Opinion
151184/2015
06-28-2018
PHILADELPHIA INDEMNITY INSURANCE COMPANY a/s/o Wee Care Child Care, LLC, Plaintiff, v. B & L MANAGEMENT CO. LLC, Defendant.
Richard A Lambert, FRENKEL LAMBERT WEISS WEISMAN & GORDON, LLP, One Whitehall Street, New York, NY 10004 David R Frank, LAW OFFICE OF MARGARET G. KLEIN & ASSOCIATES, 200 Madison Avenue, New York, NY 10016
Richard A Lambert, FRENKEL LAMBERT WEISS WEISMAN & GORDON, LLP, One Whitehall Street, New York, NY 10004
David R Frank, LAW OFFICE OF MARGARET G. KLEIN & ASSOCIATES, 200 Madison Avenue, New York, NY 10016
Carmen Victoria St. George, J.
In this subrogation action, defendant, the managing agent of a building where plaintiff's subrogee was a tenant, makes this motion to dismiss the complaint on the ground that this action is precluded by a waiver of subrogation clause in the lease between plaintiff's subrogee and the landlord, for whom defendant is an agent.
Factual and Procedural Background
In 2009, plaintiff's subrogor, Wee Care Child Care, LLC (Wee Care) entered into a lease with non-party 445–151 East LLC (the Owner) for space on the first floor of a building located at 451 East 83rd Street, New York, New York (the Building). Defendant B & L Management Co. LLC is the managing agent for the Building. Under the terms of the lease, the Owner and Wee Care agreed to waive their respective subrogation rights with respect to any property damage. Paragraph 9 (e) (the Waiver) provides, in relevant part:
"Notwithstanding anything contained to the contrary each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in full force and collectible and to the extent permitted by law, Owner and Tenant each hereby release and waives all right of recovery against the other, or anyone claiming through or under each of them by way of subrogation of otherwise. The release and waiver herein referred to shall be deemed to include any loss or damages to the demised premises and/or to any personal property, equipment, trade fixtures, goods, and merchandise located here. The foregoing release and waiver shall be in full force only if both releasers' insurance policies contain a clause providing that such a release and waiver shall not invalidate the insurance" (see Frank affirmation, Exhibit C).
Both the Owner and Wee Care procured insurance policies that did not invalidate this paragraph of the lease.
On June 8, 2014, the HVAC unit in apartment 2–C of the Building malfunctioned causing water damage to Wee Care's space below. Plaintiff, Wee Care's insurer, paid out $105,698.08 to Wee Care for the flood damage repairs.
On February 4, 2015, plaintiff commenced this subrogation action seeking $105,698.08 from defendant. In its complaint, plaintiff alleges that defendant was negligent in managing the Building, and failed to properly maintain the HVAC unit in apartment 2–C, thereby causing the HVAC unit to leak and flood the Wee Care space. Issue was joined on March 30, 2015 . A preliminary conference was held on March 3, 2016, and a compliance conference was held on July 14, 2016.
Although a verified answer is attached to defendant's motion as exhibit B, it was not filed in the NYSCEF system.
Defendant moves to dismiss the complaint, pursuant to CPLR § 3211 (a) (1) (documentary evidence), on the grounds that paragraph 9 (e) of the lease is a valid subrogation waiver and was in effect at the time of the loss. Defendant argues that it is covered under the Waiver as the managing agent of the building; therefore, it has no liability to plaintiff. Defendant argues that, while the Waiver does not expressly include it as managing agent, reading the lease as a whole, the parties intended to include the Owner's agents and employees in the Waiver. Accordingly, defendant contends that this subrogation action must be dismissed.
Plaintiff opposes the motion and cross moves to compel defendant to comply with its discovery demands. In opposition to defendant's motion to dismiss, plaintiff argues that the language of the Waiver refers only to the "Owner and Tenant," and, therefore, defendant is not covered under the Waiver. Plaintiff notes that since defendant is not a party to the lease it cannot be a party to the Waiver. Plaintiff also argues that reading the lease as a whole, it is clear that Wee Care did not waive its subrogation rights against defendant. Plaintiff contends that the cases upon which defendant relies for the proposition that it is included in the subrogation waiver, do not set forth the exact language of the subject subrogation waiver, and therefore, are not persuasive nor applicable to the Waiver in this lease.
In reply, defendant notes that plaintiff does not dispute that the validity of the Waiver; rather, plaintiff argues that defendant cannot claim the benefit of the Waiver. Defendant also argues that all the cases upon which it relied in support of its motion, expressly state that a subrogation clause which refers the landlord/owner also includes the managing agent under the waiver. Moreover, the only case relied upon by plaintiff, is a unique fact pattern distinguishable from the facts herein.
With respect to plaintiff's claim for discovery, defendant argues that plaintiff is not entitled to discovery because discovery is stayed during the pendency of this motion.
Discussion
Although defendant labeled its motion as a motion to dismiss pursuant to CPLR § 3211 (a) (1) (see Notice of Motion), such a motion is prohibited after joinder of issue. Moreover, the arguments set forth by the parties make it clear that they intended this motion to be one for summary judgment. Accordingly, on February 15, 2018, this court issued an order converting defendant's motion to dismiss pursuant to CPLR § 3211, to one for summary judgment pursuant to CPLR § 3212, and adjourned the matter to permit supplement submissions to make a complete record (see Nonnon v. City of New York , 9 NY3d 825, 827 [2007] ; see also Mihlovan v. Grozavu, 72 NY2d 506, 508 [1988] ). The parties did not file any supplemental submissions.
Notably, all the cases relied up by defendant are decisions rendered on motions for summary judgment.
"To obtain summary judgment it is necessary that the movant establish his cause of action or defense sufficiently to warrant the court as a matter of law in directing judgment in his favor ( CPLR § 3212, subd [b] ), and he must do so by tender of evidentiary proof in admissible form. On the other hand, to defeat a motion for summary judgment the opposing party must show facts sufficient to require a trial of any issue of fact ( CPLR§ 3212, subd [b] )" ( Zuckerman v. City of New York , 49 NY2d 557, 562 [1980] [internal quotation marks omitted], quoting Friends of Animals v. Associated Fur Mfrs. , 46 NY2d 1065, 1067–1068 [1979] ). If the movant fails to establish entitlement to summary judgment as a matter of law, summary judgment must be denied, regardless of the sufficiency of the opposition papers (see Winegrad v. New York Univ. Med. Ctr. , 64 NY2d 851, 853 [1985] ).
The equitable doctrine of subrogation allows an insurer to stand in the shoes of its insured to seek indemnification from third parties whose wrongdoing caused the loss for which the insurer is bound to reimburse (see Pennsylvania Gen. Ins. Co. v. Austin Powder Co. , 68 NY2d 465, 471 [1986] ). Moreover, absent a violation of law or transgression of a strong public policy, parties to a contract are free to make whatever agreement they wish, including a waiver of subrogation (see generally Koren–DiResta Constr. Co., Inc. v. New York City School. Constr. Auth. , 293 AD2d 189 [1st Dept 2002] ). Here, there is no dispute that the Owner and Wee Care validly agreed to waive any subrogation claims they may have against each other. "Such clauses are viewed as a device by which the parties merely allocate the risk of liability between themselves to third parties through insurance" ( Interested Underwriters at Lloyds v. Ducor's Inc. , 103 AD2d 76, 77 [1st Dept 2014] ).
Therefore, the only issue to be decided is whether defendant can claim the benefit of the Waiver. There is no dispute that at the time of the water damage, defendant was the managing agent of the Building and Wee Care was a tenant. Further, there is no dispute that the Waiver does not specifically reference defendant; rather it expressly states that Owner and Tenant waive any and all subrogation rights they may have against each other. Reading the lease as a whole, however, reveals that its terms were intended to apply to both the owner and its agent.
In reviewing the language of the lease, it is important to note that the lease is a New York standard form office lease with a rider that adds paragraphs 40–91 to the lease. The first clause of the lease provides, in relevant part:
"Agreement of Lease made on this ___ day of September 2009, between 445–151 E 83 LLC c/o B & L Management Company, LLC with offices at 316 East 83rd Street, New York, New York, 1022, party of the first part, hereinafter referred to as OWNER , (emphasis added) ..." (see Frank affirmation, Exhibit C).
This indicates that at the time the lease was entered into defendant was acting as an agent of the Owner and when the lease referred to OWNER in its text, B & L was to be considered included when any reference is made to the OWNER. Further, the lease and rider routinely refer to the "Owners or Owner's [its] agents," "Owner, its managing agent," (see Frank affirmation, Exhibit C paragraphs 8, 13, 21, 33, 47[h], 47[q], 52[b], 65[b], 65[c], 89[c] ). Thus, it is clear that the parties intended to include the Owner's agents in the Waiver. It is also important to note that in paragraph 52 (b), tenant is obligated to name the Owner as well as its managing agent and any mortgagee of the Building, as an additional insured in the liability insurance required under the lease (see Frank affirmation, exhibit C).
Courts have routinely held that when the subrogation waiver does not expressly include the management company, the management company is equally protected by the waiver (see Global Imports Outlet, Inc. v. The Signature Group LLC, 90 AD3d 401, 402 [1st Dept 2011] [Waiver applies to managing agent]; Foremost Furniture Showroom, Inc. v. 830 West Co. , 73 AD3d 491, 492 [1st Dept 2010] [Waiver applies to managing agent]; General Acc. Ins. Co. v. 80 Maiden Lane , 252 AD2d 391, 392 [1st Dept 1998] ; Insurance Co. of N. Am. v. Borsdorff Servs. 225 AD2 494, 494 [1st Dept 1996][Reading the lease as a whole demonstrates the intent of the parties to lease that both the landlord and managing company be equally protected by the subrogation waiver]; Pilsner Bottling Co. v. Sunset Park Indus. Assoc. , 201 AD2d 548, 549 [2d Dept 1994] ; ["A reading of the entire lease illustrates that the parties intended to include agents or employees within the meaning of the term ‘Landlord’, under the subrogation-waiver clause of the lease. It appears that the parties anticipated that the parties would operate through employees, agents, or servants"] ).
This case is distinguishable from the case relied upon by plaintiff, Interested Underwriters at Lloyds v. Ducor's Inc. , (103 AD2d 76, 77 [1st Dept 2014] ). In Interested Underwriters , tenant leased a portion of a premises known as 434 Central Avenue Cedarhurst, New York from the defendant owner. A fire, which originated on an adjacent lot, 432 Central Avenue, Cedarhurst, New York, also owned by defendant, caused $218,000 in damage to the tenant's space. Plaintiff, tenant's subrogor, paid tenant's insurance claim and then commenced an action against defendant for the recovery of the $218,000. Defendant moved to dismiss the action on the ground that, pursuant to paragraph 9 of the lease between it and tenant, tenant had agreed to waive any right of subrogation against defendant as landlord (id. ). The motion court granted defendant's motion. In reversing the motion court's decision and order, the Appellate Division held that, while the waiver of subrogation clause in the lease was valid, the fire originating on an adjacent lot, arose out of an act wholly outside of the scope of the landlord tenant relationship, and, thus was not covered under the waiver clause. The court noted that it could not be inferred from the language of the waiver that the parties intended to allocate all risks between them to their insurer, including the risk of loss from any act wholly unrelated to the landlord tenant relationship, and committed by a third party who coincidentally happens to also be tenant's landlord.
Here, contrary to plaintiff's arguments, the loss experienced by Wee Care is directly related to its landlord tenant relationship with the Owner, to wit, property damage caused by another unit in the Building. Further, Wee Care's loss is the type of loss contemplated by the waiver of subrogation clause. Thus, Interested Underwriters is not persuasive.
Accordingly, defendant's motion for summary judgment dismissing the complaint must be granted and plaintiff's cross motion must be denied.
Accordingly it is
ORDERED that defendant B & L Management, LLC's motion for summary judgment is granted and the complaint dismissed with costs and disbursements to defendant as taxed by the Clerk upon submission of an appropriate bill of costs; and it is further
ORDERED that plaintiff Philadelphia Indemnity Insurance Company a/s/o Wee Care Child Care, LLC's cross motion is denied; and it is further
ORDERED that the Clerk is directed to enter judgment accordingly.