Opinion
23-CV-3347 (JPO)
07-23-2024
GREY ROCK GATHERING & MARKETING, LLC, Plaintiff, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant.
OPINION AND ORDER
J. PAUL OETKEN, UNITED STATES DISTRICT JUDGE:
Plaintiff Grey Rock Gathering & Marketing, LLC (“Grey Rock”), brings this action against Defendant Liberty Mutual Insurance Company (“Liberty Mutual”) for breach of contract and breach of the duty of good faith and fair dealing. Currently before the Court are Grey Rock's motion for summary judgment (ECF No. 16) and Liberty Mutual's motion for partial summary judgment as to certain categories of damages sought by Grey Rock and for judgment on the pleadings as to Grey Rock's good faith and fair dealing claim. (ECF No. 33.)
I. Background
A. Factual Background
The following facts are drawn from the parties' Local Rule 56.1 statements and responses. (ECF Nos. 16-2, 25, 34).
Grey Rock did not file a response to Liberty Mutual's Rule 56.1 Statement filed in conjunction with Liberty Mutual's motion for partial summary judgment.
Grey Rock is in the oil and gas trading business. It owns oil storage tanks located along the Gulf Coast, including a facility in Lake Charles, Louisiana, which contains multiple storage tanks. (ECF No. 16-2 ¶ 4.) As part of its business, Grey Rock purchases crude oil and other petroleum products, aggregates them, and then sells them based on specifications from purchasers. (ECF No. 25 ¶¶ 4, 13.) Liberty Mutual insures Grey Rock under the terms and conditions of Marine Cargo Policy No. HOOMC11336602 (the “Policy”). The Policy consists of a Declaration page (ECF No. 1-1); a Marine Cargo Policy (ECF No. 1-2); and Warehouse Endorsement (ECF No. 1-3).
From September 2020 until July 2021, Chevron was the exclusive purchaser of crude oil from Grey Rock's Lake Charles, Louisiana facility. (ECF No. 16-2 ¶ 6.) Between September 2020 and June 24, 2021, Grey Rock delivered 850,246 barrels of crude oil to Chevron, all without complaint from Chevron, and was paid $44,240,944.92 for that crude oil. (Id. ¶ 9.) Pursuant to the contract between Grey Rock and Chevron, the oil that Grey Rock sold to Chevron had to meet certain specifications, including that the oil was to contain less than 1 part per million (ppm) of organic chlorides. (ECF No. 16-12 at 2.)
On June 24, 2021, Grey Rock loaded two barges with approximately 51,000 barrels of petroleum from two of its tanks at Grey Rock's Lake Charles facility for delivery to Chevron. (ECF No. 16-7; ECF No. 25 ¶¶ 13-14.) Grey Rock analyzed samples of the shipment prior to delivery to Chevron. The samples revealed that the shipment contained more than 10 ppm organic chlorides. (ECF No. 16-10.) Grey Rock reported the results to Chevron, which subsequently rejected the shipment pursuant to the terms of its contract with Grey Rock. Grey Rock kept the shipment aboard the barges which caused Grey Rock to incur demurrage from Enterprise Marine Services, LLC, in the amount of $230,412.83. (ECF No. 16-6.) Grey Rock ultimately concluded that the source of the excessive organic chlorides was a shipment of crude oil it received in June 2021 from Phoenix Oil, Inc. (“Phoenix”), which contained levels of organic chlorides in excess of that permitted under Grey Rock's contract with Phoenix. (ECF No. 25 ¶ 14.) Subsequent sampling revealed excess levels of organic chlorides in Grey Rock's storage tanks.
On July 16, 2021, Grey Rock filed its claim for loss under its Policy with Liberty Mutual, seeking to recover for its inventory. (ECF No. 16-13.) Liberty Mutual contracted Sedgwick to produce a survey report, which Sedgwick issued on February 10, 2022. (ECF No. 16-18.) On March 12, 2022, Liberty Mutual denied coverage of Grey Rock's claim. (ECF No. 16-19.)
Following Liberty Mutual's denial of coverage, Grey Rock sued Phoenix in Harris County, Texas district court.
B. Procedural History
Grey Rock commenced this action against Liberty Mutual on April 21, 2023, asserting claims for breach of contract and breach of the duty of good faith and fair dealing. (ECF No. 1.) Grey Rock filed a motion for summary judgment on October 16, 2023. (ECF No. 16.) Liberty Mutual filed its opposition to Grey Rock's motion for summary judgment on November 13, 2023. (ECF No. 22.) Grey Rock filed its reply in further support of its motion for summary judgment on November 20, 2023. (ECF No. 26.) Liberty Mutual subsequently filed a motion for partial summary judgment, and for judgment on the pleadings in part, on January 29, 2024. (ECF No. 33.) Grey Rock filed its opposition to Liberty Mutual's motion for partial summary judgment on February 15, 2024. (ECF No. 37.) Liberty Mutual filed its reply in further support of its motion for partial summary judgment on February 22, 2024. (ECF No. 38.)
II. Legal Standards
A. Summary Judgment under Federal Rule of Civil Procedure 56(a)
Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is material if it “might affect the outcome of the suit under the governing law ....” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine if, considering the record as a whole, a rational jury could find in favor of the non-moving party. Ricci v. DeStefano, 557 U.S. 557, 586 (2009). In deciding a motion for summary judgment, a court must consider the evidence “in the light most favorable to the non-moving party and draw all reasonable inferences in its favor.” Allen v. Coughlin, 64 F.3d 77, 79 (2d Cir. 1995).
B. Judgment on the Pleadings under Federal Rule of Civil Procedure 12(c)
Under Rule 12(c), a party may move for judgment on the pleadings “[a]fter the pleadings are closed-but early enough not to delay trial.” Fed.R.Civ.P. 12(c). “The standard for granting a Rule 12(c) motion for judgment on the pleadings is identical to that for granting a Rule 12(b)(6) motion for failure to state a claim.” Lynch v. City of New York, 952 F.3d 67, 75 (2d Cir. 2020) (internal brackets and quotation marks omitted). To survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). When evaluating whether a complaint meets these requirements, “the court must accept as true all well-pled factual allegations in the complaint and draw all reasonable inferences in the plaintiff's favor.” Doe v. Indyke, 457 F.Supp.3d 278, 282 (S.D.N.Y. 2020) (citing Steginsky v. Xcelera Inc., 741 F.3d 365, 368 (2d Cir. 2014)).
III. Discussion
Grey Rock moves for summary judgment as to the breach of contract claim and the breach of the duty of good faith and fair dealing claim. Liberty Mutual opposes Grey Rock's motion for summary judgment, maintaining that there are genuine issues of material fact to be tried. (ECF No. 22 at 1.) Liberty Mutual cross-moves for partial summary judgment as to certain categories of damages claimed by Grey Rock and moves for judgment on the pleadings on the breach of duty claim. (ECF No. 36 at 1.)
A. Interpreting Insurance Policies under New York Law
“The initial interpretation of a contract is a matter of law for the court to decide.” Parks Real Est. Purchasing Grp. v. St. Paul Fire & Marine Ins. Co., 472 F.3d 33, 42 (2d Cir. 2006) (quoting Morgan Stanley Grp. v. New Eng. Ins. Co., 225 F.3d 270, 275 (2d Cir. 2000) (brackets omitted). “In determining a motion for summary judgment involving the construction of contractual language, a court should accord that language its plain meaning giving due consideration to the surrounding circumstances and apparent purpose which the parties sought to accomplish.” Palmieri v. Allstate Ins. Co., 445 F.3d 179, 187 (2d Cir. 2006) (quoting Thompson v. Gjivoje, 896 F.2d 716, 721 (2d Cir.1990)). When the contractual language is “unambiguous [the district court] may . . . construe [the contract] as a matter of law and grant summary judgment accordingly.” Id. (quoting Thompson, 896 F.2d at 721). However, “[w]here contractual language is ambiguous and subject to varying reasonable interpretations, intent becomes an issue of fact and summary judgment is inappropriate.” Id. (quoting Thompson, 896 F.2d at 721).
“Whether a contract is ambiguous . . . is a threshold question of law to be determined by the court.” Parks Real Est. Purchasing Grp., 472 F.3d at 42 (quotation marks omitted); see also Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 600 F.3d 190, 201 (2d Cir. 2010). “The mere assertion of an ambiguity does not suffice to make an issue of fact.” Palmieri, 445 F.3d at 187 (quoting Thompson, 896 F.2d at 721). Rather, “[a]n ambiguity exists where the terms of an insurance contract could suggest more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.” Parks Real Est. Purchasing Grp., 472 F.3d at 42 (internal quotation marks and citation omitted).
If the language in an insurance policy is ambiguous, the court may also “consider extrinsic evidence submitted by the parties to assist in determining their actual intent.” McCostis v. Home Ins. Co. of Ind., 31 F.3d 110, 112-13 (2d Cir.1994). “If the extrinsic evidence does not yield a conclusive answer as to the parties' intent, it is appropriate for a court to resort to other rules of construction, including the contra-insurer rule, which states that any ambiguity in an insurance policy should be resolved in favor of the insured.” Id. “This rule gains added force when ambiguities are found in an exclusionary clause.” Haber v. St. Paul Guardian Ins. Co., 137 F.3d 691, 698 (2d Cir. 1998).
B. Grey Rock's Contaminated Inventory
1. Whether Grey Rock Has Established a Prima Facie Case for the Contaminated Inventory
Grey Rock seeks to recover for its contaminated inventory. The parties do not dispute that the Policy at issue here provides “all-risks” coverage subject to its terms and conditions. (ECF No. 22 at 4.) “Under an all-risk policy, losses caused by any fortuitous peril not specifically excluded under the policy will be covered.” Parks Real Est. Purchasing Grp., 472 F.3d at 41 (emphasis and quotation marks omitted). An insured making a claim under an all-risk policy has the initial burden to establish a prima facie case for recovery. An insured meets this burden by showing: “(1) the existence of an all-risk policy, (2) an insurable interest in the subject of the insurance contract, and (3) the fortuitous loss of the covered property.” Int'l Multifoods Corp. v. Com. Union Ins. Co., 309 F.3d 76, 83 (2d Cir. 2002) (quotation marks omitted). This burden is “relatively light.” Int'l Multifoods, 309 F.3d at 83. The Second Circuit has explained:
All risk coverage covers all losses which are fortuitous no matter what caused the loss, including the insured's negligence, unless the insured expressly advises otherwise. A loss is fortuitous unless it results from an inherent defect, ordinary wear and tear, or intentional misconduct of the insured. An insured satisfies its burden of proving that its loss resulted from an insured peril if the cargo was damaged while the policy was in force and the loss was fortuitous .... All risk open cargo policies . . . provide broad coverage for shippers.Ingersoll Milling Mach. Co. v. M/V Bodena, 829 F.2d 293, 307-08 (2d Cir. 1987) (internal citations omitted). An insured “needs only to show a fortuitous loss; it need not explain the precise cause of the loss.” Int'l Multifoods Corp., 309 F.3d at 84 (citing In re Balfour MacLaine Int'l Ltd., 85 F.3d 68, 77-78 (2d Cir. 1996)).
Liberty Mutual argues that Grey Rock has failed to establish the third prong of its prima facie case, “the fortuitous loss of the covered property.” According to Liberty Mutual, in order to establish a fortuitous loss of the covered property, Grey Rock must “show that the existing inventory in storage was in sound condition before the introduction of Phoenix's allegedly off-spec petroleum products.” (ECF No. 22 at 14.)
Grey Rock contends that it is not required to demonstrate the soundness of the oil in storage prior to the contamination. (ECF No. 26 at 6.) To establish the third prong of its prima facie case, Grey Rock need only establish “the fortuitous loss of the covered property.” “A loss is fortuitous unless it results from an inherent defect, ordinary wear and tear, or intentional misconduct of the insured.” Ingersoll Milling Mach., 829 F.2d at 307. An insured “needs only to show a fortuitous loss; it need not explain the precise cause of the loss.” Int'l Multifoods Corp., 309 F.3d at 84 (citing In re Balfour MacLaine Int'l Ltd., 85 F.3d at 77-78).
Grey Rock submits that all of the oil it sold to Chevron during the months from September 2020 through July 2021 was in sound condition. Grey Rock also contends that the petroleum products it received from Phoenix contained organic chlorides in excess of that permitted under its contract with Phoenix. Moreover, Grey Rock points out that Liberty Mutual's own report establishes that the amount of oil “previously sound” was 109,247.26 barrels. (ECF No. 16-18 at 4.) Neither party has submitted evidence that contradicts Grey Rock's account of the contamination. Although Grey Rock was not required to explain the precise cause of the loss, the undisputed facts show that it has adequately done so. Accordingly, the Court concludes that Grey Rock has sustained its relatively light burden to establish a prima facie case for recovery of its contaminated inventory.
2. Whether Coverage for the Contaminated Inventory Is Excluded
Having concluded that Grey Rock has established a prima facie case for recovery as to its contaminated inventory, the Court must determine whether that coverage is excluded pursuant to Clause 3(h) of the Warehouse Storage Coverage Endorsement. “Once the insured shows that a loss has occurred, the insurer shoulders the burden of demonstrating that the loss claimed is excluded expressly from coverage under the policy terms.” M.H. Lipiner & Son, Inc. v. Hanover Ins. Co., 869 F.2d 685, 687 (2d Cir. 1989). “[T]o ‘negate coverage by virtue of an exclusion, an insurer must establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case and that its interpretation of the exclusion is the only construction that [could] fairly be placed thereon.'” Parks Real Est. Purchasing Grp., 472 F.3d at 42 (quoting Throgs Neck Bagels, Inc. v. GA Ins. Co. of N.Y., 671 N.Y.S.2d 66, 69 (1st Dep't 1998)) (brackets in original). “Under New York insurance law, ‘[t]he burden, a heavy one, is on the insurer, and [i]f the language of the policy is doubtful or uncertain in its meaning, any ambiguity must be resolved in favor of the insured and against the insurer.'” Id. (quoting Pepsico, Inc. v. Winterthur Int'l Am. Ins. Co., 788 N.Y.S.2d 142, 144 (2d Dep't 2004)) (brackets in original).
Clause 3(h) of the Warehouse Endorsement states that the Policy “does not insure . . . [l]oss or damage due to any process or while the property is actually being worked upon.” (ECF No. 16-6 cl. 3(h).) The parties do not dispute that Grey Rock co-mingled the contaminated petroleum products it received from Phoenix with other petroleum products in order to meet the specifications required to sell its petroleum products to Chevron. (ECF No. 22 at 21.) However, the parties disagree as to whether the co-mingling of petroleum products while in storage constitutes a “process.”
Liberty Mutual contends that, based on dictionary definitions of the term “process,” Clause 3(h) should be interpreted to “exclude loss or damage due to any actions or operations directed to some end or to produce something.” (ECF No. 22 at 17-18.) According to Liberty Mutual, “[t]he contamination (i.e., claimed damage) was due to the blending and commingling of Phoenix's off-spec petroleum products with the existing inventory (i.e., the actions or operations) to satisfy Chevron's contractual specifications (i.e., directed to some end or to produce something).” (Id. at 22.) In further support of its interpretation, Liberty Mutual argues that “[t]he intent of the parties, as measured by the language of the clause, is to exclude loss or damage due [to] an act that may result in a change in or to the property insured.” (Id. at 18.) Liberty Mutual reasons that “[t]hat is logical in the context of a first-party insurance policy” because “[l]oss or damage caused by a change in or to the property due to an intentional act- i.e., ‘due to any process or while the property is actually being work upon'-is not fortuitous.” (Id.)
For its part, Grey Rock contends that its act of introducing the off-spec petroleum products from Phoenix into its storage facility does not constitute a “process” and that Liberty Mutual failed to meet its burden to negate coverage under the exclusion. Grey Rock principally argues that had Liberty Mutual “wished to specifically exclude contamination from the Warehouse Storage endorsement, it could have included the word ‘contamination'” in Clause 3(h) “or a separate contamination clause excluding coverage.” (ECF No. 26 at 4.) Grey Rock also contends that Liberty Mutual's definition of “process” as “any actions or operations directed to some end or to produce something” would result in illusory coverage. (ECF No. 26 at 4-5.) For example, Grey Rock contends, under Liberty Mutual's interpretation, the act of pumping oil into or out of the storage tank, and even the act of storing oil in and of itself, would all constitute “operation[s] directed to some end.” (ECF No. 26 at 4.)
Considering first and foremost the language of Clause 3(h) and the Policy as a whole, and taking into account the various other considerations raised by the parties, the Court determines that the language of Clause 3(h) is ambiguous as to whether Grey Rock's act of co-mingling petroleum in storage tanks constitutes a “process.” Liberty Mutual has failed to meet its heavy burden of establishing that the “exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case and that its interpretation of the exclusion is the only construction that [could] fairly be placed thereon.'” Parks Real Est. Purchasing Grp., 472 F.3d at 42 (quoting Throgs Neck Bagels, Inc., 671 N.Y.S.2d at 69) (brackets in original).
In addition, here, where the language in the exclusionary clause of an insurance policy is ambiguous, and “extrinsic evidence does not yield a conclusive answer as to the parties' intent, it is appropriate for a court to . . . [apply] the contra-insurer rule ....” McCostis, 31 F.3d at 1113. The Court thus applies the contra-insurer rule and resolves the ambiguity in favor of Grey Rock.
Accordingly, Grey Rock is entitled to summary judgment on its contract claim with respect to the contaminated inventory.
C. Grey Rock's Off-Spec Shipment from Phoenix
Grey Rock also seeks to recover for the off-spec petroleum products supplied by Phoenix. Liberty Mutual contends that Grey Rock has failed to establish that the loss with respect to the petroleum supplied by Phoenix occurred during the period of coverage. Liberty Mutual states that the Warehouse Storage Coverage Endorsement “cover[s] property . . . while temporarily stored” in the locations identified in the Policy. (ECF No. 16-6 cl. 1.) The Court agrees. By Grey Rock's own account, the petroleum products supplied by Phoenix were already off-spec when they were delivered to Grey Rock's Lake Charles facility. Thus, the claimed loss occurred prior to the period covered by the Warehouse Storage Coverage Endorsement.
Liberty Mutual further contends that even if the Court were to find that the claimed loss occurred during the coverage period, coverage would be excludable under Clause 3(a) of the Warehouse Endorsement. Again, the Court agrees. Clause 3(a) excludes “Loss or damage due to wear and tear, inherent vice, latent defect or gradual deterioration.” (ECF No. 16-6 cl. 3(a).) Grey Rock alleges that the petroleum products supplied by Phoenix were off-spec at the time they were delivered to Grey Rock. Grey Rock also acknowledges that the off-spec condition of the petroleum products was not apparent and was discovered only through investigation. Thus, coverage for the off-spec petroleum products supplied by Phoenix is properly excluded by Clause 3(a) because of inherent vice and latent defect.
Accordingly, Grey Rock's motion for summary judgment on its breach of contract claim with respect to off-spec product supplied by Phoenix is denied.
D. Breach of the Duty of Good Faith and Fair Dealing
Liberty Mutual moves for judgment on the pleadings as to Grey Rock's claim for breach of the duty of good faith and fair dealing under Federal Rule of Civil Procedure 12(c) as duplicative of Grey Rock's breach of contract claim. Grey Rock responds that its claim for breach of the covenant of good faith and fair dealing is based on conduct different from that which underlies the breach of contract claim. While the breach of contract claim is based on Liberty Mutual's denial of insurance coverage, the breach of the duty of good faith and fair dealing claim is based on Liberty Mutual's handling of the claim. (Compl. ¶¶ 29-52.) Liberty Mutual “is correct that, except in cases where an insurance company refuses to defend or settle a claim brought by a third party against an insured, ‘New York law does not recognize an independent cause of action for bad faith denial of insurance coverage.'” Fishberg v. State Farm Fire & Cas. Co., No. 20-CV-6664, 2021 WL 3077478, at *3 (S.D.N.Y. July 20, 2021) (quoting Vitrano v. State Farm Ins. Co., No. 08-CV-103, 2008 WL 2696156, at *3 (S.D.N.Y. July 7, 2008)) (collecting cases). “However, New York courts do recognize that an insurance company's handling of a claim can give rise to a breach of the duty of good faith and fair dealing.” Id. (collecting cases). “Moreover, where the conduct allegedly violating the implied covenant is not also the predicate for breach of . . . an express provision of the contract, . . . then the two claims need not be dismissed as duplicative.” Id. (internal citations and quotation marks omitted). Grey Rock has adequately alleged that Liberty Mutual mishandled the claim independently of the breach itself. Accordingly, the Court denies Liberty Mutual's motion for judgment on the pleadings as to Grey Rock's claim for breach of the duty of good faith and fair dealing.
E. Declaratory Relief Claim
Liberty Mutual moves for judgment on the pleadings as to Grey Rock's declaratory relief claim under Federal Rule of Civil Procedure 12(c) as duplicative of Grey Rock's breach of contract claim. Grey Rock does not dispute that the declaratory judgment claim is duplicative of the breach of contract claim and should be dismissed. (ECF No. 37 at 1, 7.) Accordingly, the Court grants Liberty Mutual's motion for judgment on the pleadings as to Grey Rock's declaratory judgment claim.
F. Exemplary Damages
Grey Rock seeks exemplary damages on its claim for breach of the duty of good faith and fair dealing. “New York courts have identified a limited number of instances where an insured can recover damages in excess of contract damages, that is, tort damages, from his or her first-party insurer.” Manning v. Utils. Mut. Ins. Co., 254 F.3d 387, 400 (2d Cir. 2001). “[T]he awarding of compensatory and punitive damages in such cases requires a two-step analysis.” Id. “First, the defendant's conduct must be ‘actionable as an independent tort for which compensatory damages are ordinarily available.'” Id. (quoting Rocanova v. Equitable Life Assur. Soc. of U.S., 83 N.Y.2d 603, 613 (1994). “Second, in order to state a claim for punitive damages, a claimant must allege conduct which is ‘aimed at the public generally,' involves ‘a fraud evincing a high degree of moral turpitude' and demonstrates ‘such wanton dishonesty as to imply a criminal indifference to civil obligations.'” Id. (quoting Rocanova, 83 N.Y.2d at 613). Grey Rock does not make any such allegations. The Court therefore grants Liberty Mutual's motion for judgment on the pleadings as to Grey Rock's claim for exemplary damages.
G. Demurrage Costs
Grey Rock seeks to recover the demurrage it paid to Enterprise Marine Services for storge of the contaminated petroleum following Chevron's rejection of the shipment. (ECF No. 34 (“Liberty SoF”) ¶¶ 6-8.) Grey Rock contends that the “demurrage expenses for storing the contaminated cargo while the claim was being investigated and in an effort to mitigate its damages” are recoverable under the “Sue and Labor” clause. (ECF No. 37 at 2.) The “Sue and Labor” clause states:
In case of any loss or misfortune, it shall be lawful and necessary to and for The Insured, his or their factors, servants and assigns, to sue, labor and travel for, in and about the defense, safeguard and recovery of the goods insured, or any part thereof, without prejudice to this insurance.
The acts of The Insured or The Company, in recovering, saving and preserving the goods insured, in case of disaster, shall not be considered a waiver or an acceptance of an abandonment.
Subject always to the applicable limit of liability, sue and labor charges are payable irrespective of percentage.(ECF No. 16-5 at 9-10).
Liberty Mutual contends that the demurrage is not covered under the Sue and Labor clause because Grey Rock has not submitted any evidence to demonstrate that the barge storage was designed to reduce or eliminate a covered loss under the Policy. (ECF No. 38 at 3.) In its complaint, Grey Rock alleges that it decided to “keep the cargo loaded on the barges” when it became “[a]ware that all of its tanks had . . . become contaminated.” (Compl. ¶ 28.) Although Grey Rock does not point to any specific evidence that its decision was designed to reduce or eliminate a covered loss under the Policy (ECF No. 38 at 3), the overall factual record precludes a determination that no reasonable factfinder could find for Grey Rock on this point. The Court concludes that there is a genuine dispute of material fact as to whether Grey Rock stored the contaminated petroleum on the barges in an effort to mitigate its damages.
Grey Rock also contends that, in any event, the demurrage is recoverable as consequential damages on its claim for breach of the implied covenant of good faith and fair dealing. Grey Rock is correct. “Consequential damages . . . are in addition to the losses caused by a calamitous event . . . and include those additional damages caused by a carrier's injurious conduct-in this case, the insurer's failure to timely investigate, adjust and pay the claim.” BiEconomy Mkt., Inc. v. Harleysville Ins. Co. of New York, 10 N.Y.3d 187, 196 (2008) (quotation marks omitted). Thus, if Grey Rock prevails on its claim for breach of the duty of good faith and fair dealing, it may recover consequential damages.
Accordingly, Liberty Mutual's motion for summary judgment as to Grey Rock's claim for demurrage is denied.
H. Attorney's Fees
Grey Rock seeks to recover the attorney's fees it incurred in bringing its lawsuit against Phoenix as consequential damages on its breach of duty claim. As discussed above, Liberty Mutual is not liable for coverage of Grey Rock's loss as to the off-spec petroleum delivery. However, Liberty Mutual is liable for Grey Rock's loss as to its contaminated inventory. Factual disputes remain as to whether Liberty Mutual may be liable for some portion of the attorney's fees Grey Rock incurred in bringing its lawsuit against Phoenix in the event that Grey Rock prevails on its breach of duty claim. Accordingly, the Court denies Liberty Mutual's motion for summary judgment on this issue.
IV. Conclusion
For the foregoing reasons, Grey Rock's motion for summary judgment is GRANTED in part and DENIED in part. Liberty Mutual's motion for partial summary judgement and for judgment on the pleadings is GRANTED in part and DENIED in part.
The parties are directed to confer regarding further proceedings and, by September 10, 2024, file a joint status letter addressing (1) whether the parties wish to be referred to Magistrate Judge Cave or the Court's mediation program for a settlement conference, and (2) proposed further proceedings, including dates for trial between October 2024 and March 2025.
The Clerk of Court is directed to terminate the motions at ECF Nos. 16 and 33.
SO ORDERED.