Opinion
Index No.: 159101/2014
10-05-2018
THE GLAZIER GROUP, INC. and DELTA DALLAS ALPHA CORP., Plaintiffs, v. NOVA CASUALTY COMPANY, HUB INTERNATIONAL NORTHEAST LIMITED, and IVY FISCHER, Defendants.
NYSCEF DOC. NO. 441 Mot. Seq. Nos. 003, 006 MELISSA A. CRANE, J.S.C. :
Motion sequence numbers 003 and 006 are consolidated for disposition. Defendant Nova Casualty Company (Nova) moves (mot. seq. no. 003), pursuant to CPLR 3212, for summary judgment dismissing the amended complaint against it. Plaintiff the Glazier Group, Inc. (TGG) cross-moves, pursuant to CPLR 3212, for summary judgment on the issue of liability.
Nova's notice of motion also seeks relief pursuant to CPLR 3211. Nova's counsel stated at argument, however, that the motion was essentially for summary judgment (court tr dated 4/26/18 at 3:26-4:2). Additionally, that branch of the motion which was to amend Nova's answer was granted without opposition (id. at 3). Finally, Nova requests that its motion be directed at the amended complaint, as the causes of action asserted therein are identical. The court will do so.
Defendant HUB International Northeast Limited (HUB) moves (mot. seq. no. 006), pursuant to CPLR 3211 (a) (1), (a) (5), and (a) (7), to dismiss parts of the amended complaint based on documentary evidence, the statute of limitations, and for failure to state a cause of action. Nova cross-moves and joins in HUB's motion.
Background
TGG is the parent company of plaintiff Delta Dallas Alpha Corp. (Delta), that operated the "Bridgewaters" catering hall at 11 Fulton Street, New York, NY (first amended complaint [FAC], ¶¶ 8-11). Nova is an insurance company. It issued an insurance policy to TGG covering several locations, including Bridgewaters (id., ¶ 12, Scharpf reply affirmation, exhibit A, Commercial Property and General Liability insurance policy [the Bridgewaters Policy] at 3). HUB was TGG's insurance broker, and procured the Bridgewaters Policy from Nova (FAC, ¶ 21).
TGG alleges that it shared a close relationship with HUB, and that TGG's principal, Peter Glazier, and HUB's vice president of business development, Robert Fiorito, regularly interacted socially (id., ¶¶ 21-22). Moreover, HUB occasionally lent TGG money to make premium payments, and advised TGG on fulfilling its insurance needs (id., ¶ 21).
When Glazier first met with Fiorito to obtain an insurance policy, he provided Fiorito with a copy of the Bridgewaters lease, that specified the insurance TGG had to carry (id., ¶ 26). The lease required TGG to carry, among other things, flood insurance (id., ¶ 27). Glazier allegedly believed that TGG had always had flood insurance, but after Hurricane Irene in 2011, he contacted Fiorito to confirm that HUB had procured this type of coverage (id., ¶ 28). Fiorito assured Glazier that HUB had procured all necessary coverage (id., ¶ 31).
In December 2011, Nova issued the Bridgewaters Policy to TGG for the year running from December 13, 2011 to December 13, 2012 (Bridgewaters Policy at 1). The policy provides coverage for damage to Business Personal Property "located in or on the building," including "machinery and equipment," "personal property owned by . . . and used in [the] business," and "improvements and betterments" that are part of TGG's building that it does not own (Bridgewaters Policy, Building and Personal Property Coverage Form, ¶ A [1] [b]). Additionally, the policy covers loss of Business Income and defined Extra Expenses caused by "direct physical loss or damage to the property" (Bridgewaters Policy, Business Income Coverage Form, ¶ A [1]). Several endorsements modify coverage, including an Equipment Breakdown Extension Endorsement (the Breakdown Endorsement). The Breakdown Endorsement states that Nova will provide coverage for "a fortuitous event that causes direct physical damage to 'covered equipment,'" including by "mechanical breakdown" or "artificially generated electrical magnetic or electromagnetic energy" (Bridgewaters Policy, Breakdown Endorsement, ¶ A [1]). "Covered equipment is defined in part as "Covered Property that . . . utilizes energy" (id., ¶ E [3] [a]).
The Causes of Loss - Special Form, sets forth exclusions and limitations on coverage. The Special Form provides that Nova will not cover any loss or damage to covered property as a result of an excluded cause, "regardless of any other cause or event that contributes concurrently or in any sequence to the loss" (Bridgewaters Policy, Causes of Loss - Special Form, ¶ B [1]). One of the excluded causes of loss is for water (id., ¶ B [1] [g]). This exclusion states that Nova will not provide coverage for "[f]lood, surface water, waves (including tidal wave and tsunami), tides, tidal water, overflow of any body of water, or spray from any of these, all whether or not driven by wind (including storm surge)" (Bridgewaters Policy, Water Exclusion Endorsement, ¶ B [1]).
On October 29, 2012, Superstorm Sandy struck New York City. The next day, Glazier entered Bridgewaters and found three to four inches of water throughout the first floor (FAC, ¶ 36). Additionally, there were water marks five to six feet up on the walls, and the elevator pits were filled with water (id.). TGG filed a claim with Nova under the Bridgewaters Policy for business income loss and damage to business personal property, and continued to spend money on payroll and operations, believing that the policy covered the loss (id., ¶¶ 37-38, 41). In total, TGG spent $25,000 per week on operations, and returned over $1 million in deposits for canceled events while Bridgewaters was unusable (id., ¶¶ 39-40).
On November 19, 2012, Otis Elevator Company (Otis) provided an estimate on necessary repairs to the elevators, titled "Repairs Due to Hurricane Sandy" (Lerner affirmation dated 11/30/17, exhibit B, Otis estimate). Otis stated that the cause of the damage was "Hurricane Sandy and [was] water related" (id. at 6). On December 4, 2012, York Specialized Loss Adjusting (York), Nova's adjustors, issued an initial report on the damage to Bridgewaters and TGG's claim (Lerner affirmation, exhibit D, Bruaski report). Mark Bruaski, York's executive general adjuster, stated in the report that "this loss was caused by heavy winds and subsequent flood conditions as a result of Named Storm Hurricane Sandy" (id. at 9). Relevant to the motion, Bruaski also stated that there was mechanical damage to the elevators caused by "either the named storm or an electrical surge" (id. at 13). A further inspection, by the Hartford Steam Boiler Insurance Company, revealed that the drive units for both elevators "exhibited corrosion consistent with being submerged in saltwater" (Slootweg aff dated 9/29/17, exhibit 2, Bridgewaters denial letter at 2).
On January 14, 2013, the South Street Seaport Limited Partnership (the Seaport) commenced an eviction proceeding against Delta (the Seaport litigation) (Bryant affirmation dated 12/6/17, exhibit E, notice of petition). On May 28, 2013, the court (Nervo, J.) found after trial that the Seaport had established entitlement to unpaid rent in the amount of $272,207.78, and issued a judgment of eviction (Bryant affirmation, exhibit 6, decision and order dated 5/28/13).
Relying on the flood exclusion, Nova ultimately refused to indemnify TGG under the policy (id., ¶ 44; Slootweg aff, exhibit 2, Bridgewaters denial letter dated 11/13/13 at 2). Plaintiffs allege that, as a result, they were forced to close Bridgewaters and surrender Delta Dallas' lease on the property four years early (id., ¶ 78). Plaintiffs claim a related additional loss of business income of approximately $6 million (id.).
Plaintiffs filed their initial complaint against Nova and HUB on September 16, 2014 (NYSCEF Doc. No. 1, complaint dated 9/16/14). Plaintiffs spoke with defendant Ivy Fischer (Fischer), HUB's general counsel, on September 30, 2014, to discuss the lawsuit (FAC, ¶ 47). Following the meeting, Fischer sent plaintiffs an email attaching several documents that purported to show that plaintiffs were aware that the Bridgewaters Policy lacked flood coverage (id., ¶ 48). Among these documents was an agenda for a meeting that plaintiffs claim they did not attend, and an email dated February 7, 2012 from HUB account executive M'Lynda Kopacka, stating that plaintiffs had not applied for flood coverage and HUB would offer none (id., ¶¶ 49-50). Plaintiffs claimed HUB never sent this email (id., ¶¶ 51-53). Plaintiffs informed HUB that they believed the email was fraudulent. However, HUB did not immediately act on this accusation. In fact, HUB produced the email in discovery (id., ¶¶ 55-58). At her deposition, Kopacka initially testified as to how she might have sent the email, before recanting her testimony after instruction from HUB's counsel. She then admitted "the email did not "go through" (id., ¶¶ 60-62). Plaintiffs filed a motion to compel production of discovery related to the email. On the eve of the deadline to file its opposition, HUB's counsel emailed plaintiffs that HUB had investigated the email, found it to be fraudulent, and terminated Kopacka (id., ¶ 70).
On September 26, 2017, while the parties were briefing Nova's motion for summary judgment, plaintiffs filed the FAC (NYSCEF Doc. No. 211, FAC dated 9/26/17). The FAC alleges eight causes of action: breach of contract - loss of business income against Nova (first cause of action); breach of contract - business personal property against Nova (second cause of action); negligence against HUB (third cause of action); negligent misrepresentation against HUB (fourth cause of action); breach of contract against HUB (fifth cause of action); fraud against HUB (sixth cause of action); breach of fiduciary duty against HUB (seventh cause of action); and violation of Judiciary Law § 487 against Fischer (eighth cause of action).
Discussion
Nova's Motion for Summary Judgment
Summary judgment is appropriate where there are no disputed material facts (Andre v Pomeroy, 35 NY2d 361, 364 [1974]). The moving party must tender sufficient evidentiary proof to warrant judgment as a matter of law (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). The opposing party must proffer its own evidence to show disputed material facts requiring a trial (id.). However, the reviewing court should accept the opposing party's evidence as true (Hotopp Assoc. v Victoria's Secret Stores, 256 AD2d 285, 286-287 [1st Dept 1998]), and give the opposing party the benefit of all reasonable inferences (Negri v Stop & Shop, 65 NY2d 625, 626 [1985]).
Nova moves for summary judgment dismissing both causes of action against it, that concern TGG's claims for business income loss and business personal property damage, respectively. The central issue on both causes of action is whether or not the policy's water exclusion apples to bar coverage, as that exclusion applies to the entire policy. Nova argues that the water exclusion is unambiguous, and that the policy bars recovery for any loss caused by water damage, whether partially or in full. Further, it claims that the damage to the elevators does not trigger coverage under the Breakdown endorsement, as the water exclusion applies to claims made under that endorsement. In opposition, TGG claims that Nova should cover the elevator damage under the Breakdown endorsement, that also covers loss of business income. Additionally, TGG claims that the language of the Breakdown endorsement excepts it from the exclusions listed in the causes of loss form, including the water exclusion.
"The unambiguous provisions of an insurance policy, as with any written contract, must be afforded their plain and ordinary meaning" (Broad St., LLC v Gulf Ins. Co., 37 AD3d 126, 130-31 [1st Dept 2006]). The policy should be read as a whole, and no particular words or phrases should receive undue emphasis (Bailey v Fish & Neave, 8 NY3d 523, 528 [2007]). Courts should give effect to every clause and word of an insurance contract (Northville Indus. Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 89 NY2d 621, 633 [1997]). An interpretation is incorrect if "some provisions are rendered meaningless" (County of Columbia v Continental Ins. Co., 83 NY2d 618, 628 [1996]). It is the insured's burden to show that the provisions of a policy provide coverage (BP A.C. Corp. v One Beacon Ins. Group, 33 AD3d 116, 134 [1st Dept 2006]). Moreover, where the policy language offers no reasonable basis for a difference of opinion, the court should not find it ambiguous (Breed v Insurance Co. of N.A., 46 NY2d 351, 355 [1978]). Provisions in a contract are not ambiguous merely because the parties interpret them differently (Mount Vernon Fire Ins. Co. v Creative Housing Ltd., 88 NY2d 347, 352 [1996]).
Here, the water exclusion applies to bar coverage. The water exclusion's text includes damage from flood waters, water driven by wind, and storm surge, all of which adequately describe Hurricane Sandy and the damage it caused to Bridgewaters (Bridgewaters Policy, Water Exclusion Endorsement, ¶ B [1]). While the Bruaski report suggests that an electrical surge could have been responsible for some of the damage to the elevators, the Bridgewaters policy makes clear that there is no coverage for damage that an excluded cause of loss even partially causes (Bridgewaters Policy, Causes of Loss - Special Form, ¶ B [1]). Thus, the exclusion bars coverage regardless of whether Bruaski's report is correct as to any part an electrical surge played. As the Appellate Division, First Department has held,
"[i]n determining whether a particular loss was caused by an event covered by an insurance policy where other, noncovered events operate more closely in time or space in producing the loss, the question of whether the covered event was sufficiently proximate to the loss . . . will depend on whether it was the dominant and efficient cause"(Throgs Neck Bagels v GA Ins. Co. of New York, 241 AD2d 66, 69 [1st Dept 1998]). Here, there is no question that the flooding was responsible for the damages at Bridgewaters. The Bruaski report states that heavy rains and subsequent flooding caused the damage (Bruaski report at 9). A later inspection showed that the elevators mechanical units showed damage consistent with saltwater immersion (Slootweg aff, exhibit 2, Bridgewaters denial letter at 2).
Plaintiffs' argument that the water exclusion does not apply to coverage under the Breakdown Endorsement is unavailing. The Breakdown Endorsement provides that "all exclusions in the Causes of Loss Forms apply except as modified below and to the extent that coverage is specifically provided by [the Breakdown Endorsement]" (Bridgewaters Policy, Breakdown Endorsement, ¶ A [3]). The policy then specifies how the Breakdown Endorsement modifies each Causes of Loss form, and nowhere mentions the water exclusion specifically (id., ¶ A [3] [a]). Plaintiffs argue that the court should read the phrase "except as modified below and to the extent coverage is specifically provided" to bar all exclusions when the Breakdown Endorsement applies. However, this interpretation would render the specific modifications immediately following that language meaningless. The court may not interpret the policy in a way that renders any provision of it meaningless (County of Columbia, 83 NY2d at 628).
Plaintiffs also rely on the testimony of John Slootweg, Nova's property claim director (Slootweg aff, ¶ 1). However, a review of Slootweg's testimony shows that his testimony is inconsistent as to whether the exclusion would apply (compare Lerner affirmation, exhibit E, Slootweg EBT dated 9/27/16 at 93:7 ["Cause of loss form would apply"] with id. at 93:22-23 ["If there is coverage under this form, they do not apply"]). In any case, the policy language is clear and unambiguous, and parole evidence may not vary it (e.g. Video-Cinema Films v Seaboard Sur. Co., 214 AD2d 433, 434 [1st Dept 1995]). Thus, the water exclusion bars all coverage under the Breakdown Endorsement. Accordingly, the court grants Nova's motion for summary judgment dismissing this action against it. The court has considered the remaining arguments of the parties with respect to Nova's motion and finds them unavailing.
HUB's Motion to Dismiss Partially
"On a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction" (Leon v Martinez, 84 NY2d 83, 87 [1994]). "[The court] accept[s] the facts as alleged in the complaint as true, accord[ing] plaintiffs the benefit of every possible favorable inference, and determin[ing] only whether the facts as alleged fit within any cognizable legal theory" (id. at 87-88). "[W]here . . . the allegations consist of bare legal conclusions, as well as factual claims either inherently incredible or flatly contradicted by documentary evidence, they are not entitled to such consideration" (Ullmann v Norma Kamali, Inc., 207 AD2d 691, 692 [1st Dept 1994]).
As an initial matter, Nova cross-moves in support of HUB's motion. Leaving aside whether such application is procedurally proper, the court has dismissed this action against Nova. Accordingly, Nova's cross motion is dismissed as moot.
Additionally, HUB moves to dismiss the eighth cause of action alleged against Fischer. As plaintiffs do not allege this cause of action against HUB, HUB may not move to dismiss it (see Tambriz v P.G.K. Luncheonette, Inc., 124 AD3d 626, 628 [2d Dept 2015] ["To the extent that AYT and 6010 moved for summary judgment dismissing the subrogation cause of action . . . insofar as asserted against 6010, that relief is not available because no such cause of action was asserted against 6010"]). Moreover, this court has already denied Ivy Fisher's motion, via separate counsel, to dismiss (see order on motion no. 7 dated 4/27/2018). Accordingly, that branch of HUB's motion is denied.
HUB further argues that res judicata, collateral estoppel, and judicial estoppel, should apply to bar plaintiffs from litigating issues related to their eviction from Bridgewaters, based on the decision evicting plaintiffs in the Seaport litigation and statements made in that case. However, HUB was not a party to that litigation, preventing it from invoking res judicata (e.g. Arroyo-Graulau v Merrill Lynch Pierce Fenner & Smith, Inc., 135 AD3d 1, 4 [1st Dept 2015] ["Res judicata does not apply in this case because a linchpin of the doctrine . . . an identity of parties litigating against each other in the two actions, is missing"]). Moreover, plaintiffs did not obtain a judgment in their favor in the Seaport litigation. This prevents HUB from invoking judicial estoppel (Kalikow 78/79 Co. v State of New York, 174 AD2d 7, 11 [1st Dept 1992] ["judicial estoppel may not be asserted as a defense unless it can be shown that the party against whom the estoppel is sought procured a judgment in its favor as a result of the inconsistent position taken in the prior proceeding"]). Finally, in order to collaterally estop plaintiffs from arguing that they were evicted because Nova failed to indemnify them under the policy, that issue must not only have been decided in the prior action and be decisive here, but plaintiffs must have had a full and fair opportunity to litigate it (Kaufman v Eli Lilly & Co., 65 NY2d 449, 455 [1985]). HUB has failed to establish any of these elements. Thus, to the extent that HUB's motion relies on any variety of estoppel argument described above, it is denied.
A. Negligence (Third Cause of Action)
For their third cause of action, plaintiffs allege that HUB, knowing that plaintiffs were required to maintain flood insurance for Bridgewaters, negligently failed to obtain this insurance. HUB argues that plaintiffs' failure to pay rent arrearage that had accumulated prior to the storm is a superseding cause of their damages. Further, they claim that plaintiffs' damages must be limited, either to the 180-day period set forth in the policy or up until they were evicted from the premises. In opposition, plaintiffs argue that both causation and damages are typically left for the fact finder to resolve, and not the court on a motion to dismiss. Moreover, plaintiffs state that their damages are a normal consequence of HUB's actions.
"To establish a prima facie case of negligence under New York law, a plaintiff must demonstrate that the defendant owed him or her a duty of reasonable care, a breach of that duty, and a resulting injury proximately caused by the breach" (Elmaliach v Bank of China Ltd., 110 AD3d 192, 199 [1st Dept 2013]). Insurance brokers owe a common law duty "to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so" (Murphy v Kuhn, 90 NY2d 266, 270 [1997]).
Here, plaintiffs have adequately alleged that they informed HUB that they needed flood coverage, that HUB failed to procure such coverage, and that HUB's failure to procure this coverage caused damages, including the loss of the premises. Accepting the facts alleged in the complaint as true, as the court must on this motion (Leon, 84 NY2d at 87-88), the court must credit plaintiffs' allegation that they were unable to continue paying rent due to the losses they suffered from the storm. HUB's contention that Delta was evicted from Bridgewaters, due to an unrelated failure to pay rent, raises a factual question the court cannot resolve on a motion to dismiss (see Williams v Citigroup, Inc., 104 AD3d 521, 522 [1st Dept 2013] [fact-intensive analyses ill-suited to resolution on dismissal motions]). Moreover, HUB's proposed damage limitation similarly raises factual questions inappropriate for resolution at this time (Red Oak Fund, L.P. v MacKenzie Partners, Inc., 90 AD3d 527, 528-29 [1st Dept 2011] ["Although plaintiff may not in the end be able to prove its damages with reasonable certainty, 'a determination to that effect at this juncture would be premature'"]; G.H. Dorety Constr. v Joseph Francese, Inc., 252 AD2d 656, 657 [3d Dept 1998] ["Defendants' challenge to plaintiff's calculation of damages is not within the purview of its motion to dismiss pursuant to CPLR 3211"]). Indeed, HUB does not make clear why, for example, on a tort claim the policy's indemnification provision should limit damages. Accordingly, the court denies that branch of HUB's motion to dismiss the third cause of action for negligence.
For the same reason, that branch of HUB's motion to limit the damages available on plaintiffs' breach of contract is also denied.
B. Negligent Misrepresentation (Fourth Cause of Action)
For their fourth cause of action, plaintiffs allege that HUB had a special relationship with plaintiffs, who relied on HUB's advice and counsel in insurance matters. Plaintiffs further allege that they relied on Fiorito's statements that HUB had procured all of the necessary insurance for Bridgewaters, and did not obtain additional coverage. HUB argues that there was no such special relationship between the parties. In opposition, plaintiffs argue that their course of dealing with HUB establishes such a relationship.
Negligent misrepresentation requires proof "(1) [of] the existence of a special or privity-like relationship imposing a duty on [Plaintiffs and Third-Party Defendants] to impart correct information to [Defendants/Third-Party Plaintiffs]; (2) that the information was incorrect; and (3) reasonable reliance on the information" (J.A.O. Acquisition Corp. v. Stavitsky, 8 NY3d 144, 148 [2007]). In the context of insurance brokers and insureds, a special relationship may arise when
"(1) the agent receives compensation for consultation apart from payment of the premiums; (2) there was some interaction regarding a question of coverage, with the insured relying on the expertise of the agent; or (3) there is a course of dealing over an extended period of time which would have put objectively reasonable insurance agents on notice that their advice was being sought and specially relied on"(Voss v Netherlands Ins. Co., 22 NY3d 728, 735 [2014] [internal citation omitted]). "[T]he issue of whether such additional responsibilities should be recognized and given legal effect is governed by the particular relationship between the parties and is best determined on a case-by-case basis" (Murphy v Kuhn, 90 NY2d 266, 272 [1997]).
Here, plaintiffs successfully allege that they reasonably relied on Fiorito's incorrect statement that HUB had procured flood insurance. Further, while the complaint does not allege that TGG paid HUB for consultation in addition to premium payments, plaintiffs do claim that that TGG came to HUB with coverage questions, and that HUB was TGG's exclusive insurance broker (FAC, ¶¶ 113-115). On a motion to dismiss, these allegations are sufficient to show a special relationship (Voss, 22 NY3d at 735).
Nevertheless, this claim must be dismissed as duplicative. The core allegation underlying this claim is that HUB failed to procure flood insurance for TGG, the same allegation giving rise to plaintiffs' claims for negligence and breach of contract. Moreover, plaintiff seeks the same damages on each of those three claims, as well as additional consequential damages on the breach of contract claim (FAC, ¶¶ 187-189). A cause of action is duplicative where it arises from the same facts and alleges the same damages as another asserted claim (e.g. Soni v. Pryor, 102 AD3d 856, 858 [2d Dept 2013]; Estate of Nevelson v Carro, Spanbock, Kaster & Cuiffo, 290 AD2d 399, 400 [1st Dept 2002] ["It is not the theory behind a claim that determines whether it is duplicative"]). Duplicative claims are subject to dismissal under CPLR 3211(a)(7) (e.g. Pollak v Moore, 85 AD3d 578, 579 [1st Dept 2011] ["Plaintiffs alternative claims sounding in breach of fiduciary duty, fraud, fraud in the inducement and negligent misrepresentation were duplicative of his breach of contract claims and, as such, properly dismissed"]). Accordingly, the court grants that branch of HUB's motion to dismiss the fourth cause of action. C. Fraud (Sixth Cause of Action)
For their sixth cause of action, plaintiffs allege that HUB manufactured the Kopacka email in order to induce plaintiffs to settle or withdraw their lawsuit. Confusingly, plaintiffs also appear to allege that HUB fraudulently misrepresented that it had procured all necessary coverage for Bridgewaters, though its damages claim for fraud only seeks punitive damages and "the costs and reasonable attorneys' fees incurred in connection with uncovering HUB's fraud" (FAC, ¶ 190). HUB argues that plaintiffs could not have relied on HUB's forged email, as they did not withdraw or settle this action. Further, HUB states that the fraud claim is duplicative of the breach of contract claim to the extent it relates to HUB's failure to procure flood coverage. In opposition, plaintiffs argue that they have undertaken considerable time and effort to expose HUB's fraud, and should therefore be able to recover damages. Additionally, plaintiffs argue that the fraud claim is distinct from the breach of contract claim because HUB had already breached its contract with TGG when it misrepresented to plaintiffs that it had acquired flood insurance. "Generally, in a claim for fraudulent misrepresentation, a plaintiff must allege a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury" (Mandarin Trading Ltd. v Wildenstein, 16 NY3d 173, 178 [2011] [internal quotation marks and citations omitted]). If the injured party does not allege "misrepresentations collateral or extraneous to the agreement[]" the fraud claim is duplicative of a breach of contract claim and must be dismissed (RGH Liquidating Trust v Deloitte & Touche LLP, 47 AD3d 516, 517 [1st Dept 2008]).
With respect to Fiorito's alleged misrepresentation that HUB had procured all necessary insurance, this claim arises out of HUB's alleged contractual failure to procure requested insurance. Plaintiffs do not allege fraud collateral to the complaint. The alleged misrepresentation, while posited under a different theory, arises out of that same fact (Nevelson, 290 AD2d at 400). Essentially, plaintiffs allege, HUB did not intend to fulfill its contractual duty to procure insurance. This is insufficient to maintain a separate fraud claim (New York Univ. v Continental Ins. Co., 87 NY2d 308, 318 [1995] ["General allegations that defendant entered into a contract while lacking the intent to perform it are insufficient to support the claim"]).
With respect to the forged email, plaintiffs have successfully alleged, and HUB has essentially conceded, that a HUB employee manufactured an email to TGG in an attempt to cover up HUB's failure to procure flood insurance. However, the fraud claim is not a viable vehicle to hold HUB responsible for its employee's conduct. Plaintiffs allege that they have suffered considerable expense to expose the email as fraudulent, because HUB refused to admit it. However, the fact remains that plaintiff's were never duped into believing that the email was legitimate. To the contrary, plaintiffs persisted in this lawsuit and stuck to their contention that the email was a forgery. Accordingly, plaintiffs cannot allege the element of justifiable reliance (see Shaffer v. Gilberg, 125 A.D.3d 632 [2d Dep't 2015](["plaintiff always maintained that he knew the promissory notes and loans were fabricated and, thus, he failed to allege the necessary elements of justifiable reliance on a material misrepresentation"]; see also Dweck v Oppenheim & Co, Inc., 30 AD3d 163 [1st Dep't 2006]).
All is not lost for plaintiff however. This court previously declined to sanction HUB for discovery abuses without prejudice to plaintiff renewing that application, pending further development of the record. Should it turn out that HUB unreasonably delayed its investigation into the forged email, or withheld its knowledge about it from discovery, certainly sanctions in the form of attorney's fees would then be appropriate.
Finally, plaintiffs' claim for punitive damages also fails. "[A] private party seeking to recover punitive damages must not only demonstrate egregious tortious conduct by which he or she was aggrieved, but also that such conduct was part of a pattern of similar conduct directed at the public generally" (Rocanova v Equitable Life Assur. Soc. of U.S., 83 NY2d 603, 613 [1994]). Plaintiffs do not allege any conduct by HUB directed towards the public generally. The cases plaintiffs cite are not to the contrary. In Johnson v Proskauer Rose LLP (129 AD3d 59, 73-74 [1st Dept 2015]), defendant's conduct was "alleged to have been directed at a wide swath of clients." In Bernstein v Kelso & Co. (231 AD2d 314, 318 [1st Dept 1997]), defendant had allegedly defrauded all the shareholders of a corporation. Accordingly, that branch of HUB's motion to dismiss the sixth cause of action is granted.
C. Breach of Fiduciary Duty (Seventh Cause of Action)
For their seventh cause of action, as with the fourth cause of action for negligent misrepresentation, plaintiffs allege that they had a fiduciary relationship with HUB, that HUB breached such duty when it failed to obtain flood coverage and failed to inform plaintiffs that it had not, and that it breached such duty when it manufactured the Kopacka email. HUB argues that it has no fiduciary relationship with plaintiffs that would support such a claim. Further, HUB states that the breach of fiduciary duty claim is duplicative of the contract claim. Finally, to the extent this claim is brought based on the Kopacka email, HUB asserts that any fiduciary relationship that existed was terminated when plaintiffs sued HUB, which predates the Kopacka email. In opposition, plaintiffs claim that the fiduciary duty claim is factually distinct because the fiduciary duty is separate from HUB's duty under the contract. Moreover, plaintiffs argue, as with the negligent misrepresentation claim, that they have adequately pleaded a fiduciary relationship between the parties.
"A fiduciary relationship arises between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation[ship]" (Roni LLC v Arfa, 18 NY3d 846, 848 [2011] [internal quotation marks and citation omitted]). "Put differently, a fiduciary relation[ship] exists when confidence is reposed on one side and there is resulting superiority and influence on the other" (id.). "Ascertaining the existence of a fiduciary relationship inevitably requires a fact-specific inquiry" (id.). The Appellate Division, First Department consistently holds that it is appropriate to dismiss a breach of fiduciary duty claim that duplicates a breach of contract claim (see, e.g. Stefatos v Frezza, 95 AD3d 787, 787-88 [1st Dept 2013]).
Here, any claim related to the forged email fails. HUB proffered the email after plaintiffs commenced this action and terminated any fiduciary duty that may have existed (EBC I, Inc. v Goldman Sachs & Co., 91 AD3d 211, 215 [1st Dept 2011]). Moreover, regardless of whether plaintiffs have pleaded a fiduciary relationship, this claim is duplicative of the claim for breach of contract, to the extent it concerns HUB's failure to procure flood insurance. Plaintiffs allege various statements, as well as HUB's failure to inform them that HUB did not procure flood insurance, but the crux of this claim is that HUB failed to procure flood insurance. Any potential breach of a fiduciary duty in this instance does not "spring from circumstances extraneous to, and not constituting elements of, the contract" (Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 389 [1987]). Moreover, both claims seek identical damages (Soni, 102 AD3d at 858). Plaintiffs' claim for punitive damages on this cause of action fails for the same reason as it does in relation to the fraud cause of action.
Accordingly, that branch of HUB's motion to dismiss the seventh cause of action for breach of fiduciary duty is granted. The court has considered the remaining arguments of the parties on this motion and finds them to be unavailing.
Accordingly, it is hereby,
ORDERED that the motion for summary judgment of defendant Nova Casualty Company is granted and the first amended complaint is dismissed against them; and it is further
ORDERED that the cross motion of plaintiff the Glazier Group, Inc. for summary judgment on liability against Nova Casualty Company is denied; and it is further
ORDERED that the Clerk of the Court shall enter judgment in favor of defendant Nova Casualty Company dismissing the first amended complaint against it in this action, together with costs and disbursements to be taxed by the Clerk upon submission of an appropriate bill of costs; and it is further
ORDERED that the remainder of this action is severed and shall continue; and it is further
ORDERED that defendant HUB International Northeast Limited's motion to dismiss is granted and the fourth, sixth, and seventh causes of action of the first amended complaint are dismissed; and it is further
ORDERED that defendant HUB is directed to serve an answer to the complaint within 20 days after service of a copy of this order with notice of entry; and it is further
ORDERED that the cross motion of defendant Nova to dismiss the amended complaint is dismissed as moot; and it is further
ORDERED that counsel are directed to appear for a status conference in Room 304, 71 Thomas Street, New York, NY, on November 13, 2018 at 10:00 a.m. Dated: 10-5-2018
ENTER:
/s/_________
HON. MELISSA A. CRANE, J.S.C.