodriguez had filed a personal injury lawsuit against

9    Jasam and Crotona.   There is little question that these

10   conditions or events had all existed or occurred by July 5, 2000,

11   when the last of the three became true:   Rodriguez filed his

12   personal injury lawsuit.   Representations to the contrary after

13   that date would have been false; failure to disclose those facts

14   could have provided the basis for rescission based on fraudulent

15   concealment.   The parties do not agree, however, that any such

16   representations or concealments were made on or after July 5,

17   2000.   And the district court declined to tell the jury, either

18   in its special verdict form interrogatories or after receiving a

19   written query from the jury, what date to consider for these

20   purposes.

21               To resolve this question, we look to New York Insurance

22   Law § 3105(a), which directs us to examine statements made "by,

23   or by the authority of, the applicant for insurance" and to do so

24   as of the point in time "at or before the making of the insurance

25   contract."   Id.   Fidelity argues that the date that must be used

26   is August 22, 2000, when, it asserts, it first received notice

                                      12
1    from Surre of Jasam's request for insurance coverage for Crotona

2    and the Crotona properties, and when it issued in return the

3    endorsement for these additional risks.    That is, in Fidelity's

4    view, Surre acted "by authority of" Jasam when it requested

5    insurance coverage on August 22, 2000.    The insurance contract

6    was "made" on that date, irrespective of when Jasam may have

7    requested insurance from Surre, and irrespective of what Jasam

8    may have represented to Surre when it made that request.

9              Fidelity identifies no evidence that Jasam itself made

10   representations of any sort on August 22, 2000.    Fidelity relies

11   entirely on statements made by Surre at the time and on (1) "the

12   general rule . . . that an insurance broker is regarded as agent

13   for the insured," Riedman Agency, Inc. v. Meaott Constr. Corp.,

14   90 A.D.2d 963, 964, 456 N.Y.S.2d 553, 555 (4th Dep't 1982),

15   appeal dismissed, 58 N.Y.2d 824, and (2) the well-established

16   principle that an agent's frauds or misrepresentations are

17   imputed to the principal if made within the scope of the agent's

18   authority, see, e.g., Dyke v. Peck, 279 A.D.2d 841, 843, 719

19   N.Y.S.2d 391, 394 (3d Dep't 2001); Adler v. Helman, 169 A.D.2d

20   925, 926, 564 N.Y.S.2d 828, 830 (3d Dep't 1991).

21             In light of the Agency Agreement between Fidelity and

22   Surre, however, Fidelity's reliance on these principles is

23   misplaced.   "Although an insurance broker is generally considered

24   to be an agent of the insured, a broker will be held to have

25   acted as the insurer's agent where there is some evidence of

26   'action on the insurer's part, or facts from which a general

                                     13
1    authority to represent the insurer may be inferred.'"    Rendeiro

2    v. State-Wide Ins. Co., 8 A.D.3d 253, 253, 777 N.Y.S.2d 323, 324

3    (2d Dep't 2004) (quoting Bennion v. Allstate Ins. Co., 284 A.D.2d

4    924, 925, 727 N.Y.S.2d 222, 224 (4th Dep't 2001) (citations

5    omitted)).   The Agency Agreement explicitly authorized Surre, as

6    Fidelity's agent, to "accept applications for insurance" and "to

7    bind [Fidelity] on coverages."    Agency Agreement, Plaintiff's

8    Trial Exhibit 21, at 1.    And the policy issued by Fidelity

9    provided that "written notice by or on behalf of any claimant to

10   any of our agents in New York State . . . will be the same as

11   notice to [Fidelity]."     Fidelity Insurance Policy, Plaintiff's

12   Trial Exhibit 17, at 35.    These clear delegations of authority

13   amply establish Surre's authority to represent Fidelity in these

14   specific roles.   Aside from the common-law insured-broker

15   relationship, overridden in this respect by contract, Fidelity

16   has not identified any evidence that Surre did not possess this

17   explicitly delegated authority.    See Warnock Capital Corp. v.

18   Hermitage Ins. Co., 21 A.D.3d 1091, 1094, 803 N.Y.S.2d 606, 609

19   (2d Dep't 2005) (concluding that insured is entitled to coverage

20   based on broker-issued binder "as a matter of law [in light of]

21   evidence indicating that [insurer] and [broker]'s course of

22   conduct demonstrated that [broker] maintained apparent authority

23   to issue a binder on behalf of [insurer]").    To the extent Surre

24   acted within the scope of this agency agreement, moreover,

25   Surre's knowledge of Jasam's business, properties, and claims

26   must be imputed to Fidelity, even if that knowledge was untimely

                                       14
1    communicated by Surre to Fidelity.     See, e.g., Seward Park Hous.

2    Corp. v. Cohen, 287 A.D.2d 157, 167, 734 N.Y.S.2d 42, 50-51 (1st

3    Dep't 2001) ("The general rule is that knowledge acquired by an

4    agent acting within the scope of his agency is imputed to his

5    principal and the latter is bound by such knowledge although the

6    information is never actually communicated to it." (quoting

7    Center v. Hampton Affiliates, 66 N.Y.2d 782, 784, 488 N.E.2d 828,

8    829, 497 N.Y.S.2d 898, 899 (1985) (internal quotation marks

9    omitted)).

10               Based on the scope of Surre's authority as Fidelity's

11   agent, the only representations relevant in these circumstances

12   are those that were made by Jasam to Surre in connection with the

13   binder for coverage for Crotona and the Crotona properties.     The

14   accuracy of those representations must be evaluated at the time

15   when Surre, acting as Fidelity's agent for purposes of accepting

16   insurance applications and binding Fidelity to coverage, received

17   Jasam's request and thereafter bound Fidelity to the requested

18   coverage.     Surre's knowledge of Jasam's business and claims at

19   that time is imputed to Fidelity.     Any error or delay by Surre in

20   communicating this request to Fidelity as its principal is

21   irrelevant to our misrepresentation inquiry, even though it would

22   be relevant to Fidelity's claim that Surre breached the Agency

23   Agreement.6


          6
             We also note that with respect to Surre's authority to
     bind Fidelity to coverages, we would look to Surre's apparent
     authority and not "any secret limitations upon [its] actual
     authority which may have been imposed by [the insurer] in this
     particular instance." Cees Restaurant, Inc. v. Lobdell, 15
                                     15
1               Because there is no evidence that Jasam itself made any

2    further representations on August 22, 2000, the jury should not

3    have been permitted to attribute Jasam's earlier representations

4    to that date.    The district court's failure to specify the proper

5    date in its special verdict form, and its subsequent instruction

6    to the jury to consider Jasam's representations as of either

7    August 5, 1999, or August 22, 2000, gave a misleading impression

8    and inadequate understanding of the law and was therefore error.

9               We cannot ourselves determine, from the text of the

10   special verdict form or otherwise, whether the jury concluded

11   that Jasam had misrepresented or fraudulently concealed

12   information on August 22, 2000 -- a finding that would be

13   impermissible as a matter of law -- or on August 5, 1999.   This

14   ambiguity requires that we vacate the judgment of the district

15   court in its entirety.7

16              II.   Judgment as a Matter of Law

17              The defendants also ask us to enter judgment in their

18   favor as a matter of law, notwithstanding the jury's answers to

19   the interrogatories.   For the following reasons, we decline to do

20   so.

21   A.    Sufficiency of the Evidence




     N.Y.2d 275, 281, 206 N.E.2d 180, 184, 258 N.Y.S.2d 87, 91 (1965).
           7
             The defendants raise several other arguments related to
     the jury instructions, the exclusion of certain testimony, and
     limitations placed on the participation of Rodriguez's counsel at
     trial. We need not evaluate these arguments to resolve this
     appeal and express no view as to their merits.
                                     16
1              The defendants assert that even if the jury made (or

2    another jury were to make) a finding of material

3    misrepresentation while correctly treating August 5, 1999, as the

4    date as of which to assess Jasam's communications, they would

5    nonetheless be entitled to judgment as a matter of law.   A jury

6    verdict may be set aside as a matter of law when "a party has

7    been fully heard on an issue during a jury trial and the court

8    finds that a reasonable jury would not have a legally sufficient

9    evidentiary basis to find for the party on that issue."   Fed. R.

10   Civ. P. 50(a)(1).   This requires "such a complete absence of

11   evidence supporting the verdict that the jury's findings could

12   only have been the result of sheer surmise and conjecture,

13   or . . . such an overwhelming amount of evidence in favor of the

14   movant that reasonable and fair minded men could not arrive at a

15   verdict against him."   Song v. Ives Labs., Inc., 957 F.2d 1041,

16   1046 (2d Cir. 1992) (quoting Mattivi v. S. African Marine Corp.,

17   618 F.2d 163, 168 (2d Cir. 1980)) (internal quotation marks

18   omitted; ellipsis in original).

19             The defendants are correct that some of the jury's

20   findings could not stand -- Jasam could not, for example, have

21   fraudulently concealed the Rodriguez lawsuit, which together with

22   his injuries did not occur until 2000.   But the jury could

23   reasonably have concluded that Jasam misrepresented other facts

24   in August 1999.

25             Fidelity alleges, for example, that Jasam

26   misrepresented its intended use of the Crotona properties to

                                       17
1    Surre when it requested additional coverage.     The defendants

2    counter that there was no evidence that in August 1999 the

3    Crotona properties were not vacant or that they harbored any

4    intention at the time to perform construction on the site.      But

5    construction on the property began, in fact, shortly thereafter.

6    And Jacob Rad, Jasam's principal, concedes that he knew what kind

7    of insurance coverage was required for this construction.       There

8    is little indication that he sought the appropriate coverage when

9    the nature of the property changed to a construction site.      We

10   therefore think that there remains a question as to whether Jasam

11   made material misrepresentations of fact (or fraudulently

12   concealed facts) in connection with its request for insurance for

13   Crotona in August 1999.   Judgment as a matter of law is not

14   appropriate on this ground.

15   B.   Questions of Law

16             The defendants argue that even if we were to accept the

17   jury's finding that Jasam and Crotona had made material

18   misrepresentations in August 1999, they are, for various reasons,

19   nonetheless entitled to judgment as a matter of law in light of

20   other undisputed facts.

21             1.   1997 Application.    Jasam first contends that

22   because it is undisputed that no misrepresentations were made in

23   its initial application for insurance in 1997, neither that

24   policy, nor any renewals of that policy, nor any additional

25   endorsements to that policy, are subject to rescission.     Under

26   this view, an insurance policy along with renewal of, and

                                        18
1    endorsements to, that policy exist as a monolithic contract that

2    may be rescinded based only on initial misrepresentations and

3    only as a whole.

4                Jasam relies for this proposition on the general

5    principle that insurance policy renewals are considered

6    extensions of the initial policy -- and therefore not new

7    contracts -- if there is a provision in the insurance policy

8    requiring renewal, for which it cites 68A N.Y. Jur. 2d Insurance

9    § 850.    Because a misrepresentation under N.Y. Ins. Law § 3105 is

10   to be evaluated "at or before the making of the insurance

11   contract," or so the argument goes, the absence of a new contract

12   would negate the possibility of misrepresentation under the

13   statute.

14               Regardless of the merits of this argument, it has no

15   bearing on the rescission of the renewals or endorsements of the

16   particular insurance policy at issue in this case.    New York law

17   is clear that where an insurer has the absolute right to

18   terminate a policy on its anniversary, each renewal does indeed

19   represent a new policy.    See Moore v. Metro. Life Ins. Co., 33

20   N.Y.2d 304, 312, 307 N.E.2d 554, 557, 352 N.Y.S.2d 433, 438

21   (1973).    Although the Fidelity insurance policy at issue limits

22   the insurer's ability to cancel the policy while it is in effect,

23   it places no limit beyond a sixty-day notice period on Fidelity's

24   right not to renew.    Because Fidelity retained this right, each

25   policy must be considered separately, and any misrepresentations



                                      19
1    made in the course of obtaining a renewal of the policy may be

2    grounds for rescission.

3              Similarly, Fidelity was under no obligation to issue

4    the requested endorsement to cover Crotona and the Crotona

5    properties.   Once an endorsement is issued -- whether by Fidelity

6    itself or through an authorized agent such as Surre -- that

7    endorsement is considered together with the policy proper and the

8    application as a single instrument.   See Massachusetts Mut. Life

9    Ins. Co. v. Lord, 18 A.D.2d 69, 71, 238 N.Y.S.2d 222, 224 (1st

10   Dep't), aff'd without opinion, 13 N.Y.2d 1096, 196 N.E.2d 266,

11   246 N.Y.S.2d 630 (1963) (citing Berkshire Life Ins. Co. v.

12   Weinig, 290 N.Y. 6, 10, 47 N.E.2d 418, 421 (1943)).   As with a

13   discretionary renewal, Fidelity's acceptance (by Surre) of

14   Jasam's request for coverage of the Crotona properties created a

15   new insurance contract, and any misrepresentations made to induce

16   the making of that contract may provide grounds for rescission.8

17             Jasam's presumably truthful statements in its initial

18   application for insurance in 1997 therefore do not entitle it to

19   judgment as a matter of law.



          8
             Such a misrepresentation must, of course, be material.
     We have observed that under New York law, "nondisclosure of a
     fact concerning which the applicant has not been asked does not
     ordinarily void an insurance policy absent an intent to defraud,"
     and "an applicant is ordinarily permitted to remain silent on
     matters concerning which he is not questioned. His insurance
     policy may be voided for concealment only when he conceals
     matters material to the risk and he does so in bad faith with
     intent to deceive the insurer." First Fin. Ins. Co. v. Allstate
     Interior Demolition Corp., 193 F.3d 109, 117-18 (2d Cir. 1999)
     (citations, internal quotation marks, and alteration omitted).

                                     20
1               2.   Waiver.   Jasam also argues that Fidelity waived its

2    right to rescind the insurance policy based on material

3    misrepresentations, both by contract and by cancelling the policy

4    pursuant to the policy's terms without any reservation of its

5    right of rescission.      Although these arguments may have merit, we

6    decline to resolve them at this time.

7               Jasam correctly observes that its insurance policy

8    explicitly addressed the possibility that the insured might use

9    "fraud or material misrepresentation in the obtaining of the

10   policy or in the presentation of a claim."     Where Fidelity

11   discovers such a fraud or misrepresentation, the policy permits

12   it to cancel the policy provided it mails "written notice at

13   least 15 days before the effective date of cancellation."       When

14   Fidelity discovered that Jasam had begun construction on the

15   Crotona properties, it complied with this provision by notifying

16   Jasam on April 11, 2001, that the policy would be cancelled

17   effective April 26, 2001, for "MATERIAL MISREPRESENTATION OF

18   EXPOSURES."     Cancellation Notice, Plaintiff's Trial Exhibit 38,

19   at 2.   It is not clear, however, whether under New York law the

20   insurance policy's provision or the cancellation notice prevents

21   Fidelity from seeking to rescind the same policy.

22              We are aware of only one decision addressing the issue

23   of rescission following cancellation under New York law.     In

24   Stein v. Security Mut. Ins. Co., 38 A.D.3d 977, 832 N.Y.S.2d 679

25   (3d Dep't 2007), the Supreme Court, Appellate Division, concluded

26   that even where a defendant insurer "could have rescinded

                                        21
1    [insured's] policy, rendering it void ab initio," based on

2    material misrepresentations in the application for insurance, it

3    was not free to do so once the insurer "elected to cancel [the]

4    policy rather than rescind it."    Id. at 978-79, 832 N.Y.S.2d at

5    681; see also 2004 Ops. N.Y. Ins. Gen. Counsel, Aug. 18, 2004,

6    No. 6 (observing that neither the legislature nor the courts had

7    determined whether an insurer's election of a cancellation remedy

8    for misrepresentation precludes later rescission).

9                Similarly, it does not appear that any court has

10   directly addressed the question whether, under New York law, an

11   insurer waives its common-law right to rescind an insurance

12   policy by limiting the conditions under which it would cancel the

13   policy.   The Appellate Division in Stein appears to have assumed

14   that the insurer's statutory obligation to cancel a policy only

15   with sufficient prospective notice in that case, see N.Y. Ins.

16   Law § 3425, did not alone preclude a rescission remedy.    The

17   insurer was, however, required to elect one of these remedies.

18               We think it unwise to grant judgment as a matter of law

19   to a party where, as here, the law is unclear and the issue may

20   ultimately become moot after remand.    The resolution of these

21   questions of law may, moreover, have significant consequences for

22   insurers that have selected New York law to govern their

23   policies.

24               "Where unsettled and significant questions of state law

25   will control the outcome of a case, we may certify those

26   questions to the New York Court of Appeals."    Colavito v. N.Y.

                                       22
1    Organ Donor Network, Inc., 438 F.3d 214, 229 (2d Cir. 2006)

2    (citations and internal quotation marks omitted).    Any

3    certification in this case would, however, be premature.   "In

4    deciding whether to certify a question we consider: (1) the

5    absence of authoritative state court decisions; (2) the

6    importance of the issue to the state; and (3) the capacity of

7    certification to resolve the litigation."   O'Mara v. Town of

8    Wappinger, 485 F.3d 693, 698 (2d Cir. 2007).   Although the first

9    two prongs of this test may very well be satisfied here, the

10   errors in the district court's jury interrogatories could prevent

11   resolution of this case even if we certified the question.    If

12   the New York Court of Appeals were to conclude that rescission

13   was available to Fidelity, despite its cancellation of the policy

14   in April 2001, we nonetheless would be required to remand.    The

15   outcome of this appeal does not turn on the issue.    By remanding

16   to the district court, as we do, these unsettled legal questions

17   may be rendered moot if, for example, a jury returns a verdict

18   favorable to the defendants.

19             For these reasons, we decline either to resolve, for

20   purposes of this appeal, the merits of these arguments or to

21   certify them to the New York Court of Appeals.

22             3.   Estoppel.   The defendants contend that the remedy

23   of rescission is no longer available to Fidelity because it has

24   retained all insurance premiums paid by Jasam and continued to

25   accept premiums well after it could have rescinded the policy.

26   "It is well settled that the continued acceptance of premiums by

                                      23
1    the carrier after learning of facts which allow for rescission of

2    the policy, constitutes a waiver of, or more properly an estoppel

3    against, the right to rescind," Scalia v. Equitable Life

4    Assurance Soc'y, 251 A.D.2d 315, 315, 673 N.Y.S.2d 730, 731 (2d

5    Dep't 1998) (citing Bible v. John Hancock Mut. Life Ins. Co., 256

6    N.Y. 458, 462, 176 N.E. 838, 840 (1931)).   The facts underlying

7    this issue, however, were not developed at trial.   The defendants

8    point to no evidence in the record, for example, that indicates

9    when Fidelity learned of facts which would have allowed for

10   rescission of the policy.   Were such evidence presented,

11   moreover, there is no indication that Fidelity was provided the

12   opportunity to explain to the jury any delay in exercising a

13   right of rescission.   It is not even clear on the current record

14   how long this delay was alleged to have been.

15             Because we would remand for retrial in any event, we

16   also decline to resolve the merits of this argument.   See LNC

17   Investments, Inc. v. First Fidelity Bank, 173 F.3d 454, 468-69

18   (2d Cir. 1999).9

19                               CONCLUSION

20             For the foregoing reasons, we vacate the judgment and

21   remand the case to the district court.   The district court's

22   judgment with respect to Surre is also vacated because it is




          9
             We reiterate our prior instruction that if the parties
     "want to have their contentions addressed upon the retrial, and
     any appeal therefrom, they have a responsibility to put forth the
     evidence upon which their contentions depend." Fidelity, 141 F.
     App'x at 13 n.1.
                                     24
1   dependent on the judgment with respect to the remaining

2   defendants.




                                   25
