Opinion
2013-01-24
JD & K ASSOCIATES, LLC, Plaintiff, v. SELECTIVE INSURANCE GROUP, INC., Selective Insurance Company of America, and Selective Way Insurance Company, Defendants.
Lynn Law Firm, LLP, Martin A. Lynn, Esq., of Counsel, for plaintiff. Galbo & Associates, Richard A. Galbo, Esq., of Counsel, for defendants.
Lynn Law Firm, LLP, Martin A. Lynn, Esq., of Counsel, for plaintiff. Galbo & Associates, Richard A. Galbo, Esq., of Counsel, for defendants.
ANTHONY J. PARIS, J.
This action arises out of plaintiff's claim for insurance coverage under a Policy and Extension Endorsement issued by Selective Way Insurance
Company relative to damage sustained to a concrete floor at a building located at 311–313 Wavel Street in Syracuse, New York on May 13, 2010.
As a result of the claim, the Selective defendants
had an inspection of the damaged property performed by Peter Vallas Associates, Inc., a forensic investigative engineering firm.
Plaintiff names three Selective defendants in its Complaint. The subject policy was issued by defendant Selective Way Insurance Company. Defendants' Answer alleges that neither Selective Insurance Group nor Selective Insurance Company of America entered into any insurance contract with JD & K Associates. Defendant moves for dismissal of all claims against Selective Insurance Group as it was not a party to the contract nor had any involvement in the claim. Plaintiff's opposition does not address this issue, and therefore the Court grants dismissal to defendant Selective Insurance Group. The remaining defendants will be referred to as “the Selective defendants”.
The Selective defendants issued a document entitled “Investigative Engineering Analysis Report” dated June 11, 2010 and signed by David R. Redsicker, Corporate Director of Investigations. Despite the fact that the document was entitled “Investigative Engineering Analysis Report”, David Redsicker is not an engineer. The report was co-signed by Bernard J. Sopko, P.E., who is not licensed as an engineer in the State of New York.
The Vallas investigative report concluded that the cause of the damage to the concrete floor was the settling of the fill at the south end of the floor. The drain pipe at the southeast corner of the building was listed as a possible contributing factor in the report.
Thereafter, on June 14, 2010, the Selective defendants disclaimed coverage for plaintiff's May 13, 2010 loss. The disclaimer letter contained multiple grounds for disclaimer, including the Earth Movement Exclusion contained in the policy.
Plaintiff commenced this action by the filing of a Summons and Complaint on November 2, 2011. The Complaint contains four causes of action. The first cause of action requests a declaration that Selective be estopped from disclaiming coverage based on alleged misrepresentations, or on any other basis. The second cause of action alleges breach of contract relative to coverage under an extension of coverage and seeks direct and consequential damages in the amount of $25,000. The third cause of action alleges bad faith, misrepresentation and fraud and seeks punitive damages relative to the Selective defendants' use of a non engineer. The fourth cause of action alleges a violation of General Business Law § 349.
Defendants now move pursuant to CPLR § 3212 for summary judgment to dismiss plaintiff's Complaint in its entirety. Defendants contend that the declaratory judgment and breach of contract claims should be dismissed based on the fact that the cause of loss here is excluded under the express terms of the policy, and the bad faith and GBL § 349 violation claims should be dismissed as plaintiff cannot establish detrimental reliance as a matter of law. Plaintiff opposes defendants' motion and has cross moved for partial summary judgment on its first cause of action for declaratory relief and its second cause of action for breach of contract. Plaintiff also moves to compel defendants to comply with the discovery provisions set forth in the Court's Order of July 27, 2012. Defendants' oppose plaintiff's cross motion.
I. Declaratory Relief and Breach of Contract:
According to defendants, the plaintiff's loss is expressly and unambiguously excluded under the Earth Movement Exclusion found at Section B of the policy. Section B—Exclusions states that defendants “will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.”
Section 1.b of the Earth Movement Exclusion excludes loss for damages caused directly or indirectly or in whole or in part from earth movement including in pertinent part:
“... (4) earth sinking (other than sinkhole collapse), rising or shifting including soil conditions which cause settling, cracking or other disarrangement of foundations or other parts of realty. Soil conditions include contraction, expansion, freezing, thawing, erosion, improperly compacted soil and the action of water under the ground surface.”
Defendants' letter contained additional grounds for disclaimer, but defendant has moved for summary judgment only on the earth movement exclusion ground.
Plaintiff retained its own engineer to perform an independent investigation and analysis as to the cause of the loss. In its report dated July 28, 2010, Kenney Geotechnical Engineering Services, PLLC concluded that the failure of the concrete floor slab was the result of a void under the slab. The report stated that the void was too large to be caused by ground shrinkage due to drying out or vibration induced settlement. In Kenney's opinion, the subslab void was the result of subgrade erosion by flowing water and was created at some time after the original slab construction.
According to the Kenney Report, the roof drain was the primary cause of the erosion beneath the slab as it was the only water source and the subgrade below the slab sloped toward the roof drain. In the affidavit of Christopher M.
Kenney, P.E., he specifically disagrees with the defendants' “expert” finding that “the failure of the floor was the result of settling and/or undermining of the fill at the south end of the floor just inside the footer”. Kenney opines that the failure of the floor was caused by the broken roof drain.
In moving for summary judgment, the Selective defendants rely on the initial “engineering report” of its non engineer Redsicker as well as the plaintiff's own engineering report. The Court notes that the Redsicker report was prepared in consultation with Mr. Sopko, who is an engineer, albeit not licensed to practice in New York State.
It is defendants' position that whether the damage resulted from erosion as contended by plaintiff, or by settling as concluded in the Vallas report, it is excluded under the earth movement exclusion in the policy, which excludes coverage for “contraction”, “erosion”, and “improperly compacted soil” and applies “regardless of any other cause or event that contributes concurrently or in any sequence to the loss”. See Policy, Section B–Exclusions.
The burden is on the defendants to establish the applicability of the exclusion to plaintiff's loss. Northville Industrial Corp v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA., 89 N.Y.2d 621 (1997); Hritz v. Saco, 18 AD3d 377 (1st Dept.2005).
In opposition to defendants' motion, plaintiff contends that the Earth Movement Exclusion is not applicable here. Plaintiff submits the Expert Opinion of Christopher Kenney, P.E. which concludes that the clear predominant cause of the loss was the broken drain, and that Selective defendants have failed to articulate how any alleged earth movement caused or related to the fracture of the drain.
The Court has reviewed and finds that defendants have established that the Earth Movement Exclusion in the Policy is applicable to plaintiff's claim of loss. However, that does not end the Court's inquiry and review.
Plaintiff further contends that it is covered for losses caused by water damage, specifically under the its coverage extension captioned “Broadened Water–Direct Damage” in the SelectPac Plus Property Extension endorsement located at CP 76 00 12 05 of its policy with Selective. That the policy and the extension endorsement were in full force and effect at the time of the alleged loss is not in dispute; however, the burden is on the plaintiff to establish the applicability of the extension. Northville Indus. Corp., supra; Hritz, supra.
According to plaintiff's principal, David Venditti, defendants marketed and plaintiff purchased this coverage to cover water related losses. Plaintiff believes that this coverage was meant to extend the insurance provided by the Policy and provided additional coverage as follows: “water that backs up or overflows from a sewer, drain or sump; or (1) water under the ground surface pressing on, or flowing or seeping through: (a) foundations, wall, floors or paved surface; (b) basements, whether paved or not; or (c) doors, windows or other openings.”
It is plaintiff's position that the loss involved water causing a drain to break and damage to a paved surface, and that the endorsement covers losses resulting from a broken drain or water damage relating to foundations, walls or paved surfaces.
The SelectPac Plus Property Extension Endorsement itself contains no limiting or exclusionary language. To the extent that the underlying policy contains an exclusion for earth movement, Plaintiff contends that when two provisions of an insurance policy conflict, the provision finding coverage applies.
According to defendants, however, the Extension Endorsement does not provide separate coverage but rather modifies other coverage forms in the Policy and is in fact subject to the exclusions from the Policy.
The lead—in clause of the subject Policy and the Extension Endorsement, which includes the Broadened Water–Direct Damage coverage extension, states: “Section I ... The Building and Personal Property Coverage Form is amended as follows: ... Coverage Extensions ... The Coverage Extensions found under the section titled Coverage are replaced by the following”.
The Broadened Water—Direct Damage section specifically states that “coverage is provided by this Coverage Form to pay for direct loss or damage caused by: (1) water that backs up or overflows from a sewer, drain or sump; or (2) water under the ground surface pressing on, or flowing or seeping through; (a) foundations, wall, floors or paved surface; (b) basements, whether paved or not; or (c) doors, windows or other openings.”
The Court rejects defendants' contention that the Extension would not provide coverage for plaintiff's loss. A contract that is complete, clear and unambiguous on its face and is reasonably susceptible of only one meaning, must be enforced according to the plain meaning of its terms. Greenfield v. Philles Records, 98 N.Y.2d 562 (2002); W.J. Camperlino Custom Homes, Inc. v. Chicago Title Ins. Co., 98 AD3d 1261 (4th Dept.2012); Syracuse Orthopedic Specialists v. Hootnick, 42 AD3d 890 (4th Dept.2007).
The language of the Extension is clear and unambiguous and specifically provides coverage for damage caused by water backing up or overflowing from a drain and/or for water under the ground pressing on or flowing through, inter alia, floors. According to plaintiff's expert, the only qualified and non-speculative opinion provided to the Court, the damage here was caused by a broken drain pipe which allowed water to seep into and press against the concrete floor, resulting in damage and depressions. The loss is clearly covered under the Extension. Nor is there any indication that the damage caused by water would be excluded by the earth movement exclusion, inasmuch as that would render the policy extension for water damage meaningless.
In any event, even if the Court found the language of the Extension to be ambiguous, such ambiguity would be construed against the drafter. Roberts v. Cobblestone Homes of Rochester, Inc., et al., 291 A.D.2d 786 (4th Dept.2002). In this case the drafting party would be the Selective defendants.
Based upon the foregoing, that branch of the defendants' motion for summary judgment seeking dismissal of the first two causes of action in plaintiff's Complaint is DENIED. In addition, that branch of plaintiff's cross motion for partial summary judgment on its first and second causes of action for declaratory relief and breach of contract is GRANTED as to the liability of defendants under the policy and extension endorsement with the actual amount of damages to be determined at trial.
The Court further GRANTS summary judgment dismissing plaintiff's Complaint as to defendant Selective Insurance Group for the reasons set forth in footnote 1.
In light of the Court's finding that the extension of coverage is applicable to plaintiff's loss, it is not necessary to reach plaintiff's other contentions with regard to the sufficiency of defendants' disclaimer letter or reliance on misrepresentations in issuing the disclaimer letter, or whether there is any issue regarding whether the damage constituted a “sinkhole” as defined under the policy.
II. Bad Faith, Misrepresentation and Fraud; and GBL § 349:
Defendants also move for dismissal of the third and fourth causes of action contained in the Complaint. The third cause of action is for bad faith, misrepresentation and fraud based on allegations that the Selective defendants misrepresented that Mr. Redsicker was an engineer. Plaintiff seeks punitive damages on this cause of action.
This Court has previously determined that Mr. Redsicker was not an engineer in its Order dated July 27, 2012. That Order further directed the depositions of Mr. Redsicker and Mr. Sopko of Peter Vallas Associates, Inc., and production of the investigative file of Peter Vallas Associates, Inc. containing paperwork, notes, etc. which formed the underlying basis for the investigative report. Defendants were to provide unredacted documents in response to plaintiff's discovery demands within sixty days of service of that Order.
In support of its third cause of action, plaintiff alleges that Selective defendants misrepresented Redsicker to be an engineer, and that this misrepresentation was material and was relied upon by plaintiff. Plaintiff contends that this act constituted bad faith in investigating the claim, in communicating with plaintiff, and in disclaiming coverage. Plaintiff contends that this action also constituted fraud and seeks punitive damages of $250,000 as well as actual damages.
Defendants contend that whether or not there were misrepresentations made about Mr. Redsicker's qualifications as an expert in the investigative report and disclaimer letter, plaintiff was not harmed by those alleged misrepresentations.To prevail on a claim for fraud or misrepresentation, plaintiff would need to prove that it relied on a misrepresentation, in this case that Redsicker was a professional engineer, and was harmed by that reliance. Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413 (1996); Levin v.. Kitsis, 92 AD3d 1052 (2d Dept.2011).
Plaintiff alleges detrimental reliance on the Redsicker report in its Complaint, and submits an Affidavit of David Venditti, plaintiff's principal, stating that he depended on the professional opinion of defendant's engineer to determine the cause of the loss, and that he relied on the representations in the disclaimer letter in making business decisions regarding the loss. Plaintiff identifies its claimed damages as having to retain an engineer, at significant expense, to investigate the loss.
The Court agrees with plaintiff (and apparently defendants) that the defendants' use of the “Alleged Engineering Report” by a non engineer was materially misleading. Plaintiff has further identified specific damages incurred as a result of the misrepresentation, including the necessity of retaining its own licensed and expert engineer to investigate and provide conclusions of causation.
The burden is entirely on defendants as the movant to establish plaintiff's lack of reliance and/or damages as a matter of law. Defendants have failed to do so here. Defendants merely claim in a conclusory fashion that plaintiff cannot establish any reliance or damages arising from the Redsicker report. That is insufficient to gain summary judgment. A movant does not meet its initial burden in a motion for summary judgment by merely pointing out gaps in its opponent's proof. Orcutt v. American Linen Supply Co., 212 A.D.2d 979 (4th Dept.1995); Burton v. County of Onondaga, 19 Misc.3d 1138(A) (Sup.Ct. Onondaga Co.2008).
The mere fact that plaintiff disputed the disclaimer letter early on does not establish a lack of reliance. In fact, the Court has now determined that the disclaimer was without merit because of the coverage extension.
Plaintiff has alleged and identified reliance and damages, but has no obligation to establish the validity of those claims at this stage in the proceedings. Even if the Court were to find that defendants met their initial burden on this motion, the plaintiff's opposition and affidavit of its principal would raise sufficient issues of fact as to whether the reliance was justified and for how long the reliance occurred. Nor does plaintiff have any obligation to prove its exact damages at this stage of the lawsuit.
Further, it is premature for the Court to determine whether punitive damages would be applicable in this particular matter as there has not been adequate discovery in this regard. Marsh v. Arnot Ogden Medical Center, 91 AD3d 1070 (3d Dept.2012).
Therefore, that branch of defendants' motion which seeks dismissal of the plaintiff's third cause of action is DENIED at this time.
Plaintiff's fourth cause of action is for a violation of GBL § 349. Plaintiff alleges that defendants' actions in misrepresenting Redsicker's qualifications as an expert were deceptive and unlawful under the statute and that plaintiff is entitled to statutory damages up to $1,000, punitive damages, and attorney's fees. Plaintiff does not allege that defendants' actions had a broad impact on consumers at large.
The elements of a claim under General Business Law § 349 are (1) “that the challenged act or practice was consumer oriented;” (2) “that it was misleading in a material way;” and (3) “that the plaintiff suffered injury as a result of the deceptive act.” Stutman v. Chemical Bank, 95 N.Y.2d 24, 29 (2000). The scope of Section 349 is broad. Wilner v. Allstate Ins. Co., 71 AD3d 155 (2d Dept.2010).
Defendants contend that this claim must be dismissed because plaintiff has failed to allege that “the acts or practices complained of have a broader impact on consumers at large”, and has therefore failed to state a cause of action. Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20 (1995); Falco v. Allstate Ins. Co., 70 AD3d 1458 (4th Dept.2010).
Plaintiff contends that it must show that the challenged act or practice was consumer oriented, that it was misleading in a material way and that plaintiff was injured as a result of the deceptive act. There is a lower standard for “deceptive act or practice” than for common law fraud. Gaidon v. Guardian Life Ins. Co., 90 N.Y.2d 330 (1999). A deceptive act or practice is a representation that is “likely to mislead a reasonable consumer acting reasonably under the circumstances.” Gaidon, supra; quoting Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, supra.
In Wilner v. Allstate Insurance Co., supra, the plaintiff alleged that the defendant insurer engaged in deceptive acts and practices in violation of GBL § 349, that defendant's actions were routine practice and there was an injury as a result of the deceptive acts and practices. The Appellate Court found that those allegations, which are similar to those of the plaintiff in the instant matter, were sufficient to state a cause of action under General Business Law § 349.
The Court agrees with plaintiff that any determination of the sufficiency of this claim is premature as defendants have failed to provide the outstanding discovery directed by this Court's Order of July 27, 2012. While defendants filed a notice of appeal, the appeal was not timely perfected, and defendants proceeded with the instant motion without providing the directed discovery. Should defendants continue to fail to provide that discovery, the Court would certainly entertain a motion for preclusion or other sanctions including the striking of defendants' pleadings.
Again, based on the record before the Court, it would be premature for the Court to determine whether punitive damages would be applicable here as there has not been adequate discovery in that regard as defendants have failed to comply with this Court's Order of July 27, 2012. Marsh v. Arnot Ogden Medical Center, supra.
Therefore, the Court finds that Plaintiff's claim for a GBL § 349 cause of action was sufficiently stated in the Complaint, and that branch of defendants' motion which seeks dismissal of that claim is DENIED at this time pending further discovery.
Finally, the Court GRANTS that branch of plaintiff's motion to compel defendants to provide the discovery directed in its Order of July 27, 2012 within ten (10) days of the date of service of this Order with notice of entry.To recapitulate, defendants' motion for summary judgment to dismiss the four causes of action in plaintiff's Complaint is DENIED, except as to defendant Selective Insurance Group. That branch of plaintiff's Cross Motion seeking partial summary judgment on its claims for declaratory relief and breach of contract is GRANTED as to liability with damages to be determined at trial.
Finally, that branch of plaintiff's cross motion to compel discovery is GRANTED.
The foregoing constitutes the Decision and Order of the Court. A list of the documents upon which the Court relied is attached.
AND IT IS SO ORDERED.
Filed Papers:
Defendants' Notice of Motion dated 10/6/12; Affidavit of Craig McNeil, sworn to on 10/4/12, with exhibits; Affirmation of Leo C. Kellett, Esq., dated 10/6/12, with exhibits and Memorandum of Law
Plaintiff's Notice of Cross Motion dated 12/18/12; Affirmation of Martin A. Lynn, Esq., dated 12/18/12, with exhibits and Memorandum of Law
Affirmation of Leo C. Kellett, Esq. dated 12/31/12 and Memorandum of Law
Affirmation of Martin A. Lynn, Esq. dated 1/4/13