Opinion
96663.
Decided December 12, 2007.
Law Office of Jacob P. Welch, Jacob P. Welch, Esq., of counsel for Plaintiff; Rupp, Baase, Pfalzgraf, Cunningham Coppola, LLC, Marco Cercone, Esq., of counsel, for Defendant.
By a Notice of Motion and Affidavit of Marco Cercone, Esq., dated August 24, 2007, with supporting papers, and a Reply Affidavit of Attorney Cercone, dated October 11, 2007, Defendants made application for an Order dismissing Plaintiff's complaint which is based upon damages allegedly caused by Defendants in denying Plaintiff insurance coverage and by Defendant Piontkowski's slander of Plaintiff. By a Notice of Cross-Motion and Affidavit of Jacob P. Welch, Esq., dated September 28, 2007, Affidavit of Plaintiff Dennis Lebaron, dated October 1, 2007, with supporting papers, and a letter to the Court from Attorney Welch, dated October 12, 2007, Plaintiff opposes Defendants' motion to dismiss and seeks an Order granting him leave to serve an amended complaint which purports to specify his causes of action sounding in negligence, slander and punitive damages.
According to the Complaint, on July 29, 2006, a fire in Plaintiff's van damaged many of the tools and machinery Plaintiff used in his business. After Plaintiff timely reported the loss, Defendant Erie Insurance Company (Erie) began an investigation into the claim.
On or about August 2006, after Erie had reviewed the list of items Plaintiff claimed were damaged in the fire, Defendant Piontkowski met with representatives of the Corning Police and Fire Departments. According to a Corning Police Department report, submitted with Plaintiff's motion papers, Defendant Piontkowski told the police and fire investigators that there were inconsistencies between the items listed on Plaintiff's claim and the items that were actually damaged in the fire. The police report further indicated that Defendant Piontkowski was going to re-interview Plaintiff and then forward the matter to the New York State Insurance Frauds Bureau.
In September 2006, the parties attempted to schedule an examination under oath (EUO) of Plaintiff. Conflicts between counsel for the parties developed immediately thereafter when Plaintiff, prior to the EUO, refused to release a jet washer, one of the items allegedly damaged in the fire, without receiving adequate assurances that the item would be protected. After more than two months of correspondences between counsel, in which the parties argued about Erie's right to inspect and test the disputed item, Erie finally was able to inspect the jet washer in December 2006 after which its expert found that the item was not damaged by the van fire.
On April 12, 2007, counsel for Defendants finally conducted the EUO of Plaintiff. After some introductory questions, counsel for Defendants asked Plaintiff whether he had spoken with anyone other than his attorney about the testimony he was to give at the EUO. Plaintiff responded that he had discussed the matter with his wife. When counsel for Defendants inquired about the nature of the discussions with his wife, counsel for Plaintiff refused to allow Plaintiff to answer the question, citing a spousal privilege. Plaintiff's counsel indicated that counsel for Defendants could ask Plaintiff any other questions, but that Plaintiff would not answer any questions concerning conversations Plaintiff may have had with his wife. Based upon Plaintiff's refusal, counsel for Defendants declined to ask any further questions and the EUO ended.
In their motion, Defendants contend that the complaint is premature in that Plaintiff, by failing to cooperate with Erie's investigation of his claim, breached a condition precedent to Erie's performance under the insurance contract and is, thus, precluded from any recovery. Defendants contend that Plaintiff unreasonably delayed Erie's ability to conduct a complete investigation of Plaintiff's claim by refusing to allow its experts to test the jet washer. Defendants contend that Plaintiff then further impeded Erie's investigation by refusing to cooperate in the EUO by improperly asserting a spousal privilege.
Defendants contend that Plaintiff's second cause of action alleging that Defendant Piontwoski slandered Plaintiff in his comments to the police and fire departments should be dismissed on the ground that Defendant Piontkowski's statements are entitled to a qualified privilege because (1) they were made in good faith to a law enforcement officer; and (2) Erie and the police had a common interest in the subject matter of the statements. Defendants contend that the complaint's allegations do not rise to the level of malice which is required to defeat a qualified privilege claim.
Defendants also contend that Plaintiff's negligence cause of action fails because Plaintiff has not alleged that Erie owed to Plaintiff a duty independent of the insurance contract which Plaintiff claims was breached. Defendants further contend that since Plaintiff failed to allege that Defendants' actions were sufficiently egregious or directed at the public at large, Plaintiff's claims for punitive damages must also be dismissed.
Plaintiff contends that Defendants have failed to meet the heavy burden of establishing sufficiently willful noncompliance with the insurance contract to warrant dismissal of the action since he acted reasonably in insisting that proper safeguards be established before he submitted the jet washer for testing and inspection. Plaintiff contends that he correctly asserted a spousal privilege during the EUO and that he was not required to adhere to Erie's "almost Godlike stance that he who represents an insurance company must be obeyed". Plaintiff contends that Defendants' position that Plaintiff and his wife were involved in a conspiracy to obtain insurance proceeds is "preposterous".
As for his slander claim, Plaintiff contends that his allegations do raise questions as to whether Defendant Piontowski acted with malice in discussing the insurance claim with the police. As to his negligence claim, Plaintiff contends that a separate tort action is allowable because Defendants breached their duty of good faith which is independent of the insurance contract. Finally, Plaintiff contends that since he has alleged that Defendant Piontowski's statements to the police were wilful, wanton and reckless, he may be entitled to an award of punitive damages.
A. WILLFUL NONCOOPERATION
It is well settled that an insured has an obligation to cooperate with the insurer in the investigation of a claimed loss. 232 Broadway Corp., v. New York Property Insurance Underwriting Association, 206 AD2d 419 (2nd Dept, 1994). In order for an insurer to meet its burden on a motion to dismiss a complaint based upon an insured's willful noncooperation with the investigation of a claim, the insurer must establish that (1) it acted diligently in seeking to bring about the insured's cooperation; (2) the efforts employed by the insurer were reasonably calculated to obtain the insured's cooperation; and (3) the attitude of the insured, after his or her cooperation was sought, was one of willful and avowed obstruction. Blinco v. Preferred Mutual Insurance Company, 11 AD3d 924 (4th Dept, 2004), lv to app dism, 4 NY3d 739. The insurer's burden of proving willfulness has been termed "a heavy one" and requires a showing that the insured's actions involved a pattern of noncooperation for which no reasonable excuse is offered or that the failure to cooperate was persistent. Levy v. Chubb Insurance, 240 AD2d 336 (1st Dept, 1997); Turkow v. Erie Insurance Company, 20 AD3d 649 (3rd Dept, 2005); Ingarra v. General Accident/PG Insurance Company of New York, 273 AD2d 766 (3rd Dept, 2000); Blinco v. Preferred Mutual Insurance Company, 11 AD3d 924.
The willful failure of an insured to submit to an EUO and to supply all relevant information in compliance with the provisions of an insurance policy has been held to constitute a material breach of contract and precludes recovery. Lentini Brothers Moving Storage Co., Inc., v. New York Property Insurance Underwriting Association, 53 NY2d 835 (1981); Azeem v. Colonial Assurance Company, 96 AD2d 123 (4th Dept, 1983), aff'd 62 NY2d 951; Levy v. Chubb Insurance, 240 AD2d 649. However, substantial compliance by the insured relative to the submission to an EUO or the furnishings of proofs prior to institution of a suit satisfies the insured's duty to cooperate. Avarello v. State Farm Fire and Casualty Company, 208 AD2d 483 (2nd Dept, 1994); 232 Broadway Corp., v. New York Property Insurance Underwriting Association, 206 AD2d 419.
In the instant case, Defendants' claim of noncooperation involves Plaintiff's delay in submitting the jet washer, allegedly damaged in the fire, to Erie for inspection and testing and Plaintiff's refusal to answer a question at the EUO based upon spousal privilege. As to Plaintiff's delay in submitting the jet washer, the Court finds less than compelling Plaintiff's purported reasons for failing to submit the item in question in a timely manner. While the Court understands Plaintiff's concern about preservation of the jet washer, the record fails to demonstrate why Plaintiff would believe that Erie would not adequately protect the item. Certainly, Plaintiff would have a legal recourse should the item be returned in a damaged condition.
Nevertheless, the Court finds this delay does not, in and of itself, constitute the type of willful noncooperation necessary to warrant a dismissal of the action. Plaintiff's actions, while not particularly reasonable, did not rise to the level of "willful and avowed obstruction". Blinco v. Preferred Mutual Insurance Company, 11 AD3d 924.
Plaintiff's assertion of the spousal privilege at the EUO, however, is more problematic. The purpose of a provision in a fire insurance policy requiring submission to an EUO is to enable the insurer to obtain all knowledge and facts concerning the cause of the fire and the loss involved while the information is still fresh in order to protect itself from false and fraudulent claims. Azeem v. Colonial Assurance Company, 96 AD2d 123; Davis v. Allstate Insurance Company, 204 AD2d 592 (2nd Dept, 1994). The right to examine under the cooperation clause of an insurance policy is much broader than the right of discovery under the CPLR ( Dyno-Bite, Inc., v. Travelers Companies, 80 AD2d 471 (4th Dept, 1981), app dism, 54 NY2d 1027; Evans v. International Insurance Company, 168 AD2d 374; Altidor v. State-Wide Insurance Company, 4 Misc 3d 1007 (A) (Sup.Ct., Kings Co., 2004), aff'd 22 AD3d 435) and the insurer is entitled to all knowledge and all information as to other sources and means of knowledge in regard to facts, material to its rights, to enable the insurer to decide on its obligation and protect against false claims. Dyno-Bite, Inc., v. Travelers Companies, 80 AD2d 471; 2423 Mermaid Realty Corp., v. New York Property Insurance Underwriting Association, 142 AD2d 124 (2nd Dept, 1988).
The insurer's rights with respect to an EUO are not, as Plaintiff characterized them, divine in nature, but, rather, contractual. Dyno-Bite, Inc., v. Travelers Companies, 80 AD2d 471; Allstate Insurance Co., v. Longwell, 735 F.Supp. 1187 (S.D.NY 1990). Absent any indication that an insured was forced to sign a policy which contained a cooperation clause requiring him or her to submit to an EUO, the insurer is permitted to ask, and an insured is required to answer, any material and relevant questions concerning the claim. Dyno-Bite, Inc., v. Travelers Companies, 80 AD2d 471; Pizzirusso v. Allstate Insurance Company, 143 AD2d 340 (2nd Dept, 1988), app dism, 73 NY2d 808; Evans v. International Insurance Company, 168 AD2d 374.
In fact, it has been widely held that an insured may not refuse to answer questions at an EUO on Fifth Amendment grounds without voiding his or her rights under the insurance policy. Dyno-Bite, Inc., v. Travelers Companies, 80 AD2d 471; Azeem v. Colonial Assurance Company, 96 AD2d 123; 2423 Mermaid Realty Corp., v. New York Property Insurance Underwriting Association, 142 AD2d 124; Gross v. United States Fire Insurance Company, 71 Misc 2d 815 (Sup.Ct., Kings Co., 1972); Allstate Insurance Co., v. Longwell, 735 F.Supp.1187. Moreover, an insured risks the loss of coverage under a fire insurance policy even when refusing to answer questions at an EUO or provide information to the insurer upon the advice of counsel. Pizzirusso v. Allstate Insurance Company, 143 AD2d 340; Davis v. Allstate Insurance Company, 204 AD2d 592; Evans v. International Insurance Company, 168 AD2d 374.
Based upon the foregoing, the Court finds Plaintiff had no basis to refuse to answer questions at the EUO concerning conversations he had with his wife prior to testifying. While the Court recognizes the importance of protecting confidential communications between a husband and a wife, if an insured is not permitted to invoke at an EUO a basic Constitutional right, it certainly cannot be said that Plaintiff can refuse to answer questions at an EUO based upon a spousal privilege.
Having found that Plaintiff improperly asserted the spousal privilege at the EUO, the Court must now determine the remedy. An insured's refusal to provide requested information, material and relevant to an insurer's investigation of the claimed loss, including the refusal to answer questions or participate in an EUO, is a breach of the cooperation clause of the insurance policy and coverage may be disclaimed on that basis alone. Latha Restaurant Corp., v. Tower Insurance Company, 38 AD3d 321 (1st Dept, 2007), lv to app den, 9 NY3d 803; Pizzirusso v. Allstate Insurance Company, 143 AD2d 340; 2423 Mermaid Realty Corp., v. New York Property Insurance Underwriting Association, 142 AD2d 124. Long delays occasioned by an insured's refusal to timely provide necessary information often makes it difficult for insurers to fully investigate the claim, defeating the very purpose of the insurance policy's cooperation clause. Azeem v. Colonial Assurance Company, 96 AD2d 123; Levy v. Chubb Insurance, 240 AD2d 336; Allstate Insurance Co., v. Longwell, 735 F.Supp. 1187.
However, while many Courts have disfavored the granting of conditional orders of dismissal ( Lentini Brothers Moving Storage Co., Inc., v. New York Property Insurance Underwriting Association, 53 NY2d 835), such an Order is appropriate in this case. While, as noted above, Plaintiff improperly asserted a spousal privilege during the EUO, the record demonstrates that it was counsel for Erie who stopped the EUO and refused to ask any further questions. Cf, Davis v. Allstate Insurance Company, 204 AD2d 592; Evans v. International Insurance Company, 168 AD2d 374; Pizzirusso v. Allstate Insurance Company, 143 AD2d 340. Had counsel continued with the EUO, the record may have revealed that questions concerning conversations Plaintiff had with his wife would, indeed, be information material and relevant to the subject claim. As such, Defendants have, at this point, failed to establish that they acted diligently in seeking Plaintiff's cooperation ( Blinco v. Preferred Mutual Insurance Company, 11 AD3d 924) and, notwithstanding Plaintiff's breach of his contractual obligation by failing to answer certain questions at the EUO, and his delay in submitting to Defendants the jet washer, Plaintiff's noncompliance was not so willful or extreme as to warrant dismissal of the action without giving him one last chance to answer the questions. Marmorato v. Allstate Insurance Company, 226 AD2d 156 (1st Dept, 1996).
B. NEGLIGENCE CLAIM
As for Plaintiff's negligence claim, as plead in the amended Complaint, Plaintiff contends that Defendants negligently reviewed the photographs of the items Plaintiff claims were damaged in the fire and that Defendants knew or should have known that Plaintiff would not set fire to his van while it was parked in his driveway next to his house where his wife and grandchildren were sleeping. Construing the complaint in the light to which it is entitled on a motion to dismiss (CPLR 3211(a); Leon v. Martinez, 84 NY2d 83 (1994)), the Court finds Plaintiff's cause of action sounding in tort has not been properly stated. Alexander v. Geico Insurance Company, 35 AD3d 989 (3rd Dept, 2006).
It is a well established principle that a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated. Bristol-Myers Squibb, Industrial Division v. Delta Star, Inc., 206 AD2d 177 (4th Dept, 1994); City of Watertown v. Stebbins Engineering and Manufacturing Company, 206 AD2d 828 (4th Dept, 1994). Because a tort obligation is apart from and independent of promises made in a contract, a defendant may be liable in tort only when it has breached a duty of reasonable care distinct from its contractual obligations, or when it has engaged in tortious conduct separate and apart from its failure to fulfill its contractual obligations. New York University v. Continental Insurance Company, 87 NY2d 308 (1995).
In the instant case, the essence of Plaintiff's negligence cause of action is Erie's breach of the insurance policy by failing to timely provide him with the benefits to which Plaintiff contends he is entitled due to damages he sustained in the van fire. The Complaint does not allege the creation of a relationship between Plaintiff and Defendants separate from their contractual relationship ( Alexander v. Geico Insurance Company, 35 AD3d 989) and there is no separate tort for the bad faith refusal to comply with an insurance contract. New York University v. Continental Insurance Company, 87 NY2d 308; Paterra v. Nationwide Mutual Fire Insurance Co. , 38 AD3d 511 (2nd Dept, 2007); Johnson v. Allstate Insurance Company, 33 AD3d 665 (2nd Dept, 2006); Alexander v. Geico Insurance Company, 35 AD3d 989.
C. SLANDER CLAIM
Plaintiff's third cause of action alleges that Defendant Piontkowski slandered him through comments made to the Corning Police Department about the fire. Plaintiff alleges that Defendant Piontkowski knew, or should have known, that his remarks were false and defamatory and that, as a result, Plaintiff suffered mental anxiety and anguish. Defendants contend that the statements provided to the police by Defendant Piontkowski are protected by a qualified privilege.
A communication is subject to a qualified privilege where it is made (1) in good faith by a person in the discharge of some public or private duty, legal or moral, or in the conduct of his or her own affairs, in a matter where his or her interest is concerned ( Toker v. Pollak, 44 NY2d 211 (1978); or (2) by one person to another upon a subject in which both have a common interest. Liberman v. Gelstein, 80 NY2d 429 (1992); East Point Collision Works, Inc., v. Liberty Mutual Insurance Company, 271 AD2d 471 (2nd Dept, 2000); Herlihy v. Metropolitan Museum of Art, 214 AD2d 250 (1st Dept, 1995). The defense of qualified privilege will be defeated by demonstrating that the party spoke with malice, i.e., where it is shown that the motivation for making such statements was spite or ill will (common law malice), or that the statements were made with a high degree of awareness of their probable falsity (constitutional malice). Foster v. Churchill, 87 NY2d 744 (1996); Liberman v. Gelstein, 80 NY2d 429; Kondo-Dresser v. Buffalo Public Schools , 17 AD3d 1114 (4th Dept, 2005); Fregoe v. Fregoe , 33 AD3d 1182 (3rd Dept, 2006).
In the instant case, Defendant Piontkowski is protected by a qualified privilege in that the statements he gave were part of his duties to report possible false insurance claims to the police. Chapo v. Premier Liquor Corporation, 259 AD2d 1050 (4th Dept, 1999). There can be no liability for merely giving information to legal authorities who are left entirely free to use their own judgment in proceeding any further with respect to that information. Lowmack v. Eckerd Corporation, 303 AD2d 998 (4th Dept, 2003); Cobb v. Willis, 208 AD2d 1155 (4th Dept, 1994). Moreover, Defendants and the police certainly have a common interest in the investigation of potentially false insurance claims. Liberman v. Gelstein, 80 NY2d 429; Herlihy v. Metropolitan Museum of Art, 214 AD2d 250.
The Court further finds that both the original and Amended Complaints fail to raise sufficient allegations that Defendant Piontkowski acted with malice in speaking with the police. According to the police report provided by Plaintiff, Defendant Piontkowski's discussion with the police dealt only with possible inconsistencies between the items Plaintiff claimed were damaged by the fire and the photographs taken by the police. While the papers submitted in support of Plaintiff's cross-motion make repeated suggestions that Defendants had falsely accused Plaintiff of arson, the Amended Complaint alleges only that Defendant Piontkowski "did wrongfully advise" the police about the insurance claim. Construing the Amended Complaint in the light most favorable to Plaintiff, the Court finds Defendant Piontkowski's qualified privilege is not overcome by the vague and conclusory allegations set forth in the Amended Complaint that the statements to the police were made with ill will or with a high degree of awareness of their probable falsity. Doherty v. New York Telephone Company, 202 AD2d 627 (2nd Dept, 1994); East Point Collision Works, Inc., v. Liberty Mutual Insurance Company, 271 AD2d 471; cf, Labarge v. Holmes, 30 AD3d 1087 (4th Dept, 2006); Kondo-Dresser v. Buffalo Public Schools , 17 AD3d 1114 .
D. PUNITIVE DAMAGES
Punitive damages are not recoverable for an ordinary breach of contract as their purpose is not to remedy private wrongs, but to vindicate public rights. Rocanova v. Equitable Life Assurance Society of the United States, 83 NY2d 603 (1994); Fishgold v. C.O.F., Inc., 288 AD2d 827 (4th Dept, 2001). A private party seeking to recover punitive damages must not only demonstrate egregious tortious conduct, actionable as an independent tort, 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 Assurance Society of the United States, 83 NY2d 603. While the conduct warranting an award of punitive damages need not be intentionally harmful, in order to recover for such damages, a plaintiff must allege facts indicating that the defendant acted in a wanton, willful or malicious manner and that the plaintiff seeks to vindicate a public right or deter morally culpable conduct. Fordham-Coleman v. National Fuel Gas Distribution Corporation , 42 AD3d 106 (4th Dept, 2007); Hunter v. Galland , 37 AD3d 1048 (4th Dept, 2007); Westinghouse Electric Supply Company v. Pyramid Champlain Company, 193 AD2d 928 (3rd Dept, 1993); Randi A.J. v. Long Island Surgi-Center, 46 AD3d 74 (2nd Dept, 2007).
First, inasmuch as the Court is dismissing Plaintiff's negligence and slander claims, there is no independent tort action upon which a punitive damages claim can lie. Even if the negligence and slander claims were to survive, and affording the original and Amended Complaints every possible inference, the Court finds Plaintiff's allegations fail to rise to the level of willful or wanton negligence, recklessness, or moral culpability. Hunter v. Galland , 37 AD3d 1048 . Plaintiff's claims that Defendants' behavior "may also be possibly tied to a pattern" of similar behavior towards other claimants is wholly conclusory and completed unsupported in the Complaint. In sum, the acts alleged by Plaintiff constitute private wrongs for which punitive damages may not recovered. Westinghouse Electric Supply Company v. Pyramid Champlain Company, 193 AD2d 928.
Accordingly, it is hereby
ORDERED, that Defendants' motion for an Order dismissing the within Complaint based upon Plaintiff's wilful noncooperation with Defendants' investigation of Plaintiff's claim be and the same hereby is granted, unless Plaintiff, within sixty (60) days of the date of this Decision and Order, submits to another examination under oath and answers all material and relevant questions, consistent with this Decision and Order, and rights are reserved to both parties to make appropriate applications to the Court in the event that such an examination under oath is not timely held; and it is further
ORDERED, that Defendants' motion for an Order dismissing Plaintiff's negligence, slander and punitive damages claims be and the same hereby is granted; and it is further
ORDERED, that Plaintiff's cross-motion for an Order granting him leave to amend his complaint to clarify the causes of action sounding in negligence, slander and punitive damages be and the same hereby is denied on the ground that the Court has determined herein that such causes of action are lacking in merit.