Arch Specialty Insurance Company v. Lyter Group, Inc.

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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ARCH SPECIALTY INSURANCE COMPANY,
Plaintiff, 	REPORT AND
RECOMMENDATION
-against- 	CV 23-8146 (NJC) (ARL)
LYTER GROUP, INC.,
Defendant.
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LINDSAY, Magistrate Judge:
The plaintiff, Arch Specialty Insurance Company (“Arch”), commenced this action on
November 1, 2023, against the defendant, Lyter Group, Inc. (“Lyter”), asserting claims for
breach of contract, unjust enrichment and accounts stated. ECF No. 1. On March 4, 2024, Arch
moved for a default judgment. ECF No. 14. The motion was referred to the undersigned by
District Judge Choudhury. On October 15, 2024, the undersigned issued a report recommending
that the motion be denied with leave to renew due to the plaintiff’s failure to provide
documentary evidence of its demand for payment. ECF No. 16. On November 1, 2024, District
Judge Choudhury adopted the report in its entirety and denied the motion. On December 10,
2024, Arch renewed its motion for a default judgment, which was also referred to the
undersigned. ECF No. 19. On May 2, 2025, the undersigned issued a second report, once again,
recommending that the motion be denied because Arch had failed to file proof that it had served
Lyter with the motion or any documents in support of the request for default judgment. ECF No.
20. Before District Judge Choudhury had acted on the second report, Arch filed a third motion
for a default judgment. ECF No. 21. By order dated May 27, 2025, that motion was also
referred to the undersigned. For the reasons set forth below, the undersigned respectfully
recommends that the plaintiff’s motion for a default judgment be granted awarding Arch the
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principal amount of $76,185.00, plus the costs of litigation in the amount of $573.70, and
prejudgment interest at a statutory rate of 9%.
BACKGROUND
A. 	Factual Background
The following facts are taken from the complaint as well as the plaintiff’s renewed
motion for a default judgment and the exhibits attached to that motion. Arch is an insurance
company organized under the laws of the State of Missouri with a principal place of business at
Harborside 3, 210 Hudson Street, Suite 300, Jersey City, New Jersey 07311. Compl. ¶ 1;
Vilenchik Decl. ¶ 3. Lyter is a corporation organized under the laws of the State of New York
with a principal place of business at 100 Motor Parkway, Suite 107, Hauppauge, New York
11788. Compl. ¶ 2; Vilenchik Decl. ¶ 4.
On October 18, 2018, Lyter applied for a commercial general liability insurance policy,
through its broker, Nicholas Aligizakis (“Aligizakis”) of Collinsville Insurance Agency, LLC.
Steer Decl. ¶ 5. Arch issued a Commercial General Liability Insurance Policy to Lyter effective
November 16, 2018 to November 16, 2019 (“the Policy”). Id., Ex. B. Pursuant to the Policy’s
terms, the initial premium of $34,453.00 was based on information submitted by Lyter and/or its
insurance agent/broker on Lyter’s behalf regarding Lyter’s estimated exposure during the
effective dates of coverage. Steer Decl. ¶ 10, Ex. B. Because the initial premium was based on
estimated information, the Policy was subject to an audit to determine the actual exposure during
the effective dates of coverage. Steer Decl. ¶ 11. Specifically, the Policy includes an “Annual
Minimum and Deposit Premium Endorsement” that modifies the common policy conditions as
follows:
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The premium designated in this Policy as “advance premium” is a minimum
and deposit premium, which shall be credited to the amount of the earned
premium due at the end of the policy period.
At the close of each period . . . designated in the Declarations as the audit
period, the earned premium including any premium adjustments . . . shall be
computed for such period and upon notice therefor to the Named Insured, shall
become due and payable.
Steer Decl. Ex. B. The Commercial General Liability Coverage Form, also annexed to
the Policy, further provides:
5. Premium Audit
a. We will compute all premiums for this Coverage Part in accordance with our
rules and rates.
b. Premium shown in this Coverage Part as advance premium is a deposit
premium only. At the close of each audit period we will compute the earned
premium for that period and send notice to the first Named Insured. The due
date for audit and retrospective premiums is the date shown as the due date on
the bill. If the sum of the advance and audit premiums paid for the policy
period is greater than the earned premium, we will return the excess to the first
Named Insured.
Id.
On January 8, 2020, a representative of Arch conducted an audit for the period between
December 1, 2018 and December 1, 2019.1 Id. Ex. C. The auditor determined that an additional
premium of $76,185.00 was owed by Lyter to Arch. Id. ¶ 14. Following the completion of the
audit, Lyter’s assigned representative and accountant, Raymond Stankey, CPA, signed an
acknowledgement certifying his participation in the audit process. Id. ¶ 15. Thereafter, an audit
endorsement was generated for the Policy, which reflected the Additional Premium owed. Id. ¶
16. The audit endorsement was allegedly mailed to Lyter and Aligizakis on June 1, 2020, setting
forth a due date of July 30, 2020. Id. ¶ 17. Following the mailing of the audit endorsement,
1 The audit period differs slightly from the policy period reflected as November 16, 2018 to November 16, 2019.
See infra.
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Arch and Aligizakis engaged in discussions via email to discuss a potential payment plan. Id.
Ex. E. In addition, on August 5, 2023, Arch’s counsel sent a letter to Lyter demanding payment
of $79,057.17. Vilenchik Decl. Ex. B.
Arch alleges that Lyter is also obligated to pay a New York State Surplus Lines Tax and
a New York State Stamping Fee equal to 3.6% and 0.18% of the Additional Premium,
respectively (“New York State Taxes and Fees”). Steer Decl. ¶ 14. To this end, Arch claims that
the total New York State Taxes and Fees amounts to $2,872.17. Id. According to Arch,
Lyter has refused to remit the payment of the Additional Premium and New York State Taxes
and Fees. Id. ¶¶ 20,21.
B. 	Procedural Background
As indicated above, Arch filed the complaint in this action on November 1, 2023.
ECF No. 1. The summons and complaint were served on Lyter by service on the New York
State Department of State on November 6, 2023. ECF No. 9. On December 21, 2023, Arch filed
a request for a certificate of default with the Clerk of the Court.2 ECF No. 10. On January 2,
2024, the Clerk of the Court certified that Lyter had failed to answer or otherwise move with
respect to the complaint. ECF No. 12. On May 13, 2025, Arch filed the instant motion for a
default judgment, along with proof of service of the motion and supporting papers on Lyter.
ECF No. 21. Despite being served with a copy of the motion by regular mail, to date, Lyter has
not opposed the motion for default judgment or responded in any way.
DISCUSSION
A. 	Legal Standards Governing Default Judgments
2 Prior to the filing of the motion, the case had been referred to Court Annexed Arbitration Program pursuant to
Local Civil Rule 83.7(d). ECF No. 8.
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Federal Rule of Civil Procedure 55 establishes a two-step process regarding default
judgments. First, the Clerk of the Court enters the party's default. Then, as here, a motion for a
default judgment is made to the district court judge. A default constitutes an admission of all
well-pleaded factual allegations in the complaint, except those relating to damages. See
Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992); see
also Joe Hand Promotions, Inc. v. El Norteno Rest. Corp., No. 06-CV-1878, 2007 WL 2891016,
at *2 (E.D.N.Y. Sept. 28, 2007) ("[A]ll well-pleaded factual allegations in the plaintiff's
complaint pertaining to liability are deemed true"). However, even if a plaintiff's claims are
deemed admitted, a plaintiff must still demonstrate that the allegations set forth in the complaint
state valid claims. See City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d
Cir. 2011) (suggesting that "a district court is 'required to determine whether the plaintiff's
allegations establish the defendant's liability as a matter of law'" prior to entering default
judgment) (quoting Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009)) (alterations omitted).
A default also "effectively constitutes an admission that the damages were proximately caused
by the defaulting party's conduct: that is, the acts pleaded in a complaint violated the laws upon
which a claim is based and caused injuries as alleged." Cablevision Sys. New York City Corp. v.
Lokshin, 980 F. Supp. 107, 111 (E.D.N.Y. 1997). The movant need only prove that the
"compensation sought relate[s] to the damages that naturally flow from the injuries pleaded."
Greyhound, 973 F.2d at 159.
B. 	Breach of Contract Claim
1. 	Liability
A breach of contract action is generally pleaded by stating “(1) the terms of the contract,
(2) the performance by the plaintiff of [its] obligations, (3) the breach by the defendant, (4)
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damages, and (5) consideration.” Harsco Corp. v. Segui, 91 F.3d 337, 348 (2d Cir. 1996); accord
Kausal v. Educ. Prods. Info. Exchange Institute, 105 A.D.3d 909, 910, 964 N.Y.S.2d 550 (2d
Dep't 2013).3 Under New York law, “[a] party injured by breach of contract is entitled to be
placed in the position it would have occupied had the contract been fulfilled according to its
terms.” Merrill Lynch & Co. Inc. v. Allegheny Energy, Inc., 500 F.3d 171, 185 (2d Cir. 2007)
(citing Boyce v. Soundview Tech. Group, Inc., 464 F.3d 376, 384 (2d Cir. 2006)).
In this matter, Arch and Lyter entered into an insurance agreement in which Arch agreed
to, and did, provide coverage in exchange for the payment of a premium. Steer Decl. ¶¶ 6, 9.
Pursuant to the Policy, the parties agreed that Lyter’s initial premium was based on an estimate
and that an audit could result in the imposition of additional premiums. Id. ¶¶ 10-11. In January
2020, Arch conducted an audit and determined that Lyter owed an additional premium
amounting to $76,185.00. Id. ¶ 14, Ex. C. Pursuant to the terms of the policy, upon notice to
Lyter, the additional premiums became due and payable. Id. Ex. B. Specifically, the policy
provided:
At the close of each audit period we will compute the earned premium for that
period and send notice to the first Named Insured. The due date for audit
and retrospective premiums is the date shown as the due date on the bill.
Id. (emphasis added). The policy’s “Common Policy Conditions,” as amended by
endorsement Form No. 00 ML0219 00 02 13, further provides:
At the close of each period (or part thereof terminating with the end of the
policy period) designated in the Declarations as the audit period, the earned
premium including any premium adjustments made by endorsement to this
policy during the policy period shall be computed for such period and upon
notice thereof to the Named Insured, shall become due and payable.
3 The Court notes that the plaintiff cites to New York law. The Policy does not contain a choice-of-law provision
but Lyter is a New York corporation with a principal place of business in New York. “[I]n a default judgment
context, where the moving party relies on New York law and no party has challenged its application, the court
should rely on New York law.” .Arch Specialty Ins. Co. v. B & V Constr. Inc., No. 23-CV-2429 (NGG) (LGD),
2024 WL 1739862, at *4 (E.D.N.Y. Apr. 23, 2024).
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Id. (emphasis added).
As indicated in the undersigned’s previous report, Arch alleged in the complaint that it
“billed and/or issued demands for payment for the outstanding amount to Lyter in a timely
fashion.” Compl. ¶ 13. However, Arch failed to provide the Court with a copy of that
bill/demand for payment when it first moved for a default judgment. Notably, Arch is still
unable to produce a copy of that demand but, in support of the resubmitted motion, Raymond
Steer, Jr., a Vice President of Arch Insurance Group Inc., now attests that following the
completion of the audit, Lyter’s assigned representative and accountant, Raymond Stankey,
signed an acknowledgement certifying his participation in the audit process on January 9, 2020.
Steer Decl. Ex. B. Steer also attests that an audit endorsement was generated for the Policy,
which reflected the Additional Premium owed. Id. ¶ 16; Ex. D. Finally, Steer avers that the
audit endorsement was mailed to Lyter and Aligizakis on June 1, 2020, setting forth a due date of
July 30, 2020.4 Id. ¶ 17. Although the undersigned would have preferred to see documentary
evidence of the demand setting forth the due date, the undersigned will accept Steer’s unrefuted
declaration as evidence of the demand. Therefore, the Court finds that Arch has established a
breach of contract claim for the Additional Premium.
Arch has not, however, established a breach of contract claim for New York Taxes and
Fees. Arch alleges in the complaint that Lyter was obligated to pay a New York State Surplus
Lines Tax and a New York State Stamping Fee equal to 3.6% and 0.18% of the Additional
Premium, See Compl. ¶ 14. According to Arch’s calculations, these taxes and fees equal
$2,883.57 in total. But nothing in the policy or the additional evidence submitted by Arch
4 Arch’s counsel also asserts that prior to commencing the instant litigation, he demanded payment of the Additional
Premium . . . owed by Lyter and attempted to collect the same without success. Vilenchik Decl. ¶ 9, Ex. B.
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supports that claim. In fact, several courts in this district have examined Arch’s entitlement to
these taxes and fees and have rejected similar claims. See e.g. Arch Specialty Ins. Co. v. B & V
Constr. Inc., No. 23-CV-2429 (NGG) (LGD), 2024 WL 1739862, at *5 (E.D.N.Y. Apr. 23,
2024) (citing Arch Specialty Ins. Co. v. M. Lopez Contracting Corp., No. 19-CV-7024, 2021 WL
7830147, at *4 (E.D.N.Y. Mar. 10, 2021) (“While the Complaint and Pellitteri Declaration both
state that Defendant was ‘obligated to pay’ the NYS Taxes and Fees, there is no allegation that
the Policy required Defendant to pay those fees to Plaintiff. Nothing in the Policy or the papers
submitted by Plaintiff indicates an obligation by Defendant to pay the NYS Taxes and Fees to
Plaintiff, whether to compensate Plaintiff for paying its taxes, or otherwise.”)); Arch Specialty
Ins. Co. v. Better Energy Serv. Inc., No. 20 CV 6255 LDH CLP, 2022 WL 5434218, at *6
(E.D.N.Y. Aug. 26, 2022), report and recommendation adopted as modified, No. 20 CV 6255
LDH CLP, 2022 WL 4551379 (E.D.N.Y. Sept. 29, 2022 (plaintiff failed to cite the New York
statutes providing for these taxes and fees, and provided no authority under which plaintiff, as
the insurer, would be “obligated” to pay such taxes and fees)(collecting cases). Accordingly, the
undersigned respectfully recommends that Arch’s motion as to the breach of contract claim for
the New York State Taxes and Fees be denied.
2. 	Damages
Arch has provided sufficient evidence to support its claim for damages with respect to the
Additional Premium. See Steer Decl. Ex. C, D. Specifically, the audit conducted on January 8,
2020, determined that an additional premium of $76,185.00 was owed by Lyter to Arch. Id.
Following the completion of the audit, Arch prepared an audit endorsement reflecting the
Additional Premium owed and mailed the endorsement to Lyter and its broker. Accordingly, the
undersigned respectfully recommends that Arch be awarded $76,185.00 in damages for the
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unpaid additional premium, which is the amount of money that it would have received under the
contract had it been performed. See Merrill Lynch & Co., 500 F.3d at 185.
In addition, Arch seeks to recover prejudgment interest calculated from July 30, 2020, the
date it claims payment was due. “Under New York law, “[i]nterest shall be recovered upon a
sum awarded because of a breach of performance of a contract . . . computed from the earliest
ascertainable date the cause of action existed.” Arch Specialty Ins. Co. v. B & V Constr. Inc.,
2024 WL 1739862, at *7 (citing N.Y. C.P.L.R. § 5001(a)-(b)). Courts award prejudgment
interest in breach of contract cases from the date of the contract breach. Id. (citing Cont'l Cas.
Co. v. Contest Promotions NY, LLC, No. 15-CV-501, 2016 WL 1255726, at *7 (E.D.N.Y. Mar.
28, 2016)). “The statutory rate is nine percent per year. See N.Y. C.P.L.R. § 5004. Id. Steer
attests that the audit endorsement was mailed to Lyter and Aligizakis on June 1, 2020, setting
forth a due date of July 30, 2020. Steer Decl. ¶ 17. As such, “the earliest date of [the] breach is .
. . the date the Additional Premium became due.” Arch Specialty Ins. Co., 2022 WL 5434218, at
*8. Accordingly, the undersigned also respectfully recommends that Arch be awarded
prejudgment interest calculated at a rate of nine percent per annum on the total recommended
amount of $76,185.00, beginning July 30, 2020, until the date of the District Court's Order
adopting this Report and Recommendation.
Finally, Arch also seeks to recover its litigation costs, specifically, the filing fee of
$400.00 and the service of process fee of $173.31. Vilenchik Decl. ¶ 17. Federal Rule of Civil
Procedure 54(d) provides an award of costs to the prevailing party. Filing fees and costs for
service are appropriately reimbursable as litigation costs. See Arch Specialty Ins. Co. v. B & V
Constr. Inc., 2024 WL 1739862, at *6 (citing Master Grp. Glob. Co., Ltd. v. Toner.Com Inc.,
No. 19-CV-6648, 2020 WL 5260581, at *15 (E.D.N.Y. Aug. 10, 2020), report and
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recommendation adopted, No. 19-CV-6648, 2020 WL 5259057 (E.D.N.Y. Sept. 3, 2020)
(awarding costs related to the filing fee and for service of process). Arch’s filing fee is verified
by the docket sheet and it has provided documentation evidencing the fees paid for service of
process. Vilenchik Decl. Ex. E. Therefore, the undersigned recommends that Arch be awarded
$573.31 in litigation costs.
C. 	Accounts Stated and Unjust Enrichment
Arch contends it is “separately and independently” entitled to a default judgment on its
third count for accounts stated. The Court disagrees. “‘[A] defendant cannot be found liable on
both an account stated claim ... and a breach of contract claim . . . in connection with the same
allegations of a failure to pay monies owed.’” Arch Specialty Ins. Co., 2022 WL 5434218, at *4
(citing Arch Specialty Ins. Co. v. Kajavi Corp., 2019 WL 3719461, at *3 (citations and
quotations omitted)). In addition, Arch appears to have abandoned the unjust enrichment claim.
Accordingly, the undersigned recommends that Arch’s motion be denied to the extent it is
seeking a default judgment on the accounts stated or unjust enrichment claims.
OBJECTIONS
A copy of this Report and Recommendation is being electronically filed on the date
below. Counsel for the plaintiff shall serve a copy of this Report and Recommendation on the
defendant upon receipt and shall file proof of service with the Court. Any objections to this
Report and Recommendation must be filed with the Clerk of the Court with a courtesy copy to
the undersigned within 14 days of service. Failure to file objections within this period waives
the right to appeal the District Court’s Order. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72;
Beverly v. Walker, 118 F.3d 900, 902 (2d Cir. 1997); Savoie v. Merchants Bank, 84 F.3d 52, 60
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(2d Cir. 1996).
Dated: Central Islip, New York
February 17, 2026 	______/s/_______________
ARLENE R. LINDSAY
United States Magistrate Judge
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