Opinion
No. 656986/2022 Motion Seq. No. 001
10-20-2022
PHASE 1 GROUP, INC., Plaintiff, v. THE BURLINGTON INSURANCE COMPANY, Defendant.
Unpublished Opinion
DECISION + ORDER ON MOTION
ARLENE P. BLUTH, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 6, 7, 8, 9, 10, 11,12, 13, 14, 15, 16, 17, 18 were read on this motion to/for DISMISS.
Defendant's motion to dismiss plaintiffs fourth cause of action is denied.
Background
This action concerns plaintiffs allegation that defendant improperly denied insurance coverage to plaintiff relating to an ongoing underlying litigation. Plaintiff contends it is owed defense and indemnity from defendant, but defendant has refused in bad faith to defend its insured.
Plaintiff maintains it is a plumbing company and it subcontracted with Moretrench for a construction job on Governor's Island. The general contractor, Turner, then commenced a lawsuit in which it alleged that while Moretrench was excavating a trench along a road, it struck an electrical conduit and caused substantial damage to the power grid on Governor's Island. Turner alleged two cases of action against plaintiff.
Plaintiff brings four causes of action against defendant, including declaratory relief that defendant has a duty to defend plaintiff in the underlying action, declaratory relief that defendant must indemnify plaintiff if plaintiff is found liable in the underlying action, for breach of contract and for breach of the implied duty of good faith and fair dealing.
Defendant brings this motion to dismiss the fourth cause of action for breach of the implied duty of good faith and fair dealing on the ground that it is duplicative of the breach of contract action. It emphasizes that this claim is premised on the same facts that allegedly support the breach of contract claim and so it should be dismissed.
In opposition, plaintiff insists it has alleged distinct facts that relate to the breach of the implied duty of good faith and fair dealing and so this claim should survive the instant motion. It claims it alleges that defendant acted in bad faith by denying coverage based on an improper application of the insurance policy provisions about the duty to defend.
In reply, defendant emphasizes it merely took a position that it did not have to provide coverage and that conclusion does not automatically constitute bad faith. It insists that the denial coverage is the entire basis for this claim and so it is duplicative because it stems from how defendant applied plaintiffs claim to the applicable insurance policy.
Discussion
"Where a good faith claim arises from the same facts and seeks the same damages as a breach of contract claim, it should be dismissed" (Mill Fin., LLC v Gillett, 122 A.D.3d 98, 104, 992 N.Y.S.2d 20 [1st Dept 2014]).
Here, the fourth cause of action (breach of the implied covenant of good faith and fair dealing) alleges that the insurance policy "constitutes an enforceable agreement that imposes upon Burlington certain obligations, including the obligation to defend Phase 1 and to participate in settlement of covered claims" (NYSCEF Doc. No. 2, ¶ 90). Plaintiff also contends that defendant breached the insurance policy by "by refusing to defend Phase 1, refusing to participate in ongoing mediation in the Litigation, and possibly exposing Phase 1 to judgment in excess of the limits of liability of applicable insurance policies" (id. at ¶ 91). Plaintiff seeks compensatory and consequential damages for this cause of action but only compensatory damages for the third claim for breach of contract (id. at 13-14).
The Court finds that although these allegations arise out of similar facts as the third cause of action for breach of contract, plaintiff seeks different damages for the good faith claim. That requires the Court to deny the motion. Both causes of action assert that defendant breached the contract (the insurance policy) by refusing to provide defense and indemnity. But the good faith and fair dealing cause of action asserts consequential damages while the breach of contract claim does not. This fourth claim also seeks legal fees while the third claim does not.
As stated above, case law is clear that dismissal is appropriate only where the claim seeks the same damages. Where claims for the breach of contract and breach of the implied covenant of good faith and fair dealing "seek different categories and/or types of damages, the cause of action seeking damages for breach of the implied covenant of good faith and fair dealing should not be dismissed as "duplicative" of the cause of action alleging breach of contract" (E. Ramapo Cent. School Dist. v New York Schools Ins. Reciprocal, 199 A.D.3d 881, 885, 158 N.Y.S.3d 173 [2d Dept 2021]).
Accordingly, it is hereby
ORDERED that defendant's motion to dismiss the fourth cause of action is denied and defendant shall answer pursuant to the CPLR.
Conference: December 12, 2022 at 11:30 a.m. By December 5, 2022, the parties are directed to upload 1) a discovery stipulation signed by all parties, 2) a stipulation of partial agreement about discovery or 3) letters explaining why no agreement about discovery could be reached. The Court will then assess whether a conference is required (for instance, if the parties submit a discovery stipulation that satisfies this part's rules, then an in-person conference may not be required). The failure to upload anything by December 5, 2022 will result in an adjournment of the conference.