Guo Wengui / Miles Guo — bankruptcy case · JUDGMENT · ECF #2585

UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT BRIDGEPORT DIVISION In Re \* Case No. 22-50073 (JAM) \* HO WAN KWOK and GENEVER \* HOLDINGS CORPORATION, \* \* Debtors. \* GENEVER HOLDINGS LLC, \* Adv. Proc. No. 23-05007 \* Plaintiff, \* v. \* \* Bridgeport, Connecticut AIG PROPERTY CASUALTY \* January 30, 2024 COMPANY, \* \* Defendant. \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* \* TRANSCRIPT OF PROCEEDINGS BEFORE THE HONORABLE JULIE A. MANNING UNITED STATES BANKRUPTCY JUDGE #51 MOTION FOR SUMMARY JUDGMENT APPEARANCES: For Genever Holdings LLC: MICHAEL T. McCORMACK, ESQ. O'Sullivan McCormack Jensen & Bliss PC 180 Glastonbury Blvd. Suite 206 Glastonbury, CT 06033 Chapter 11 Trustee: LUC A. DESPINS, ESQ. Paul Hastings LLP 200 Park Avenue New York, NY 10166 Proceedings recorded by electronic sound recording, transcript produced by transcription service. **Fiore Reporting and Transcription Service, Inc. Shelton, CT 06484 (203)732-6461**

APPEARANCES: (Cont'd) For AIG Property Casualty: JOHN FREDERICK O'CONNOR, JR., ESQ. Steptoe & Johnson LLP 1330 Connecticut Avenue, NW Washington, DC 20036 MICHAEL P. THOMPSON, ESQ. Gordon & Rees LLP Gorden Rees Scully Mansukhani 95 Glastonbury Blvd. Suite 206

Glastonbury, CT 06033

2

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 3 of 41

Ho Wan Kwok - January 30, 2024 3 (Proceedings commenced at 2:10 p.m.) THE COURT: On the calendar at 2:00 p.m., so I ask the courtroom deputy to please call the calendar. THE COURTROOM DEPUTY: Case No. 23-5007, Genever Holdings LLC versus AIG Property Casualty Company. THE COURT: Good afternoon. If we could have appearances for the record, please. MR. McCORMACK: Good afternoon, Your Honor. On behalf of the plaintiff Genever Holdings LLC, I am Michael McCormack from O'Sullivan McCormack Jensen & Bliss. THE COURT: Good afternoon. MR. McCORMACK: And with me is Luc Despins. MR. DESPINS: Chapter 11 Trustee, Your Honor. Thank you. THE COURT: Good afternoon. MR. O'CONNOR: Good afternoon, Your Honor. John O'Connor and Michael Thompson for AIG. THE COURT: Good afternoon. MR. THOMPSON: Good afternoon, Your Honor. THE COURT: So Mr. McCormack, this is your motion, correct? MR. McCORMACK: Yes, it is, Your Honor. THE COURT: Please proceed. MR. McCORMACK: Thank you. Does Your Honor prefer if I argue from the table or the --

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 4 of 41

Ho Wan Kwok - January 30, 2024 4 THE COURT: You can -- you can argue wherever you're comfortable. MR. McCORMACK: Thank you, Your Honor. THE COURT: It's fine with the Court. MR. McCORMACK: Your Honor, this is our motion for summary judgment on count four of the adversary complaint, in which we seek a declaratory judgment that AIG Property and Casualty Company is obligated to provide coverage under the property insurance coverage section of the insurance policy that it issued to Genever Holdings for the period March 6th, 2023 to March 6th, 2024. We seek declaratory relief that Genever is entitled to coverage for its fire losses that it sustained in the form of property damage and contents losses as a result of the fire. And as we indicate in our brief, in a declaratory judgment action involving insurance coverage there are two issues. One is is -- has the insured triggered coverage under the insuring agreement? And if it has, has the insurance company met its burden of proving that an exclusion clearly and unambiguously takes it out of coverage. And under the undisputed facts and the record evidence, Genever has established coverage under the

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 5 of 41

Ho Wan Kwok - January 30, 2024 5 insuring agreement of the property insurance policy. First, this is an all-risk insurance policy for purposes of property coverage. And by it's clear terms, it provides coverage to the named insured, Genever, against all risks of direct physical loss or damages to your house, contents. and other permanent structures. And under the clear terms of the policy, the definition of you or your is the named insured, Genever Holdings. And so for purposes of coverage for property loss under an all risk insurance policy, the insured has to prove three things. Number one, that there is the -- there is an all risk insurance policy. Number two, that the insured has an insurable interest in the subject of the insurance policy and the insured contents. And number three, there was a fortuitous loss of covered property. And as we set forth in our brief, based upon the undisputed facts and the law, all three of those elements are met here. One, as I indicated, it's an all risk policy. That's determined by the clear terms of the policy. And that is a question of law for the Court. Two, there is no dispute that Genever Holdings LLC

Ho Wan Kwok - January 30, 2024 6 was the owner of the 18th floor apartment at the Sherry- Netherland that caught fire and for which coverage is sought. And third, there is no dispute and cannot be dispute that this was a fortuitous loss to the named insured. As we indicate in our brief, a fortuitous loss -- a loss is fortuitous, it's a question of law. A loss is fortuitous unless the loss results from inherent defect, ordinary wear and tear, or intentional misconduct of the insured. And there is no evidence to indicate that there was any intentional conduct of Genever Holdings LLC. And there is no evidence that this was anything involving -- a loss involving an inherent defect or ordinary wear and tear. So as the evidence we put forth in the motion for summary judgment we think is undisputed, we have triggered an obligation of AIG to provide coverage under the all-risk policy portion of the policy. Now, to avoid coverage, AIG has to come forward with evidence to show that an insuring exclusion clearly and unambiguously applies. And as we indicate in our brief, that's a heavy burden for an insurance company. In order to avoid coverage under an exclusion, an insurer has to show that an exclusion is clear and

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 6 of 41

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 7 of 41

Ho Wan Kwok - January 30, 2024 7 unmistakable in its language, it's subject to no other interpretation, and it clearly applies to the particular facts of the case. And here, AIG has not put forth any evidence to show that there's an exclusion that takes away coverage after Genever has established that it sustained a loss under the all-risk policy. In its opposition and in its special defenses, AIG cited three or four exclusions. And they don't state that the exclusions apply. They simply state that Genever is not entitled to coverage if or to the extent the exclusions apply. They've not met their heavy burden of proving that any of the exclusions apply. They have cited an intentional acts exclusion, a dishonest acts exclusion, a business property exclusion, and a -- I forget what the other one is, but it's in our brief, I apologize, Your Honor -- but they don't rely upon -- they don't cite the business property or they don't provide any evidence to show that the business property exclusion or the other exclusions apply. What they argue here, and this is critical, is they argue that there's a question of fact as to the cause and origin of the fire and whether Mr. Kwok may have been involved with the fire. And those simply are not issues of

Fiore Reporting and Transcription Service, Inc.

fact for purposes of the issue whether Genever is entitled

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 8 of 41

Ho Wan Kwok - January 30, 2024 8

to declaratory relief.

And the reason for that is because, number one, Genever under an all-risk policy does not have to establish the precise cause of the loss. It just has to establish that it was a fortuitous loss, not involving intentional conduct on the part of Genever. That's been established here.

And what AIG argues throughout their brief, and I think they've argued throughout this case, is that somehow Mr. Kwok is an insured under the policy, or they believe that Mr. Kwok was insured under the policy, and if he were insured under the policy, that they would be able to rely upon the exclusions, the intentional act exclusions and the dishonest act exclusions.

And all the Court needs to do to show -- to conclude that AIG has not met its burden of proving that they can avoid coverage for property loss under the exclusions is look at the clear and unambiguous terms of the exclusions. And that's in the policy. It's exclusion number 21 and 22.

The intentional acts exclusion specifically says we do not cover any loss caused by any act whose consequences could have been foreseen by a reasonable person committed by, by or at the direction of you, your spouse, or a family member, and with the intent to cause loss or

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 9 of 41

Ho Wan Kwok - January 30, 2024 9 damage. That language is significant because it is limited to conduct committed by you, your spouse, or a family member. And under the clear and unambiguous terms of the policy, the definitions, the term you and your specifically refers to Genever LLC. It does not refer to an individual. And so, therefore, AIG has not met its burden of establishing that the intentional act exclusion allows them to avoid coverage under the property coverage section of the policy. The dishonest acts exclusion is exclusion 22. And for the Court's reference, I'm referring to the policy at page 21 of 45, document No. 66-5. Again, a dishonest acts exclusion states we do not cover any loss caused by any dishonest or criminal act by or at the direction of you or any family member. Again, that definition of you is limited to Genever Holdings. So, Your Honor, with respect to -- there's no factual basis on which AIG could establish or has established that these exclusions apply. I want to address the argument they make with respect to the fact that they -- or they argue that they were led to believe that Mr. Kwok was the member of Genever LLC, and they learned after the fire that that was not true, that Genever (BVI) was the member of the LLC.

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 10 of 41

Ho Wan Kwok - January 30, 2024 10 As we submit in our papers, and in particular our reply brief, that issue does not create any material issue of fact in this case because the clear terms of the policy limit the property coverage of the policy to coverage for the named insured, Genever. And there's no dispute that Genever was the owner of this apartment that caught fire at all times from 2018 up until the date of the fire. What AIG argues in their brief, and they argue this incorrectly, is that had Mr. Kwok been the member of Genever LLC, he would have been insured under the policy. And they argue that they somehow could have argued that if he was involved with the fire, or that there's -- if there's a question of fact as to whether he was involved in the fire, then that should defeat summary judgment because then the insured would have -- there is a question as to whether the insured would have been involved in the fire. But as we submit in our reply brief, and this is under again the clear terms of the policy, which is a question of law to be interpreted by the Court, the AIG relies upon what's called the additional insured endorsement, or, I'm sorry, insured person endorsement, and that's found in the policy, specifically page 44 of 45, and page 45 of document No. 66-5. And that's the document that AIG relies upon to

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 11 of 41

Ho Wan Kwok - January 30, 2024 11 say that they understood that Mr. Kwok was the member of Genever LLC and they believe that he would have been an additional insured under the policy. But that endorsement, by it's clear and unambiguous terms, only applies to liability coverage under the policy, a situation where somebody is suing Genever LLC claiming Genever is liable for some type of loss. That's the liability coverage. The fourth claim for relief seeks property damage under the property coverage. That's a completely separate coverage element. And all that this insured person endorsement says, it says that with respect to the liability coverage, liability only applies to an occurrence arising out of the ownership of the residence listed above. Additionally, the limited liability corporation members and managers of the limited liability corporation are an insured person with respect to ownership of the house. As I said, all that does is indicate that if there's an individual member of the LLC, and there's a claim for liability brought against that member, that member may be an insured under the policy for purposes of liability coverage only. It does not change the terms of the property

Ho Wan Kwok - January 30, 2024 12 coverage section of the policy which is section two of the policy. And that's the reason why AIG's argument that they somehow were misled to believe that Mr. Kwok was the member and they issued the policy based upon that makes no material difference and does not create a question of fact. Because at all times, under this -- at all times, AIG wrote the policy with Genever as the named insured. No dispute. No dispute that Genever owned the apartment at all times. And under the clear terms of the policy, the property coverage only applies to the property owned by Genever. It does not provide coverage to people who are not named insureds under the policy. In opposition to the motion for summary judgment, there's an argument made that the motion is premature and that there has to be -- there is a need for discovery on a variety of topics. Again, as we point out in our reply brief, there is no additional discovery that would create a material issue of fact with respect to whether property coverage exists under part two of the policy for Genever. And the reason for that is because it's an all risk policy. The Court looks at the terms of the policy and determines whether Genever has met its burden of proof of triggering coverage and whether AIG has established its Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 12 of 41

Ho Wan Kwok - January 30, 2024 13 heavy burden of showing that an exclusion applies and it has not. They argue that discovery may determine the cause or origin of the fire. As I indicated previously, the cause and origin is not an element of proof for purposes of establishing property coverage under this policy. They also argue that they might -- they want discovery with respect to the application process back in 2018. Again, as I explained, that doesn't make a difference whether Mr. Kwok was a member of the LLC or, as the true facts are of the -- or the facts are that Genever (BVI) was the sole member of Genever LLC, it can't change the clear terms of the policy. And I think what's important also for the Court is there's no evidence of any misrepresentation by Genever LLC. But importantly, if you accept this argument that they want discovery to determine whether Mr. Kwok was or was not the member of Genever LLC and what AIG thought, it doesn't matter for purposes of the events in 2023. Because as I explained earlier, if Mr. Kwok was the member of Genever LLC, like AIG argues it believed, he would have only been insured or could have only been insured under limited circumstances for liability purposes. It wouldn't -- would not make a difference for purposes of the Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 13 of 41

Ho Wan Kwok - January 30, 2024 14 property coverage. And so, therefore, whatever they learned, it makes no difference with respect to the risk that AIG insured the apartment building. Second, as the Court is aware, and as we put forth in our brief, in August of 2022, Mr. Kwok was stripped of any economic ownership or any rights that he had in any property or in any corporations. So even if this -- even if AIG believed that he was the member of Genever LLC in 2018, as of August of 2022 and September of '22, he was stripped of any ownership interests and Clair Ebrehart was entered as a -- or was appointed as the Director of Genever (BVI) and, therefore, the -- which was the member of Genever LLC. And so when you fast forward to the March fire, there's no issue with respect to any ownership interest or membership interest that this -- Mr. Kwok as an individual may have had as AIG, you know, claims it believed. So the point is, Your Honor, is that whatever happened in 2018 doesn't change the clear terms of the policy language here and doesn't change the undisputed fact that he would -- if he were a member of the LLC in 2018, he would have been removed in this bankruptcy proceeding in August of 2022. And finally, you know, again this goes with Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 14 of 41

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 15 of 41

Ho Wan Kwok - January 30, 2024 15 respect to the issue of whether or not Mr. Kwok was an insured under the policy, AIG argues that Genever should be estopped from arguing that he was not an insured under the policy. And as we put forth in our brief, the issue of estoppel does not create a question of fact because the issue of estoppel cannot be used by AIG to alter the clear terms of the policy. Accepting AIG's argument would be, in effect, asking the Court to rewrite the clear and unambiguous terms of the property coverage of the policy, section two. And as we state in our reply brief, the Court is not allowed to do that. And so in sum, Your Honor, I don't think there's any dispute based upon the record evidence that Genever met its burden of establishing a right to property coverage under the policy. And AIG has not come forward with evidence, admissible evidence, to, one, show that an exclusion clearly and unambiguously takes away coverage or that there's a question of fact out there as to whether a particular exclusion would apply. And for those reasons, under the law, Genever is entitled to a declaratory judgment establishing that there is property coverage under the terms of the policy.

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 16 of 41

Ho Wan Kwok - January 30, 2024 16 Thank you, Your Honor. THE COURT: I just have one question. MR. McCORMACK: Sure. THE COURT: I think I understand, but I want to make sure I do. When you were -- before I hear from Attorney O'Connor, I want to -- you said, and I believe this is what you were saying, so I just want to make sure I am accurate, that the membership of Genever LLC changed in 2022. And you're talking about when the Trustee had proceedings in the BVI that changed the membership structure? MR. McCORMACK: That's correct, Your Honor. THE COURT: All right. That's what I wanted to make sure. MR. McCORMACK: Yes. THE COURT: Okay. MR. McCORMACK: Yes. THE COURT: Thank you. MR. McCORMACK: And on that point too, just on the issue of their claim that they need more discovery, I think it's important to remember, as we point out in our brief, that they have had since about May of last year to conduct whatever discovery they wanted in terms of cause and origin or anything and they -- they've done some discovery, they just haven't pursued any additional discovery.

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 17 of 41

Ho Wan Kwok - January 30, 2024 17 They did not pursue any discovery on the issues raised in our summary judgment after the motion was filed. And they've not pursued any discovery up to this point. So the argument that, you know, they want additional discovery before the Court rules on the summary judgment should not be accepted. 7 The Court has everything it needs for purposes of interpreting this policy and determining as a matter of law whether or not Genever has triggered or has established a right to coverage under the property coverage portion of the policy. Thank you. THE COURT: Thank you. Attorney O'Connor. MR. O'CONNOR: Your Honor, I'll proceed from the podium. THE COURT: Sure. Whatever you're comfortable with. MR. O'CONNOR: Thank you, Your Honor. The posture we're at here today is a lot different from the one that existed at the time of the preliminary injunction motion. At the PI hearing, the Court needed to make factual calls, and that's expected, and that's understood, and that's appropriate. That is not the procedural posture

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 18 of 41

Ho Wan Kwok - January 30, 2024 18 we're in right now. Right now all disputed issues of material fact must be resolved in favor of my client. And we still have four months of discovery left. So the question isn't even really do all the factual disputes that exist right now are there any that would preclude summary judgment, but it's can we really say that -- I can confidently say none would -- no additional factual disputes will be developed in the four months that we have left of discovery. I mean, the Court set a discovery schedule in November, provided for seven months of discovery. We have four months left of that period. And I think AIG is entitled. I mean, I think the evidence we have right now is sufficient to defeat summary judgment, but we're entitled to continue to build on that and we have four months to do it. And there was no requirement that you do this in month one and this in month two. We have seven months to do discovery and that goes all the way until May 17th. I want to talk about -- one of the things Mr. McCormack talked about was the various defenses that AIG has propounded in this case. And three of them in particular I think are important for purposes of this motion. And those are

Ho Wan Kwok - January 30, 2024 19 misrepresentation, estoppel, and subsumed within those there are agency concepts. And thing that all three of those have in common is they're almost never properly resolved on summary judgment. And it's particularly when there's -- when discovery has not even been completed, because those are deeply imbedded -- they involve deeply imbedded questions of fact. I want to start with misrepresentation because I think the way that Genever has framed that is incorrect. Genever I think doesn't seriously argue that AIG was told the correct facts about the ownership of Genever either at the issuance of the first policies in 2018 or at renewal in 2023. AIG's understanding, provided by Wolfson, the broker, was that Mr. Kwok was the sole member of this LLC. Because as Jordan Gerber testified at the preliminary injunction hearing, and his testimony is in the summary judgment record, ordinarily the market that AIG sells insurance to is individuals. And sometimes those individuals will have an LLC because they want to, you know, not have their name in the property records or whatever, but they want an individual standing behind that property. And so the argument, they take misrepresentation Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 19 of 41

Ho Wan Kwok - January 30, 2024 20 as if that's got to somehow go to one of the other defenses in the case, but that's not true. Under New York Law, which I think everyone agrees applies here, if a misrepresentation is made to the insurer such as the insurer would not have issued the policy if it had known the true facts, the insurer is entitled to disclaim coverage on that basis and rescind the policy. And what do we have in the summary judgment record? Mr. Gerber's testimony at the preliminary injunction hearing, and we also have his declaration, and what does he say at paragraph 8, AIG's PCG, that's private client group, would not have issued the policies based on the information received if its underwriters had been correctly informed that a holding company, and not Mr. Kwok, owned Genever. Would not have issued. And the Court has to credit that on summary judgment. And so if that fact is established by the fact finder at a trial of this case, then we would be entitled to avoid coverage based on misrepresentation because we were insuring a collection of people and entities that we didn't understand. AIG had an understanding that it was insuring Genever Holdings, an LLC that just owns this apartment, and a couple of other servants quarters and one guy, and instead it was insuring a British Virgin Islands company.

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 20 of 41

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 21 of 41

| | Ho Wan Kwok - January 30, 2024<br>21 | |----|----------------------------------------------------------------| | 1 | And that became important, not because the British | | 2 | Virgin Island company is out doing other business, but it | | 3 | became important because then, when the Trustee came in late | | 4 | in 2022 and changed the ownership of Genever (BVI), that all | | 5 | occurred without AIG knowing that this change in ownership, | | 6 | and the change in the circumstances of who was an insured | | 7 | under the policy, had occurred because it got done above | | 8 | Genever Holdings.<br>It got done at the British Virgin Islands | | 9 | level.<br>So you have misrepresentation. | | 10 | Now, one of the things that Genever has said is, | | 11 | well, the misrepresentation was relayed to AIG by the | | 12 | broker.<br>And the Court found at the -- at the preliminary | | 13 | injunction stage, where it has to make factual calls, that | | 14 | more likely than not the broker would be found, at a trial, | | 15 | to be AIG's agent. | | 16 | Now, with respect, we disagree with the Court's | | 17 | finding there.<br>We acknowledge it had to make a finding and | | 18 | it was appropriate to make a finding. | | 19 | It's not appropriate to make a finding here at | | 20 | this stage because now we're talking -- we're not talking | | 21 | about injunctive relief, we're talking about the whole | | 22 | enchilada.<br>We're talking about a judgment.<br>And we don't | | 23 | make judgments on summary judgment based on the Court's | | 24 | weighing of the evidence. | | 25 | The evidence here, and Mr. Gerber was very clear | | | |

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 22 of 41

Ho Wan Kwok - January 30, 2024 22 about that in paragraph 23 of his declaration where he said at no time did Wolfson act as AIG's agent in connection with the issuance of the insurance policies to Genever. Wolfson was acting on Genever's behalf with respect to issuance and renewal of the AIG policies. The decision whether to issue or to renew Genever -- the Genever policies was made by AIG based on information provided to it by Genever and its broker Wolfson. So the summary judgment record has clear evidence from Mr. Gerber that Wolfson was acting on behalf of the policy holder, not on behalf of AIG, did not have any authority with respect to issuance of the policies. That authority rested solely with AIG and that has to be accepted at the summary judgment stage. And turning to estoppel, as we've stated in our brief and stated at the preliminary injunction hearing, one of our points is Genever should be estopped from denying that Mr. Kwok was the sole member of Genever Holdings LLC, because AIG had been told that he was and AIG proceeded on that basis in issuing and renewing the policies. And that becomes significant when we have a fire. And lord knows, I'm not suggesting that Mr. Despins had something to do with the fire, but AIG's understanding was that Mr. Kwok was the owner of Genever, not Mr. Despins, which turned out to be the facts that had been undisclosed

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 23 of 41

Ho Wan Kwok - January 30, 2024 23 to AIG. And Genever does -- they misread read the LLC endorsement at the back of the homeowner's policy. There's two sentences there. One sentence says the member or members of an LLC are additional insureds for purpose of liability. A separate sentence says they're an insured with respect to ownership of the premises. So they -- you know, to AIG's understanding at all times, Mr. Kwok was an insured with respect to the property coverage and the liability coverage that was issued under those policies. Now, we've cited a number of cases in our brief that say estoppel almost never should be decided on summary judgment because it's they're deeply imbedded questions of fact about reliance, reasonable reliance, those are issues that get sussed out at a trial. They don't get sussed out generally on summary judgment, and certainly not on summary judgment when we're four months before the close of discovery and not all the facts have been developed. I want to add that there's no practical benefit to doing summary judgment piecemeal partway through discovery, and presumably they'll be summary judgment motions at the end of discovery. One, as for the reasons I've said here, if the

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 24 of 41

| | Ho Wan Kwok - January 30, 2024<br>24 | |----|--------------------------------------------------------------| | 1 | Court were to grant summary -- partial summary judgment when | | 2 | we have clear facts in the record relating to | | 3 | misrepresentation, estoppel, and agency, and we have four | | 4 | months more of discovery that would be chopped off, | | 5 | truncated, at least as it relates to coverage under the | | 6 | property policy, in our view, that would be injecting error | | 7 | into this process and we'd have to do it all again at some | | 8 | point when summary judgment's going to get done again in | | 9 | four months or five month, whenever the summary judgment | | 10 | deadline is. | | 11 | But as a practical matter, it doesn't even move | | 12 | this claim along because partial summary judgment doesn't | | 13 | advance final resolution of the claim because you can't | | 14 | execute on a grant of partial summary judgment. | | 15 | It also doesn't really narrow the discovery in any | | 16 | meaningful way because, as Genever points out, we need to | | 17 | take discovery on all of the other claims in this case, | | 18 | which include the third-party liability claims that Genever | | 19 | has made, the bad faith claim that Genever added when it | | 20 | amended its complaint in December. | | 21 | So there's not a practical benefit to taking a | | 22 | pause half way through discovery, or not even half way | | 23 | through discovery, and saying I'm going to rule on this now | | 24 | when the record is replete with evidence. | | 25 | One, I'm refuting the positions that Genever is | | | |

Ho Wan Kwok - January 30, 2024 25 taking with respect to misrepresentation, estoppel, and agency. Two, there's still discovery to be taken with respect to the cause of the fire, which is likely to inform multiple of the defenses in this case. And three, when there's just no practical benefit to it. If the Court has questions, I'm happy to take them, but we just think this is premature to do this in the middle of discovery. And I think Mr. Gerber's declaration clearly sets forth disputed facts on misrepresentation, agency and estoppel. THE COURT: The only question I have at the moment, and I just don't have the page cite in front of me of the policy, you were saying that there was a provision in the policy that said -- that supports your argument that if Mr. Kwok was the member of the LLC that he would be an additional insured -- and I don't know if that's the exact term you used, so I apologize, I may be using the wrong term -- but you were arguing, when you were talking about the broker and whether the broker was really an agent of AIG, you were talking about misrepresentations and you were saying that -- you were pointing me to a provision that I don't know that I looked at before.

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 25 of 41

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 26 of 41

| | Ho Wan Kwok - January 30, 2024<br>26 | |----|---------------------------------------------------------------| | | | | 1 | MR. O'CONNOR:<br>I can point Your Honor to it. | | 2 | THE COURT:<br>Okay. | | 3 | MR. O'CONNOR:<br>And just to clarify the argument, | | 4 | misrepresentation doesn't really have much to do with the | | 5 | LLC endorsement, because all that really matters for | | 6 | misrepresentation is AIG was told a set of facts, those | | 7 | facts were false or incorrect, even innocently incorrect, | | 8 | and if AIG had known the truth, it actually would not have | | 9 | issued the policy that it issued.<br>So those don't even get | | 10 | to that. | | 11 | But the endorsement does bear on issues relating | | 12 | to estoppel. | | 13 | THE COURT:<br>Okay. | | 14 | MR. O'CONNOR:<br>And the page is -- it's ECF 66-5, | | 15 | and at the PDF, 44-45.<br>It's the second to last page of the | | 16 | exhibit. | | 17 | THE COURT:<br>Okay.<br>I just want to make sure I had | | 18 | the -- I'm looking at what you're asking me to, well, what | | 19 | you were discussing during your argument and I want to make | | 20 | sure I had the right cite. | | 21 | MR. O'CONNOR:<br>Yes, Your Honor. | | 22 | And one thing I should have said on estoppel that | | 23 | I didn't is really what Genever says about estoppel is you | | 24 | can't rewrite policy.<br>I agree with that, 100 percent agree | | 25 | with that, but that's not what estoppel does here. | | | |

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 27 of 41

Ho Wan Kwok - January 30, 2024 27 What estoppel does here is it estops Genever from asserting a set of facts that are inconsistent with what it told AIG at the time that AIG issued the policies and renewed them. We're not trying to change what the policy says. We're trying to prohibit Genever from changing courses from what it initially told AIG. Thank you. THE COURT: Okay. Thank you. Mr. McCormack, would you like to respond? MR. McCORMACK: Your Honor, with the Court's permission, may I just have a few moments to confer with my client? THE COURT: Certainly. Certainly. MR. McCORMACK: Thank you. (Pause.) MR. McCORMACK: May I just step out, Your Honor? THE COURT: Certainly. MR. McCORMACK: Thank you. (Pause.) MR. McCORMACK: Thank you, Your Honor. I want to direct the Court back to the insured person endorsement that Attorney O'Connor -- or which Attorney O'Connor was just referring to. And as I mentioned in my opening portion, that is document No. 66-5. It's pages 44 and 45 of document 66-5. That endorsement does not

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 28 of 41

Ho Wan Kwok - January 30, 2024 28 say what Attorney O'Connor indicated it says. It specifically starts out with respect to coverage provided by this endorsement, all provisions and conditions of the policy apply unless they are changed by this endorsement. And then there are three sections. A refers to part three, liability. Part three liability is part three for liability coverage of the policy. Our request for declaratory relief is under part two, property of the policy. So that first paragraph doesn't apply to this property coverage claim. And then it has paragraph B. It simply identifies the address of Genever Holdings LLC as 71 Fifth Avenue, 18th Floor, New York. That's the location of the apartment that is owned by Genever. And then on the page that we were discussing earlier, and Attorney O'Connor referenced, that refers to, quote, "Part 3-Liability." And again, that's part three, liability coverage of the policy. It's not part two, the property coverage of policy, which is what our summary judgment is focused on. And that part three liability section states that part three liability only applies to an occurrence arising out of the ownership of the residence listed above. Additionally, the limited liability corporation members and manager of the limited liability corporation, trust, or

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 29 of 41

Ho Wan Kwok - January 30, 2024 29 trustees, are also an insured person with respect to the ownership of the residence. Under the clear terms of this endorsement, that's only applicable to the liability coverage of the policy. And the reason why they have that in there is on the first page of the endorsement it changes the insuring agreement of the liability coverage section of the policy. And it says we will pay damages and insured person becomes legally obligated to pay because of personal injury or property damage caused by an occurrence. As I indicated earlier, that's if there was a claim of liability asserted against somebody. This endorsement identifies who the insured persons are for purposes of that liability claim. And the language that we're focused on indicates that an individual, the member of the LLC, might be an insured person for purposes of liability coverage if it relates to ownership of the house. We're not talking about that on the motion for summary judgment. Genever seeks declaratory relief that it's entitled to property coverage under part two of the policy. With respect to the misrepresentation issue, it's clear under the law that AIG would have to establish that there was a material misrepresentation.

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 30 of 41

Ho Wan Kwok - January 30, 2024 30 And there's no issue, as I -- as I indicated earlier, there's no -- there's no materiality here based upon their belief that Mr. Kwok was the sole member of the LLC because it doesn't change the terms of the property coverage of the policy. And also, as I indicated earlier, when Attorney -- when Mr. Despins was appointed Trustee and given control of the LLC, through the corporate governance order in August of '22, and then a new director of Genever (BVI) was appointed, AIG was informed in December of '22 of the bankruptcy of Genever LLC and Genever (BVI), and they were aware of the change in control that took place in August of '22. Three months later, they renewed the policy on March 6th, 2023, which is the policy that applies for purposes of the fire loss that occurred on March 15, 2023. So there was a change in control and Genever, excuse me, AIG doesn't address that issue in their opposition. And we point out in our reply brief there's nothing in the insurance policy that limits coverage or takes away coverage if there's a change in control of a corporation, change of control of Genever LLC. There's nothing in the policy that restricts that. In fact, I think it was in our reply brief that this bankruptcy proceeding, under the clear terms of the

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 31 of 41

Ho Wan Kwok - January 30, 2024 31 policy, has no affect on coverage under the policy. There's a provision in the policy that says bankruptcy proceedings do not affect AIG's obligation to provide coverage under the clear terms of the policy. With respect to this, again, what AIG understood when it issued the first policy in March of 2018 is not material to what occurred when the policy -- when a new policy was issued in March of 2023. But with respect to AIG's argument, there is no dispute that there's nothing in the application for insurance that AIG identifies as any misrepresentation. And we can conclude that by looking at what is called the request to issue coverage. And it's document No. 66-20 in the court record, pages 5 and 6, and pages 7 and 8. And when -- if the Court looks at that document, it will see that there's no representation in that request to bind coverage, in the application, that the insured was anything other than Genever Holdings LLC for purposes of this apartment. There's no reference to an individual being a member. There's no reference to any request for information as to the members of Genever LLC. And Attorney O'Connor pointed to paragraph 8 of Mr. Jordan's declaration, that does not, excuse me, Mr. Gordon's declaration, that does not have any admissible evidence that creates a material issue of fact.

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 32 of 41

Ho Wan Kwok - January 30, 2024 32 Because what Mr. Gerber said in that paragraph -- in that paragraph was that AIG relied upon statements that the broker made in telephone conversations and emails with Mr. Gerber. And as we point out in a footnote in our reply brief, there's no evidence of any telephone conversations or emails between the broker and Mr. Gerber, excuse me, where there was any representation made to that effect. Mr. Gerber admits, in paragraph 8, that he does not know what the broker and Wolfson were told. And what he says is that they would not issue a policy under which Genever (BVI) would be insured. Again, it's not -- this case is not about Genever (BVI) being insured. It's about who owned the apartment and who is entitled to property coverage under section two, the property portion of the policy. And there can be no dispute that that coverage is limited to the named insured, which is Genever Holdings LLC. And there is no dispute, and can be no dispute, that at all times AIG knew and it did issue a policy under which Genever was the named insured. And it knew, and there's no dispute, that Genever owned that apartment under which property coverage, excuse me, owned the apartment -- owned the apartment that is insured under part two, property coverage, of the policy.

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 33 of 41

Ho Wan Kwok - January 30, 2024 33 So there's nothing here that can be -- for which any additional discovery is needed. AIG had the opportunity to conduct whatever discovery it needed to address the issue of property coverage and it has not put forth any evidence to properly refute the limited motion for summary judgment seeking declaratory relief on that issue, and we respectfully request that the motion be granted. Thank you, Your Honor. THE COURT: Thank you. Attorney O'Connor, would you like to respond? MR. O'CONNOR: Very, very briefly, Your Honor. THE COURT: Sure. MR. O'CONNOR: Genever, with respect to misrepresentation, keeps wanting to go back to the LLC endorsement. But as I said at the end of my presentation, that's not -- that's not part of the path of this misrepresentation defense. The question is was AIG told things that weren't true? Would AIG have issued this policy if it had known the true facts? And Mr. Gerber's declaration couldn't be clearer on the answer to those, and at minimum it creates a factual dispute. And Mr. McCormack said, well, there's no evidence

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 34 of 41

Ho Wan Kwok - January 30, 2024 34 of Kwok being mentioned or his name, well, paragraphs 2 through 8 of Mr. Gerber's declaration lay out we got a call from Wolfson, said they had a high net worth individual. A Ms. Skivicki (ph) said it was Ho Wan Kwok. They asked who lives there? They're told Ho Wan Kwok lives there. Then the LLC endorsement comes in and said I left the individual's name off the form for privacy purposes because he's -- well, I can think of a lot of reasons he might have wanted to remain private -- but the declaration makes very clear, it lays out in detail, emails, telephone

conversations, so the idea that there's no record evidence that AIG was told that Ho Wan Kwok was the guy that owned Genever Holdings, just doesn't, that's not consistent with the record.

And the last thing I want to say is this whole debate about what was told to Mr. Gerber, what Mr. Gerber did, and what he would have done, sounds awfully facty to me, and that's -- and that's not a mistake, it's because this is a fact-bound question.

You know, you could go to a trial and the finder of fact could just believe Mr. Gerber. They could think he's a perjurer. But that's not the role for this proceeding right here.

Mr. Gerber has made very clear we would not -- AIG would not have issued this policy had it known the true

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 35 of 41

| | Ho Wan Kwok - January 30, 2024<br>35 | |----|---------------------------------------------------------------| | 1 | facts and that should be accepted on summary judgment.<br>And | | 2 | that's frankly enough to deny partial summary judgment at | | 3 | this point in the case. | | 4 | Thank you. | | 5 | THE COURT:<br>Thank you. | | 6 | All right.<br>Well, I thank you both for your | | 7 | arguments today.<br>I need to go back obviously and look at | | 8 | some of the documents that you've referred to that I have | | 9 | looked at, but I haven't looked at recently, so I need to go | | 10 | -- and I haven't looked at them necessarily in the context | | 11 | of summary judgment. | | 12 | So I need to go and review them as well as the | | 13 | cases that you've cited in your briefs. | | 14 | And I will take the matter under advisement and | | 15 | rule when we can. | | 16 | I will tell you that I can't guarantee it will be | | 17 | in the next two weeks or so.<br>It might be a little longer | | 18 | depending upon other matters that are pressing in other | | 19 | cases in addition to this case. | | 20 | But I understand the issues.<br>You've answered my | | 21 | questions, the questions that I had, and I appreciate that. | | 22 | And I think that I know there's still the issue | | 23 | out there that you both asked me to talk -- decide some time | | 24 | ago that I haven't decided yet, again, unfortunately, | | 25 | because that has -- the priorities just didn't elevate that, | | | |

Ho Wan Kwok - January 30, 2024 36 but believe me I know it's out there. I know you want me to answer that question. And I'm going to try to do both of those things at or around the same time, so that you know where things stand, and then we'll go from there. In the meantime, there is a pretrial order in place. You do whatever you think is appropriate in accordance with the terms and conditions of the pretrial order. I do know, I believe, there was an order issued on consent in this adversary proceeding in the last day or so seeking some discovery. Attorney O'Connor, you were seeking some discovery from the fire department I think, is that right? MR. O'CONNOR: That's right, Your Honor. THE COURT: And that order entered I think, didn't it? MR. O'CONNOR: It did. THE COURT: Okay. MR. O'CONNOR: It entered yesterday. THE COURT: Okay. So we will -- we will see where things go. But I appreciate the presentations of counsel and I will take it under advisement. MR. O'CONNOR: Thank you, Your Honor.

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 36 of 41

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 37 of 41

Ho Wan Kwok - January 30, 2024 37 MR. McCORMACK: Thank you, Your Honor. THE COURT: Okay. MR. O'CONNOR: Your Honor, could I raise one housekeeping matter? THE COURT: Certainly. MR. O'CONNOR: It deals with the preliminary injunction decision which the Court ruled. We all agree with respect to the homeowner's policy. The liability -- the excess policy is a different question. THE COURT: Right. MR. O'CONNOR: The Court directed AIG to withdraw the notices of cancellation, which we did. THE COURT: Right. MR. O'CONNOR: Those policies are expiring the month after -- in March. THE COURT: Oh, that's true, isn't it? Yes. MR. O'CONNOR: And so the question is, it wasn't entirely clear to me whether the Court's injunction was intended to require AIG to keep some coverage in place for Genever. And if that's the Court's intention, then they'll renew the policies. If it's not the Court's -- if the Court's intention was you have these policies, you've got to -- you can't cancel them. And then we'll -- you know, everything

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 38 of 41

Ho Wan Kwok - January 30, 2024 38 else falls where it may, then that's a different question. And I think, at least talking to Mr. McCormack, I think their view is that the Court would have intended that AIG keep coverage in place. I just need an answer. THE COURT: Yeah. You know, I haven't looked back at the preliminary injunction decision for some time as I'm sure you can understand. MR. O'CONNOR: I do. THE COURT: And I will do that. But I believe that, yes, it was the intention that AIG continue to provide insurance as long as the estate pays the premium. Right? I mean, that's -- you know, obviously if the estate didn't pay the premium, that's a different issue. MR. O'CONNOR: Sure. THE COURT: Okay. But that is -- that was the -- I'm virtually certain that was the intent of the -- without having the preliminary injunction decision in front of me. And if for some reason I think otherwise, I will let you know. What time -- what kind of cancellation? Do you have to give them 30 days or something? MR. O'CONNOR: 45, which has -- THE COURT: Oh. MR. O'CONNOR: -- technically passed.

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 39 of 41

Ho Wan Kwok - January 30, 2024 39 THE COURT: Yeah. MR. O'CONNOR: So we're looking for clarification. THE COURT: Well, again, I don't have it in front of me, so I'm a little bit at a disadvantage, but my recollection of the proceedings and the testimony of different people, including some of the testimony you've talked about, both of you have talked about today, and what I found in connection with the preliminary injunction, which obviously is a preliminary injunction, and I understand all your rights and remedies with regard to that, is that, yes, AIG was going to continue to provide insurance -- MR. O'CONNOR: Okay. THE COURT: -- to Genever as long as there was payment of premium. MR. O'CONNOR: Sure. Understood, Your Honor. THE COURT: Okay. MR. O'CONNOR: We'll proceed on that basis, unless the Court tells us otherwise. THE COURT: And I'll tell you why else I believe that's accurate, even though I don't have the preliminary injunction in front of me, but I have recollections, you know, which you can correct if you think I'm wrong, but there was a whole section of that hearing about the inability to obtain other insurance, right? MR. O'CONNOR: There was. There was.

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 40 of 41

Ho Wan Kwok - January 30, 2024 40 THE COURT: And the -- and in a Chapter 11 -- in a Chapter 7 case, it doesn't even have to be a Chapter 11, an asset can't be uninsured. It just can't. And so -- I mean, it can, but that's a problem, that's a much bigger problem. Right? And my, again, recollection is that I think I made it clear to Trustee Despins that the estate has to pay. You've got pay the premium. Okay? MR. O'CONNOR: The Court made that clear. THE COURT: But if the premium is paid, then, yes, the coverage should continue. MR. O'CONNOR: Okay. THE COURT: Okay? MR. O'CONNOR: We will -- thank you, Your Honor. We'll proceed down the path of renewal unless the Court at some point tells us otherwise. THE COURT: Yeah. And I would tell you that I don't -- I believe I will not tell you anything other than that, but I will certainly go back and look at it based upon your request today. MR. O'CONNOR: Thank you, Your Honor. THE COURT: Okay. Thank you. MR. McCORMACK: Thank you, Your Honor. THE COURT: Okay. Thank you, all. Does that conclude anything we need to do in the

Case 22-50073 Doc 2585 Filed 02/07/24 Entered 02/07/24 21:27:14 Page 41 of 41

| | Ho Wan Kwok - January 30, 2024 | 41 | |----|------------------------------------------------------------|----| | 1 | Kwok cases today, Trustee Despins? | | | 2 | MR. DESPINS:<br>Yes, Your Honor. | | | 3 | THE COURT:<br>Okay.<br>All right.<br>Thank you, all. | | | 4 | (Proceedings concluded at 3:08 p.m.) | | | 5 | I, CHRISTINE FIORE, court-approved | | | 6 | transcriber and certified electronic reporter and | | | 7 | transcriber, certify that the foregoing is a correct | | | 8 | transcript from the official electronic sound recording of | | | 9 | the proceedings in the above-entitled matter. | | | 10 | | | | 11 | | | | 12 | February 7, 2024 | | | 13 | Christine Fiore, CERT | | | 14 | | | | 15 | | | | 16 | | | | 17 | | | | 18 | | | | 19 | | | | 20 | | | | 21 | | | | 22 | | | | 23 | | | | 24 | | | | 25 | | | | | | |