Opinion
Index No. 651544/2023
05-03-2024
Pashman Stein Walder Hayden, P.C., New York, NY (Brendan M. Walsh, Angela R. Elbert, and Paul Walker-Bright of counsel), for plaintiffs. Clyde & Co U.S. LLP, New York, NY (Owen B. Carragher, Jr., Peter J. Rossi, and Lauren Elizabeth Boulbol of counsel), for defendants.
Unpublished Opinion
Pashman Stein Walder Hayden, P.C., New York, NY (Brendan M. Walsh, Angela R. Elbert, and Paul Walker-Bright of counsel), for plaintiffs.
Clyde & Co U.S. LLP, New York, NY (Owen B. Carragher, Jr., Peter J. Rossi, and Lauren Elizabeth Boulbol of counsel), for defendants.
Gerald Lebovits, J.
This is an action to recover damages for breach of an insurance contract and breach of the implied covenant of good faith and fair dealing. Defendants move, under CPLR 3212, for summary judgment dismissing the breach-of-contract claim or, in the alternative, under CPLR 3211 to dismiss the breach of the implied covenant of good faith and fair dealing claim (motion sequence 002). Plaintiffs also move under CPLR 3212 for partial summary judgment on the complaint (motion sequence 003).
Defendants' request to dismiss plaintiffs' breach-of-contract claim is denied. Defendants' request to dismiss plaintiffs' breach of plaintiffs' breach-of-covenant claim is granted. Plaintiffs' motion for partial summary judgment is granted only to the extent that (i) this court holds as a matter of law that plaintiffs' settlement in the RMC Bankruptcy does not reduce the amount of loss; and (ii) defendants' fifth affirmative defense is dismissed. The motion is otherwise denied.
BACKGROUND
These motions arise out of an insurance coverage dispute between plaintiffs, Tiffany and Company ("Tiffany") and Laurelton Sourcing LLC, and defendants, Lloyd's of London Syndicates 33, 510, 609, 780, 1084, 1225, 1414, 1686, 1861, 1969, 2001, 2012, 2232, 2488, 2987, 3000, 3623, 4444, 4472, and 4711 concerning the alleged loss of over $20 million of Tiffany's property while it was in the possession of a third-party vendor. Both parties have submitted various statements of undisputed material facts and responses to those statements of undisputed material facts in relation to these motions. (See NYSCEF Nos. 76; 128; 131; 142; 186.) The following facts, derived from those statements, are undisputed unless otherwise indicated.
RMC and Tiffany Refining Relationship
In October 2016, Tiffany entered into a Merchandise Vendor Agreement ("MVA") with Republic Metals Corporation ("RMC") under which Tiffany would periodically deliver precious metals to RMC for refining. (See NYSCEF No. 76 at ¶ 17.) Tiffany requires all vendors performing services related to its manufacturing activities (including refining services) to execute and abide by the terms of the MVA before commencing a business relationship. (See NYSCEF No. 128 at ¶ 17.) Beginning somewhere between November and December 2016, Tiffany began sending metal to RMC for refining and continued to do so until November 2018. (See id. at ¶ 57.)
Neither party has provided evidence that definitively proves when Tiffany began sending RMC metals for refining.
In February 2017, RMC sent Tiffany a link to its "New Account Application" to be completed and signed. (See NYSCEF No. 42.) That application required all new customers to provide business information, banking information for the purpose of complying with RMC's supply chain policy, anti-money laundering laws, and related activities. (See NYSCEF No. 117.) At the end of the application is the "Republic Metals Corporation Standard Terms and General Operating Conditions" ("RMC T&Cs"). (See id. at 14-19.) Mary Messier, on behalf of Tiffany, signed and returned a copy of the application to RMC on June 14, 2017. (See NYSCEF No. 90 at 179:7-11.) Also around June 2017, Tiffany began procuring precious metals from RMC, which was wholly separate from its refining transactions and not relevant to this action.
Messier is Tiffany's Senior Director of Strategic Sourcing.
The parties agree that from October 2, 2018, to October 30, 2018, Tiffany delivered 19 lots of metals to RMC that included 10,918.843 ounces of gold; 49,994.482 ounces of silver; 0.849 ounces of platinum; and 80.284 ounces of palladium to RMC for refining. (See NYSCEF No. 131 [Responses to Insurers' Statement of Undisputed Facts] at ¶ 86.) Tiffany did not cash out, and Tiffany's pool account maintained a balance of 16,006.145 ounces of gold, 66,930.027 ounces of silver, 0.994 ounces of platinum, and 80.284 ounces of palladium as of October 30, 2018, which amounted to over $20 million. (See id. at ¶¶ 87-88; NYSCEF No. 41 at 2-5.)
On November 2, 2018, RMC filed for bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York in the matter captioned In re Republic Metals Refining Corporation et al., United States Bankruptcy Court for the Southern District of New York, Case No. 18-13359 ("RMC Bankruptcy"). (See NYSCEF No. 76 at ¶ 92.) On November 21, 2018, Tiffany demanded the return of the metals it had delivered to RMC for refining in September and October 2018. (See NYSCEF Nos. 119 & 50.)
On February 19, 2019, RMC and certain of its affiliates ("Debtors") filed a response to the customers' statements, in which it stated that as of the petition date, Tiffany's assets were "[c]ommingled, processed, and likely sold" and that as of February 15, 2019, were "[s]old or otherwise irretrievable." (See NYSCEF No. 63 at Exhibit D at 7 [page 56 of PDF].) On April 11, 2019, Tiffany filed a proof of claim based on its ownership of the metals and seeking to recover the lost value of the 19 lots of metals described above ("Ownership Claim") and, in the alternative, a proof of claim asserting a general unsecured claim against RMC in the amount of $22,414,377.04 seeking to recover the lost value of the 19 lots of metals described above and a proof of claim asserting an administrative claim under Bankruptcy Code § 503 (b) (9) in the amount of $22,414,377.04. (See NYSCEF Nos. 122; 123.)
On August 8, 2019, the bankruptcy court issued a Memorandum of Decision concerning the claims of the eight of the Bucket One customers ("Silo One Customers"), which did not include Tiffany. (See Matter of Miami Metals I, Inc., 603 BR at 730-731.) In the RMC Bankruptcy, the customers were divided into several "Buckets" based on the particular facts and circumstances of their claims. (Matter of Miami Metals I, Inc., 603 BR 727, 730-731 [Bankr S.D. NY 2019] ["Silo One decision"].) For example, Silo One Customers consisted of customers whose only governing contract was the RMC T&Cs, (see id. [addressing the ownership dispute of the Silo 1 customers]), Bucket 5 consisted of customers whose agreements were "silent as to when title [of the metals] passe[s] from each Bucket 5 Customer to [Debtor]," (see Matter of Miami Metals I, Inc., No. 18-13359 (SHL), 2021 WL 126003, *2 [Bankr S.D. NY Jan. 13, 2021]), and Bucket 8 consisted of two customers that asserted ownership interests premised upon purported leases, (see Matter of Miami I, Inc., 634 BR 249, 256 [Bankr S.D. NY 2021].) Tiffany was placed in its own bucket because it had a separate contract, the MVA, with RMC.
Plaintiffs and the Senior Lenders settled that action by entering into a settlement agreement on the record before the Honorable David S. Jones, United States Bankruptcy Judge for the Southern District of New York. On December 22, 2022, Judge Jones approved the Settlement and Compromise entered into by and among the Litigation Trustee, the Senior Lenders and plaintiffs. (See NYSCEF No. 70.) At the time of the settlement, plaintiffs had allegedly incurred millions of dollars in legal fees, costs, and expenses to litigate its ownership claim. (See NYSCEF No. 142 [Insurers' Response to Tiffany's Statement of Undisputed Facts] at ¶ 111.)
The Senior Lenders consisted of Coöperatieve Rabobank U.A., New York Branch; Brown Brothers Harriman & Co.; Bank Hapoalim B.M.; Mitsubishi International Corporation; ICBC Standard Bank Plc; Techemet Metal Trading LLC; and Hain Capital Investors Master Fund, Ltd which were each party to an agreement with Debtors entered into prior to the petition date with the obligations thereunder secured by valid and perfected liens on substantially all the Debtors' assets, including inventory and cash. (See NYSCEF No. 127 at 6.)
The Insurance Policy and Claim
Defendants issued plaintiffs' parent company, Tiffany & Co, an all-risks insurance policy numbered B0901EE1701374000 ("Policy") in force during the alleged loss. The Policy defines "Insured" as "Tiffany & Co and/or Associated and/or Affiliated and/or Interrelated and/or Subsidiary Companies...." (See NYSCEF No. 23 at 2.) The policy covers "all physical loss and/or damage occurring during the period of insurance arising out of any cause whatsoever" to Tiffany's property, including, among a myriad of other things, "platinum" and "precious metals." (See id. at 8.)
Extension 1 of the Policy, titled "Entrustment to Third Parties," provides:
"It is understood and agreed that this Contract is extended to include the insured property up to a limit of USD 5,000,000 for each and every loss whilst entrusted to clients, suppliers, workshops, cutters and photographers, and other third parties, including whilst at their premises."
"It is, however, understood and agreed that whenever the Insured entrust goods to "Third Party Vendors" as approved by Tiffany Risk Management and or Laurelton Diamonds and declared to Insurers at renewal, the cover hereunder shall be operative up to the sum insured of USD 25,000,000 each and every loss."
"It is further understood and agreed that whenever the Insured entrust goods to third parties for the purposes of a sale by such third parties on their behalf, such persons shall, for the purposes of this insurance, be deemed to be employees of the Insured and the cover hereunder shall be operative up to the sum insured of USD 25,000,000 each and every loss."
"Insurers undertake to waive any rights of recourse, in the event of loss or damage, against third parties to whom the insured property may have been entrusted, except insofar as a separate insurance exists to cover the third parties' interests. Insurers may, however, avail themselves of their rights of recourse if the Insured give them their written consent."(NYSCEF No. 23 at 14.)
Tiffany provided defendants with quarterly reports that contained "Schedules of Metal Inventory Entrusted to Third Party Vendors." (See NYSCEF No. 86.) Those schedules set forth the list of approved "third party vendors" to which Tiffany had entrusted its metals, including RMC, and the dollar amounts of the metals Tiffany had at each vendor. (See id.)
The Policy provides that all insurance it provides is subject to an aggregate deductible of $10 million "per twelve (12) month contract period." (See NYSCEF No. 23 at 3.) As of June 5, 2023, plaintiffs have satisfied $1,708,373.08 of the $10 million. Thus, $8,291,626.92 remains on the Policy's deductible. (See NYSCEF No. 128 at ¶ 110.) Plaintiffs also paid the premium of $2,668,974 for the Policy. (See id. at 3.)
On November 16, 2018, Tiffany made a claim under the Policy to the Insurers for $20,799,675.57 ("Claim"). (See NYSCEF No. 26.) On April 22, 2020, defendants provided Tiffany with a written coverage determination denying the Claim. (See NYSCEF Nos. 24 & 145.) As a basis for denying coverage, the letter asserted that Tiffany had sold the subject metals to RMC and therefore that there was no coverage for the Claim, because Tiffany did not retain an insurable interest in the subject metal after its sale and the alleged loss was not fortuitous. (See NYSCEF No. 145 at 2-3.)
Plaintiffs commenced this action on March 27, 2023, by way of a verified complaint. (NYSCEF No. 2.) Plaintiffs have asserted claims for (i) breach of insurance contract, based on defendants' denial of coverage for the alleged covered loss of precious metals; and (ii) breach of the duty of good faith and fair dealing, based on defendants' asserted failure to conduct a timely, fair, complete, and proper investigation of the Claim, failure to make a timely determination of coverage, and unreasonable, malicious, reckless, or intentional delay of payment of insurance proceeds. Defendants' answer, followed by an amended answer, generally denied the complaint's allegations, and raised 17 affirmative defenses on June 5, 2023. (NYSCEF Nos. 16 & 19.)
DISCUSSION
Motion Sequence 002
On motion sequence 002, defendants seek summary judgment under CPLR 3212 dismissing the complaint or, in the alternative, dismissing plaintiffs' claim for breach of the implied obligation of good faith and fair dealing. (See NYSCEF Nos. 21 & 77.)
I. Admissibility of Defendants' Evidence in Support of Their Request for Summary Judgment
On a motion for summary judgment, the movant must establish its prima facie case "by tender of evidentiary proof in admissible form." (Zuckerman v City of NY, 49 N.Y.2d 557, 562 [1980].) Evidence must be authenticated to be admissible and, in turn, "an appropriate basis on which to grant summary judgment." (Clarke v Am. Truck & Trailer, Inc., 171 A.D.3d 405, 406 [1st Dept 2019].) A defendant moving for summary judgment seeking an order dismissing plaintiff's complaint has the "initial burden of coming forward with admissible evidence, such as affidavits by persons having knowledge of the facts, reciting the material facts and showing that the cause of action has no merit." (GTF Mktg., Inc. v Colonial Aluminum Sales, Inc., 66 N.Y.2d 965, 967 [1985].)
In support of its motion, defendants submitted various financial statements and records annexed to Monika Perez's the affidavit to establish that Tiffany only ever cashed out its account with RMC rather than seeking return of its metals. (See NYSCEF Nos. 71; 72; 73; 74; 75.) In opposition, plaintiffs contend that many of Insurers' statements of undisputed facts are not supported by admissible evidence, because they have not been authenticated or contain inadmissible hearsay. (See NYSCEF No. 130 at 5-6.) As a result, plaintiffs contend that Insurers have not met their burden of proof with admissible evidence. (See id.) The truthfulness of the exhibits is not an issue; plaintiffs do not dispute that the amounts it reflects are accurate: they dispute only their admissibility. Plaintiffs object to Exhibits 47-50 and 18. (See NYSCEF No. 131 [Response to Insurers' Statement of Undisputed Facts] at ¶¶ 18, 19, 26, 28-91, 94.)
Defendants argue that three exhibits (defendants' Exhibits 18, 49, and 50) are properly authenticated under CPLR 4540-a. Further, defendants seek to admit four exhibits for their truth. Defendants seek to admit two exhibits (Defendants' Exhibits 49 and 50) as business records under CPLR 4158 (a); and they seek admission of two exhibits (Defendants' Exhibits 47 and 48) under the "voluminous writings" exception to the best evidence rule. Last, defendants seek to admit Exhibit 18 as not hearsay.
A. Authentication Based on CPLR 4540-a
Defendants' first argument is that because Tiffany produced Exhibits 18, 49, and 50 during the claim investigation, that they are presumed to be authentic under CPLR 4540-a. (See NYSCEF No. 141 at 7.) Defendants contend that plaintiffs conceded the authenticity of the three exhibits under CPLR 4540-a because Tiffany produced them as part of the insurance claim investigation.
CPLR 4540-a provides that material produced by a party in response to a discovery demand is presumed authentic when offered by an adverse party in that action. But defendants are essentially arguing that this court should hold that Exhibits 49 and 50 are authenticated under CPLR 4540-a although their contents were submitted by Tiffany not in response to a discovery demand under Article 31 of CPLR but during a private insurance claim investigation. And defendants provide no support for the proposition that CPLR 4540-a presumes the authenticity of a document offered in one action which was produced during a non-court related action. (See U.S. Specialty Ins. Co. v State Natl. Ins. Co., Inc., 81 Misc.3d 1222 [A], 2023 NY Slip Op 51425[U], *2 [Sup Ct, NY County 2023] [finding no support that CPLR 4540-a presumes the authenticity of a document, offered in one action, produced in discovery in a different action].) Therefore, CPLR 4540-a does not apply to authenticate Exhibits 18, 49 and 50.
B. Admissibility of Exhibits 49 and 50
Exhibit 49 is a copy of plaintiffs' pool account statements created by RMC which details the amount of gold, silver, platinum, and palladium that Tiffany sent to RMC for refining and allegedly the amount of refined metal that Tiffany cashed out from the pool account from January 3, 2017, to September 28, 2018. (See NYSCEF Nos. 71 at ¶ 7 & 74 .) The final page appears to be a summary of the final lots delivered that remained at the time RMC filed for bankruptcy. Exhibit 50 contains, among other things, a series of emails from RMC to Tiffany that contain information regarding wire transfers made by RMC to Tiffany during their relationship, invoices sent to Tiffany for shipping, treatment and refining of the metals, (see e.g. NYSCEF No. 75 at 47), purchase invoices that correspond to when Tiffany cashed out the specific lots, (see e.g. id. at 66), wire transfer statements, and high-grade metal reports. A portion of the exhibit appears to be Tiffany's own documents detailing the various transactions between RMC and Tiffany. (See id. at 5-25.)
The pool account statements are split into Tiffany's pool account from January 3, 2017, to March 28, 2018 (see NYSCEF No. 74 at 1-6) and Laurelton's pool account statements from January 11, 2018, to September 28, 2018 (see id. at 7-24).
Because Exhibits 49 and 50 are being offered by defendants to prove Tiffany's delivered and cashed out when the documents say it did, this qualifies as hearsay. (See People v Slade, 37 N.Y.3d 127, 140 [2021].) Defendants argue that Exhibits 49 and 50 are admissible under CPLR 4518's business-records exception to the hearsay rule. (See NYSCEF No. 141 at 7-8.)
Business records are hearsay when offered for the truth of their contents and thus "may be received in evidence only if they fall within one of the recognized exceptions to the hearsay rule, and then only if the proponent demonstrates that the evidence is reliable." (Bank of NY Mellon v Gordon, 171 A.D.3d 197, 202 [2d Dept 2019] [internal quotation marks omitted], citing Nucci v Proper, 95 N.Y.2d 597, 602 [2001].)
Certain business records submitted in support of a motion for summary judgment may be deemed admissible if those documents meet the requirements of the business-records exception to the rule against hearsay under CPLR 4518. (See Viviane Etienne Med. Care, P.C. v Country-Wide Ins. Co., 24 N.Y.3d 498, 508 [2015].) Admission of a business record requires a "proper foundation be provided by someone with personal knowledge of the maker's business practices and procedures." (Anghel v Ruskin Moscou Faltischek, P.C., 190 A.D.3d 906, 908 [2d Dept 2021] [defendants failed to lay a proper foundation for the Matter Ledger Card concerning plaintiff's payment history as a business record because the supporting affidavit submitted by a member of defendants' law firm failed to set forth that he "was personally familiar with [the law firm's] record keeping practices and procedures"]; accord HSBC Mortg. Servs., Inc. v Royal, 142 A.D.3d 952, 954 [2d Dept 2016].) To establish a proper foundation for the admission of a business records, the proponent must satisfy the requirements outlined in CPLR 4518 (a): (1) the record is made in the "regular course of business," i.e., that it reflect a routine, regularly conducted business activity, and it is needed and relied on in the performance of functions of the business; (2) it is the "regular course of such business to make the record," i.e., it is made pursuant to established procedures for the routine, habitual, systematic making of such a record; and (3) the record is made at or about the time of the event being recorded, ensuring accuracy and habitual entry. (Bank of NY Mellon, 171 A.D.3d at 205; accord Briar Hill Apts. Co. v Teperman, 165 A.D.2d 519, 521 [1st Dept 1991].)
It is just as important on a motion for summary judgment as it is at trial to provide foundation evidence to admit business records. (See e.g. JPMorgan Chase Bank, N.A. v Clancy, 117 A.D.3d 472 [1st Dept 2014] [excluding a business record attached to a verified complaint because the complaint was not verified by a person with knowledge of the record-keeping of the business at issue and such person fails to set forth the necessary three-part foundation].) The key to admissibility of the record is that it carries the indicia of reliability ordinarily associated with business records. (See Cratsley, 86 N.Y.2d at 91; One Step Up, Ltd. v Webster Bus. Credit Corp., 87 A.D.3d 1, 11-13 [1st Dept 2011] [borrowing base certificate admissible as a business record because (1) the affiant produced one every time it requested an advance from defendant, (2) the affiant was under a contractual duty to create the records, (3) the records were created contemporaneously with the transactions, (4) defendant routinely relied on the records in the regular course of its business, and (5) the affiant certified at the bottom of the record that "the information set forth is true and complete."].)
Where, as here, one company (e.g., Tiffany) prepares certain documents and sends them to another company (e.g., defendants), which then sends them to another company (e.g., Lowers Forensics International ["LFI"]), the mere fact that the third company receives and files those documents does not make the documents business records of the third company. (See Lodato v Greyhawk N. Am., LLC, 39 A.D.3d 494, 495 [2d Dept 2007].) The general rule is that "the mere filing of papers received from other entities, even if they are retained in the regular course of business, is insufficient to qualify the documents as business records." (HSBC Bank USA v Gifford, 224 A.D.3d 447, 455 [1st Dept 2024, Gesmer, J., dissenting].) In this circumstance, the proponent of the documents also must establish, through foundation testimony on personal knowledge, either that (i) the circumstances under which the documents were created by the sending company satisfy the requirements of the business-records exception (see Corsi v Town of Bedford, 58 A.D.3d 225, 230 [2d Dept 2008]); or (ii) the documents, once received, were incorporated into the recipient's own records and routinely used by the recipient in the regular course of its business-thereby, in effect, being adopted as the recipient's own business records (see Bank of NY Mellon v Demasco, 2024 Slip Op 02033, *1 [2d Dept 2024]; DLJ Mtge. Cap. v Mahadeo, 166 A.D.3d 512, 513 [1st Dept 2018]; State of NY v 158th St. & Riverside Dr. Hous. Co., Inc., 100 A.D.3d 1293, 1296 [3d Dept 2012].) Defendants failed to satisfy either of the two conditions.
The central issue is whether Perez's affidavit lays a proper foundation under the business-record exception for the admission of the various records. As explained above, Exhibits 49 and 50 contain various records and communications concerning transactions between RMC and Tiffany that were submitted by Tiffany to Insurers for purposes of the Claim. (See NYSCEF No. 71 at ¶¶ 4-5.) As part of Insurers' investigation, they engaged LFI to review Tiffany's accounting records. (See id. at ¶¶ 3-4.) Perez stated in her affidavit that she is Vice President of LFI. (See id. at ¶ 1.) Perez does not specifically allege who created the underlying records making up Exhibit 49. The document on its face indicates that it was created by RMC, the refiner, and Perez does not allege that she is personally familiar with that entity's record-keeping practices and procedures. Perez's affidavit fails to set forth that she "was personally familiar with [Tiffany's and RMC's] record keeping practices and procedures" and makes no statement regarding her familiarity with Tiffany's business records practices and procedures, or whether she personally reviewed these documents.
Undisputedly, Perez is outside Tiffany's and RMC's enterprise. (See Cratsley, 86 N.Y.2d at 90-91.) Her status as an LFI employee does not necessarily mean she is incompetent to lay a foundation for the admission of business records created by another entity. (See Bank of NY Mellon, 171 A.D.3d at 209.) The exhibits may still qualify as business records if LFI incorporated those documents into their own records and routinely relied on them in the regular course of her business. (See id.; 158th St., 100 A.D.3d at 1297 [lab reports and test results were the contemporaneous business records generated by contractor in the performance of its contractual duties and were routinely relied on by DEC in its fulfillment of its responsibility to remediate and investigate the spills.].)
As previously noted, "[a] proper foundation for the admission of a business record must be provided by someone with personal knowledge of the maker's business practices and procedures," here LFI's. (Citibank, N.A. v Cabera, 130 A.D.3d 861, 861 [2d Dept 2015].) Even if Perez sought to lay a foundation for the admission of a business record maintained by her employer, LFI, her affidavit is insufficient to satisfy the admissibility requirements of CPLR 4518 (a). Perez's affidavit states the following as the basis of her knowledge:
"[W]e reviewed all refining transfer sheets for metals sent by Tiffany to RMC (including corresponding shipping records), customer lot sheets received from RMC, settlement purchase invoices received from RMC, RMC wire transfer statements and related purchase invoices, Tiffany's Pool Account... statements, and shipping records."(NYSCEF No. 71 at ¶ 4.)
For a document to qualify as a business record because its recipient "relies" on it, the recipient must then have proceeded to use the document itself in the course of its own business. (See 158th St., 100 A.D.3d at 1296 [DEC incorporated lab reports and test results generated by its contractor into its own records and used these documents to carry out its environmental remediation duties]; Plymouth Rock Fuel Corp. v. Leucadia, Inc., 117 A.D.2d 727, 728 [2d Dept 1986] [plaintiff used information on delivery tickets to generate its own invoices].) The recipient must have adopted the document, such that the recipient's regular and routine use of the document in its business can satisfy the business-record exception in the same way as if the recipient itself had generated the document. (See Olson v Brenntag N. Am., Inc., 69 Misc.3d 1214 [A], *37 [Sup Ct, NY County 2020].) Perez's affidavit failed to set forth whether these records were incorporated into LFI's own records or that LFI routinely relied upon such records in the regular course of LFI's business. (Cf. One Step Up, 87 A.D.3d at 11; accord Bank of NY Mellon, 171 A.D.3d at 206.)
Further, Perez makes no mention of any established procedures by LFI for the routine, habitual, systematic making of such records, nor that the entry of these records was made at or about the time of receipt and that the records were created and maintained in the ordinary course of LFI's business. Perez does not even state in her affidavit that she believes the exhibits to be an accurate and fair representation of the occurrences with which the record purports to represent. (See One Step Up, 87 A.D.3d at 11; Bank of NY Mellon, 171 A.D.3d at 206.)
As a result, defendants have failed to lay a proper foundation for the admission of Exhibits 49 and 50 concerning Tiffany's transaction history. (See Anghel, 190 A.D.3d at 907-908; accord Bank of Am., Natl. Assn. v Brannon, 156 A.D.3d 1, 8-10 [1st Dept 2017].) Moreover, certain factual assertions made by Perez in her affidavit are unsubstantiated and thus lack credibility. The affidavit claims that "[w]e were subsequently advised that Tiffany later admitted that they never requested the return of any metal resulting from the refining of the scrap metal sent to RMC." (See NYSCEF No. 71 at ¶ 6.) The affidavit does not identify the basis of her knowledge for that assertion, as it does not it identify who the source of that information was or provide any support that the statement was ever made.
Without the benefit of the business-records exception to the hearsay rule, both Exhibits 49 and 50 regarding Tiffany's and RMC's transactions are impermissible hearsay unless an independent basis for their admission exists. Here, no such independent basis exists.
Defendants have not laid proper foundation to admit the pool account statements, payment ledgers, refining transfer sheets, customer lot, sheets, wire transfer statements, high grade metal reports, and purchase invoices into evidence. Those records, therefore, are inadmissible and cannot serve to establish, prima facie, that Tiffany cashed out every month. Exhibits 49 and 50 are excluded in their entirety.
C. Admissibility of Exhibits 47 and 48
Exhibit 47 contains a spreadsheet depicting Tiffany's pool statement and wire transfers that was created by LFI for Clyde & Co. that allegedly "reflect[s] supplemental documents produced" by Tiffany during the claim investigation. (See NYSCEF Nos. 71 at ¶ 5; 141 at 7.) Exhibit 47 claims to represent deposits and cashing out as well as wire transfers between December 1, 2016, and October 30, 2018. (NYSCEF No. 72.) It contains (i) charts depicting Tiffany's pool account statements (id. at 1-5); and (ii) charts depicting wire transfers from RMC to Tiffany (id. at 6-10). The document indicates that it contains 16 pages. However, pages 11-16 are missing, and instead pages 12-17 appear to be copies of RMC purchase invoices that are partially cut off.
Exhibit 48 contains various spreadsheets created by LFI for Clyde & Co. (NYSCEF No. 73.) These include (i) "Reconciliation of Pool Account Statement and Payments," created May 31, 2023 (id. at 1-2); (ii) "Pool Statement," created June 1, 2023 (id. at 3-5); (iii) "Wire Transfers from RMC to Tiffany for the Sale of Tiffany's Metals and Other Fees Charged by RMC," created May 31, 2023 (id. at 6-9); (iv) "Other Wire Transfers from RMC to Tiffany," created May 31, 2023 (id. at 10); and (v) "Summary of RMC Wire Transfers to Tiffany as per RMC Payment Reports" (id. at 11.)
Defendants contend that because Exhibits 49 and 50 are admissible, that 47 and 48 are also admissible under the "voluminous writings" exception to the best evidence rule because they merely incorporate and reference the information contained in the former, citing Ed Guth Realty, Inc. v Gingold (34 N.Y.2d 440, 452 [1974]). (See NYSCEF No. 141 at 8.)
The best-evidence rule "requires the production of an original writing where its contents are in dispute and sought to be proven." (People v Haggerty, 23 N.Y.3d 871, 876 [2014].) However, "[i]n appropriate circumstances a short summary document, such as a chart, may be admissible where it is based upon underlying materials that are too voluminous to be manageable and where both sides have access to the underlying materials." (Artists Rights Enft. Corp. v Robinson, 67 Misc.3d 1213 [A], 2020 Slip Op 50533[U], *11 [Sup Ct, NY County 2020]; accord Pub. Operating Corp. v Weingart, 257 AD 379, 382 [1st Dept 1939].)
A document that summarizes voluminous records may in and of itself be a business record, admissible independent of the underlying documents. If the summary itself is a regularly maintained business record and satisfies the requirement for the business-records exception to the hearsay rule, then the best-evidence rule will not apply. (See R&I Elecs., Inc. v Neuman, 81 A.D.2d 832, 833 [2d Dept 1981].) If the summaries are not independently admissible as business records, they may nonetheless be admissible under the voluminous-writings exception if the underlying documents on which they are based are admissible as business records. (See People v Weinberg, 183 A.D.2d 932, 933-934 [2d Dept 1992]; accord Sager Spuck Statewide Supply Co., Inc. v Meyer, 298 A.D.2d 794, 795 [3d Dept 2002].)
Both Exhibits 47 and 48, on each page, state that they were prepared for Clyde & Co., Defendants' attorneys, suggesting that these charts were prepared in anticipation of litigation, not in the ordinary course of business, and are thus not admissible as business records. (See One Step Up, 87 A.D.3d at 11 ["Documents that are prepared in connection with or in contemplation of litigation are not admissible."]; Natl. States Elec. Corp. v LFO Constr. Corp., 203 A.D.2d 49, 50 [1st Dept 1994].) Therefore, the only way these summaries could be admitted is through the voluminous-writings exception to the best-evidence rule. But because this court has concluded that the underlying exhibits upon which the summaries are based are inadmissible hearsay, the summaries are also inadmissible.
Exhibits 47 and 48 are excluded in their entirety.
D. Admissibility of Exhibit 18
Defendants contend that the statements in Exhibit 18 are not being offered for the truth of the matter asserted, but rather for the fact that the email was sent. (See NYSCEF No. 141 at 8-9.)
Hearsay evidence is admissible if offered for a non-hearsay purpose, such as to establish the state of mind of the person making the statement. (See Provenzo v Sam, 23 N.Y.2d 256, 261-262 [1968] [allowing statement introduced to shed light on plaintiff's state of mind].) Thus, if offered solely for the fact that the statement was made, the statement is not inadmissible hearsay. (See DeSario v SL Green Mgt., 105 A.D.3d 421, 422 [1st Dept 2013].) The use of that statement, however, is restricted to the proof of matters other than the truth of the hearsay assertion.
Here, Defendants use the emails in Exhibit 18 to support the propositions that (1) "[n]ot long after Tiffany sent RMC its first lots of scrap metal RMC provided Tiffany with a copy of the RMC T&C for signature", (see NYSCEF No. 77 at 8), and (2) "[s]hortly after Tiffany began sending scrap metal to RMC for refining, RMC asked Tiffany to execute its standard terms and conditions ("RMC T&C")." (See NYSCEF No. 76 at ¶ 19.) This supports defendants' argument that the emails in Exhibit 18 are not being offered for the truth of the facts asserted but rather for the fact that the emails were sent.
Exhibit 18 is admitted in its entirety for the sole purpose as stated above.
II. The Merits of Defendants' Motion for Summary Judgment on Plaintiffs' First Cause of Action
A. Whether the Loss Suffered by Tiffany is Covered Under the Policy
An "all-risk" policy allows recovery "for all losses not resulting from misconduct or fraud unless there is a specific policy provision excluding coverage of the loss in express terms." (Roundabout Theatre Co. v Cont. Cas. Co., 302 A.D.2d 1, 5 [1st Dept 2002].) Plaintiffs, as an all-risk insured, have the burden to establish a prima facie case for recovery by proving "(1) the existence of a valid "all risks" policy; (2) an insurable interest in the subject of the [insurance] policy; and (3) the fortuitous loss of the covered property," i.e., the metals. (See Nussbaum Diamonds, LLC v Hanover Ins. Co., 64 A.D.3d 488, 491 [1st Dept 2009].) Where, as here, "[a]n insured seek[s] to recover for a loss under an insurance policy [it] has the burden of proving that a loss occurred and also that the loss was a covered event within the terms of the policy." (Consol. Rest. Operations, Inc. v Westport Ins. Corp., 205 A.D.3d 76, 80-81 [1st Dept 2022].)
In this case, there is no dispute that the Policy is a valid all-risks insurance policy. Defendants contend, however, that plaintiffs' purely economic loss is not covered under the Policy, because (1) generally, plaintiffs had no insurable interest in the property and therefore did not suffer a fortuitous loss, which is required for any all-risk insurance policy; and (2) plaintiffs did not suffer a physical loss or damage to insured property as required under the Policy. (See NYSCEF No. 77 at 13-15.)
1. Sale versus bailment
Defendants' lack of insurable interest and physical loss argument is premised on the contention that Tiffany sold its metals to RMC rather than entrusted the metals. (See id. at 14.) The parties acknowledge that the primary dispute on these motions is about whether the transactions between Tiffany and RMC constitute sales or bailments.
The court notes at the outset that this issue will not conclusively resolve the issue whether Tiffany had an insurable interest under the Policy. (See discussion infra Section II.A.2.)
Defendants make three principal arguments why the transactions here were sale transactions, rather than bailments. The arguments are addressed in turn below. First, the subject transactions are governed by the RMC T&Cs rather than the MVA and the terms of the RMC T&Cs indicate that the transactions were sale transactions. (See id. at 8-12.) Second, plaintiffs' claim is foreclosed by the RMC Bankruptcy Court's ruling that all delivery of scrap metal to RMC pursuant to the RMC T&C constitutes sales as a matter of law and that there is no factual or legal basis for this court to depart from that court's reasoning and decision. (See id. at 5-8.) Third, there is no factual basis for Section A4.1 to have ever applied to the transactions between Tiffany and RMC. (See id. at 12-13.) Therefore, defendants conclude that because the transactions were sale transactions, the pool account balance left when RMC filed bankruptcy was an unpaid debt that the Policy does not cover. (See id. at 13.)
(a) Whether the RMC T&Cs supersede the MVA
Under New York law, "[a] subsequent contract regarding the same subject matter will supersede a prior contract, but only with regard to that same subject matter." (Pope Contr., Inc. v NY City Hous. Auth., 214 A.D.3d 519, 520 [1st Dept 2023]; accord Hyuncheol Hwang v Mirae Asset Sec. (USA), Inc., 165 A.D.3d 413, 413 [1st Dept 2018].) However, a subsequent contract that does not pertain to "precisely the same subject matter" will not supersede an earlier contract unless the subsequent contract has definitive language indicating it revokes, cancels or supersedes that specific prior contract. (See Globe Food Servs. Corp. v Consol. Edison Co. of NY, Inc., 184 A.D.2d 278, 279 [1st Dept 1992] [merger clause in a later contract that stated it "shall replace all prior agreements" insufficiently to supersede a particular earlier contract.]; accord Blumenfeld Dev. Grp., Ltd. v Forest City Ratner Cos., LLC, 50 Misc.3d 1221 [A], 2016 NY Slip Op 50188[U], *7 [Sup Ct, Nassau County 2016] [merger clause in a later contract that did not state "that it was intended to supersede any and all prior arrangements-contractual or otherwise" was insufficient to supersede a particular earlier contract]; cf. Volpe v Interpublic Grp. Of Co., Inc., 2013 NY Slip Op 31784[U], *14-15 [Sup Ct, NY County 2013] ["[T]he Final Employment Agreement's unambiguous terms state that 'any agreement' between Volpe and IPG related to 'any compensation' was superseded by the Final Employment Agreement."].)
If "a question of intention is determinable by written agreements, the question is one of law, appropriately decided on a motion for summary judgment. Only where the intent must be determined by disputed evidence or inferences outside the written words of the instrument is a question of fact presented." (Mallad Constr. Corp. v Cnty. Fed. Sav. & Loan Assn., 32 N.Y.2d 285, 291 [1973]; accord CIT Grp./Credit Fin., Inc. v Weinstein, 261 A.D.2d 203, 204 [1st Dept 1999] ["Where... the intent of the parties can be determined from the face of the agreement, interpretation is a matter of law and the case is ripe for summary judgment."]; cf. Am. Express Bank Ltd. v Uniroyal, Inc., 164 A.D.2d 275, 277 [1st Dept 1990] ["[I]f it is necessary to refer to extrinsic facts, which may be in conflict, to determine the intent of the parties, there is a question of fact, and summary judgment should be denied."].) Where different conclusions may reasonably be drawn from the evidence, summary judgment should be denied. (See Mammoth Ent., Inc. v Glob. Poverty Project, Inc., 67 Misc.3d 1241 [A], 2020 NY Slip Op 50799[U], *2 [Sup Ct, NY County 2020].)
(i) Whether the two agreements govern the same subject matter:
Although defendants originally contended that the MVA and the RMC T&Cs govern the same subject matter, defendants changed their position in their reply memorandum (NYSCEF No. 141) and in their memorandum opposition of plaintiffs' motion for partial summary judgment (NYSCEF No. 184). Defendants now contend that there is no conflict between the MVA and RMC T&Cs, because the two documents represent the parties in different roles in their transactions and can therefore coexist. (See NYSCEF Nos. 141 at 6; 184 at 15.) Defendants argue that whereas the MVA addresses the transactions in which Tiffany is a buyer and RMC is a seller, the RMC T&Cs address the transactions in which Tiffany is seller and RMC is buyer. (See NYSCEF No. 141 at 6.)
Defendants' contention that the RMC T&Cs refer to RMC as "the Buyer" and Tiffany as "the Seller" (see id. at 5) is unsupported by the record. Defendants do not identify in which provisions this is the case, and having read the RMC T&Cs, this Court cannot locate any reference to RMC as "the Buyer" and Tiffany as "the Seller." Rather, the RMC T&Cs refer to Tiffany as a "Customer." (See NYSCEF No. 117 at 14.) Therefore, this argument is without merit. Regardless, as defendants are no longer contending that the agreements cover the same subject matter and the parties appear to be in agreement on the issue of whether the two agreements govern the same subject matter, the court will proceed accordingly and consider the other arguments.
(ii) Whether the integration clause is sufficient to supersede the MVA
Each party contends that the language of the RMC T&Cs is clear and unambiguous and supports its contentions, but each party reaches a different conclusion about whether the RMC T&Cs retroactively replaced the MVA and became the governing agreement between Tiffany and RMC.
The introductory language of the RMC T&Cs provides as follows:
" Unless otherwise stipulated, these Standard Terms and General Operating Conditions "Standard Terms" are appliable to transactions and/or contracts between Republic Metals Corporation, "RMC", and Customer. "Customer" is defined as any business, corporation, company, person, entity, or anyone else transacting business with RMC in any manner whatsoever. Any contract or agreement entered into between Customer and RMC will operate as if the terms represented in these Standard Terms were expressly a part thereof. RMC's Standard Terms is the governing document with respect to any and all business dealings between RMC and Customer and shall override any and all provisions, terms, and stipulations in Customer purchase orders, sales orders and/or any other Customer documents."(NYSCEF No. 117 at 14 [emphasis added].)
The Integration Clause in the RMC T&Cs provides:
" Integration: This instrument contains the entire agreement between the parties relating to the rights granted and the obligations assumed, and incorporated all representations or modifications concerning this instrument whether arising from any usage or trade, course of dealing accepted industry practice, course of performance, evidence of consistent additional terms, or otherwise."(Id. at 19.)
Defendants contend that the RMC T&Cs should be deemed to supersede the MVA based on the above quoted clauses. (See NYSCEF Nos. 77 at 9-10, citing Matter of Miami Metals I, Inc., No. 22-cv-606(JGK), 2023 WL 2242049 [Bankr S.D. NY 2023], for the proposition that the RMC T&Cs unambiguously supersede all preexisting agreements between the parties; 117 at 19 [integration clause], 14 [introductory language].)
Additionally, defendants dispute that the RMC T&Cs were signed in connection with Tiffany's procurement of metal from RMC rather than its refining relationship. (See NYSCEF No. 141 at 4-5.) Defendants contend that the timing and the application establish that "(i) the RMC T&C were executed in connection with the scrap transactions; (ii) it was understood that those transactions were sales; (iii) the plan was to "cash[] out" and receive payment for the scrap -not to seek return of metal; and (iv) procurement, at the time it was filled out, was still a future consideration." (See id. at 5.) Defendants contend that the timing of when RMC sent Tiffany the RMC T&Cs corresponds with when Tiffany first cashed out. (See NYSCEF No. 77 at 8, citing NYSCEF No. 71 [Perez's Affidavit] at ¶¶ 9(a), (b).) Further, defendants point to an email sent from Elan Farbiarz (RMC's Business Development Director) to Mary Messier requesting that the appropriate person(s) at co-plaintiff Laurelton Sourcing fill out the "Application" in a link attached to the email. (See NYSCEF No. 141 at 4, citing NYSCEF No. 42.)
In light of this court's ruling concerning the admissibility of evidence, defendants can no longer support this statement with admissible proof. Because the supporting documents referenced by the affiant to be inadmissible hearsay, the statements in the affidavit regarding the cashing out transactions are also inadmissible hearsay and cannot be considered. (See Twin City Fire Ins. Co. v 9052 LLC, 76 Misc.3d 1217 [A], 2022 NY Slip Op 50973[U], *1 [Sup Ct, NY County 2022] ["Absent the supporting documents referenced by the affiant, the affidavit is merely inadmissible hearsay."].) Therefore, defendants have not provided sufficient admissible proof that the timing of the RMC T&Cs being sent to Tiffany coincided with Tiffany cashing out for the first time.
Moreover, defendants contend that the application itself serves as proof that the transactions were sales and Tiffany would be cashing out. Defendants point to the language in the application accompanying the RMC T&Cs in which when asked "[w]hat metal types will you sell to RMC," Messier answered, "Tiffany & Co. will sending clean and dirty silver and gold scrap to RMC." (See NYSCEF No. 135 at 6.) When asked "[w]hat (if any) products do you anticipate purchasing from [RMC]," Messier answered that "[r]efining will be cashed out; future opportunity is procurement of Artisanal metal; possibly Pm Grain." (See id.)
In response, plaintiffs contend that the boilerplate language in the RMC T&Cs is insufficient to show an intent to revoke or cancel the MVA (see NYSCEF No. 130 at 8-9) and that the RMC T&Cs, by its own terms, do not supersede the MVA as the first sentence of the document states that they only apply "[u]nless otherwise stipulated," (see NYSCEF Nos. 130 at 10; 43 at 14). That phrase, plaintiffs argue, bars the RMC T&Cs from superseding the MVA because it reflects an understanding that another agreement may control. (See NYSCEF No. 130 at 10.) In support of this interpretation, plaintiffs provide the deposition of Jason Rubin (RMC's CEO), who testified that if customers had their own individually negotiated contract with RMC, that contract would govern over the RMC T&Cs if the individually negotiated contract contained a "superseding clause or... terms that conflicted." (See NYSCEF Nos. 130 at 10; 92 at 264:5-11.)
Additionally, plaintiffs contend that "[w]hether a subsequent agreement supersedes the prior contract depends on the intention of the parties, deduced from the documents and the circumstances of their execution." (See NYSCEF No. 130 at 9.) Plaintiffs argue that "the two documents and the circumstances of their execution prove the parties intended for their relationship to be governed by the MVA, not the Standard Terms." (See NYSCEF No. 130 at 9.) Plaintiffs highlight that for the first nine months of their relationship, Tiffany and RMC operated solely pursuant to the MVA and that defendants fail to explain how the RMC T&Cs could apply to an already established course of performance. (See id.) Plaintiffs argue that the RMC T&Cs were acknowledged in connection with Tiffany expanding its business with RMC in June 2017 to include procurement of precious metals from RMC, which was wholly separate from the delivery of Tiffany EPM for refining. (See NYSCEF Nos. 130 at 9; 131 at ¶¶ 80-81; 103 at 47:9-48:5; 90 at 75:25-76:6.) Plaintiffs contend that RMC presented its Standard Terms to Tiffany as part of a package of materials comprising RMC's "New Account Application" which RMC required only to grant Tiffany access to RMC's "customer portal." (See NYSCEF No. 130 at 9.) In support, plaintiffs cite the deposition of Messier in which she stated that the New Account Application, to which the RMC T&Cs are attached, was presented to her "to fill out around their... anti-money laundering information" and "also to fill out so [Tiffany] could have access to [RMC's]... customer portal." (See NYSCEF No. 90 at 176:21-177:11, 179:22-180:6.)
Plaintiffs also argue that the Termination Clause in the MVA-which states that "[t]his MVA will continue in effect until either Tiffany or Vendor shall give written notice of termination expressly referencing this MVA," (NYSCEF No. 27 at 8)-bars the RMC T&Cs from terminating the MVA. (See NYSCEF No. 130 at 10.) Plaintiffs argue that because the RMC T&Cs do not reference the MVA or indicate that the prior agreement is terminated. (See id., citing Matter of Signature Apparel Group, 577 BR 54, 110 [Bankr S.D. NY 2017], for the proposition that "a contract must be terminated in accordance with its express terms.") Last, plaintiffs contend that the Amendment Clause in the MVA-which provides that "this MVA may only be amended by a document signed on behalf of both Tiffany and Vendor," (NYSCEF No. 27 at 8)-bars the RMC T&Cs from amending the MVA. (See NYSCEF No. 130 at 10.)
As an initial matter, defendants' reliance on the Bankruptcy Court's finding in Matter of Miami Metals I, Inc. (No. 22-cv-606(JGK), 2023 WL 2242049 [Bankr S.D. NY 2023]) is misplaced. In that case, although the customer argued it had a prior lease with RMC, the parties did not execute a written agreement concerning ownership prior to the RMC Standard Terms and thus provided no evidence of an alternative contract for the court to consider. (See id. at *3.) In determining whether the RMC T&Cs superseded a prior agreement, therefore, the court refused to admit parol evidence concerning the alleged oral "leasing arrangement" and considered only the three versions of the RMC T&Cs that the customer had signed. (See id.) This presents a different issue to that here in which the customer has provided the court an alternative agreement that was extensively negotiated by the parties and which both of the parties signed.
Next, this court agrees with plaintiffs that the language in the subject integration clause is insufficiently definitive to have a superseding effect concerning the MVA as a matter of law. Although neither party references the parol-evidence rule, their arguments relate directly to whether the introductory language and integration clause trigger that rule's application. The purpose of a merger clause is "to require the full application of the parol evidence rule in order to bar the introduction of extrinsic evidence to alter, vary or contradict the terms of the writing." (Jarecki v Shung Moo Louie, 95 N.Y.2d 665, 669 [2001].) Courts give little weight to boilerplate merger clauses. (See Intl. Bus. Machines Corp. v Glob. Foundries U.S. Inc., 204 A.D.3d 441, 442 [1st Dept 2022].) However, when the merger clause evidences a negotiation by the parties, courts accord such clauses more weight in determining the parties' intent. (See Benjamin Goldstein Prod., Ltd. v Fish, 198 A.D.2d 137, 137 [1st Dept 1993].) Although there is no actual merger clause in the RMC T&Cs, this court may consider the italicized language in the introductory paragraph to indicate an intention of merger effect.
Contrary to defendants' position, the RMC T&Cs contain no "clear and unequivocal language" indicating the parties' intention to have the RMC T&Cs supersede the MVA, thereby extinguishing any remedy under the MVA. No reference in the purported merger clause explicitly indicates that it supersedes any particular clause in the MVA or that it revoked, cancelled, or superseded the MVA specifically. (See Globe Food Servs. Corp., 184 A.D.2d at 279.) The introductory language does not state that it was intended to supersede any and all prior arrangements-contractual or otherwise-or contain more definitive language such as that contained in contracts held to have a superseding effect as a matter of law. (See Cornhusker Farms, Inc. v Hunts Point Co-Op. Mkt., Inc., 2 A.D.3d 201, 203 n 1 [1st Dept 2003] ["This Subscription Agreement sets forth the entire agreement of [the parties] with respect to the subject matter hereof, and all prior understandings and agreements including the [December 1998] Letter of Intent, are merged herein."]; Kindler v Newsweek, Inc., 277 A.D.2d 159, 160 [1st Dept 2000] ["[T]his agreement supercedes any other agreement between you and Newsweek with respect to your representation of Newsweek for advertising sales."]; Northville Indus. Corp. v Fort Neck Oil Terms. Corp., 100 A.D.2d 865, 866-867 [2d Dept 1984] ["This Agreement shall be in lieu of and shall supersede any other agreements existing as of the date hereof between Fort Neck or Slomin's and Northville relating to the purchase by Northville of No. 2 heating oil."]; Tyco Elec. Subsea Commcn. v Opnext, Inc., 2012 WL 10008216, 2012 NY Slip Op 33439[U], *5 [Sup Ct, NY County 2012] ["Here, the... Agreement unambiguously declared that it would 'supersede all contemporaneous oral agreements and all prior oral and written agreements or discussions... with respect to the subject matter of this Agreement,' and made specific reference to the LOI."].)
Rather, the clause's general language, that it "shall override any and all provisions, terms, and stipulations in Customer purchase orders, sales orders and/or any other Customer documents" tracks that of integration clauses found to be insufficient to supersede a prior agreement as a matter of law. (See e.g. Globe Food Servs. Corp., 184 A.D.2d at 279 [a later contract containing the phrase "[t]his contract shall replace all prior agreements between Globe and Con Edison" was not sufficiently definitive to supersede a particular earlier contract]; Blumenfeld Dev. Group, Ltd., 2016 NY Slip Op 50188[U], *3 ["This MOU, together with all other agreements which either are referred to herein, contain all of the understandings and agreements of whatsoever kind and nature existing between the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings with respect thereto."].)
Even if this court were to construe the introductory language and integration clause as defendants propose, this court would find that plaintiffs have raised a reasonable plausible interpretation of the introductory paragraph sufficient to raise a triable issue of material fact requiring denial of summary judgment. (See Myers v Fir Cab Corp., 64 N.Y.2d 806, 808 [1985].) In interpreting a contract, courts will strive to give meaning to every sentence, clause, and word of a contract. (See e.g. Travelers Cas. & Sur. Co. v Certain Underwriters at Lloyd's of London, 96 N.Y.2d 583, 594 [2001].) A contract should be "read as a whole, and every part will be interpreted with reference to the whole; and if possible, it will be so interpreted as to give effect to its general purpose." (Beal Sav. Bank v Sommer, 8 N.Y.3d 318, 324-325 [2007].) Moreover, courts should avoid an interpretation that has the effect of rendering a clause superfluous or meaningless. (See id. at 324; accord Corhill Corp. v S.D. Plants, Inc., 9 N.Y.2d 595, 599 [1961].)
Here, the very first words of the RMC T&Cs state they apply only" unless otherwise stipulated." (See NYSCEF No. 117 at 14. ) One could interpret the language of the introductory paragraph as constituting a merger clause as it states the RMC T&Cs "override any and all" other "Customer documents." However, reading that language in conjunction with the first three words qualifying that broad statement reveals an alternative reasonable interpretation. (See Beal Sav. Bank, 8 N.Y.3d at 324-325.) Under this interpretation, the introductory paragraph specifically provides the RMC T&Cs override any and all other agreements, but only if the parties have not stipulated otherwise. It follows that the RMC T&Cs acknowledge that they apply only if no other contract governs the parties' relationship.
The full sentence reads, "Unless otherwise stipulated, these Standard Terms and General Operating Conditions 'Standard Terms' are appliable to transactions and/or contracts between Republic Metals Corporation, 'RMC,' and Customer." (NYSCEF No. 117 at 14.)
Here, as plaintiffs contend, when Messier filled out the new applicant form to which the RMC T&Cs were attached, the parties had stipulated otherwise in the MVA that the latter was the governing contract. Defendants' interpretation could have been made clear and explicit by RMC, if that was RMC's intention, by simply eliminating the first three words, just like RMC did with the inapplicable provisions of the MVA. Plaintiffs' contention that this language may reflect an understanding that another agreement may control the relationship is a plausible inference from the evidence described, particularly if the court considers the extrinsic evidence concerning the parties' extensive negotiations in crafting the final version of the MVA. (See NYSCEF Nos. 94; 96; 97; 98; 99; 100; 101.) When that is compared with the generic language in the RMC T&Cs, which were not negotiated and are attached to the bottom of the "New Account Application," a jury could reasonably conclude they are intended merely as a fallback, absent another agreement.
Because this evidence creates a question of fact about whether the MVA or the RMC T&Cs governed the relationship between RMC and Tiffany, defendants have not met their burden of establishing a correct interpretation of the agreements as a matter of law. No decision of any other bankruptcy court addressing other customers in the RMC Bankruptcy has had occasion to consider the effect of these introductory words, because no other customer has provided an alternative agreement.
Plaintiffs' next two arguments-concerning improper termination and amendment of the MVA-are unavailing. The cases plaintiffs cite are irrelevant because they involved factually distinguishable issues. For example, Matter of Signature Apparel Grp. (577 BR 54 [Bankr S.D. NY 2017]) concerned just one contract that was improperly terminated pre-petition by failing to comply with the written notice of termination requirement. (See id. at 117 [finding that an entity that was created by bankrupt LLC's managing member to receive consulting fees that he was promised for acquiescing in a scheme to conceal that debtor-LLC's exclusive license had not been properly terminated prepetition could be required to return fees on unjust enrichment theory].) Defendants here are not arguing that the RMC T&Cs purported to terminate or amend the MVA, but rather that it superseded the MVA.
A summary judgment motion should be denied if there is any doubt about the existence of a material issue of fact. (See Mammoth Ent., Inc., 2020 NY Slip Op 50799[U], *2.) Because the parties' intent cannot be conclusively determined as a matter of law from the terms of the agreements themselves, a question of fact arises about which agreement Tiffany and RMC intended to govern. Moreover, because resolving the issue requires interpreting extrinsic evidence, such as the circumstances surrounding the execution of each agreement, and credibility determinations considering conflicting deposition testimony, the issue is one of fact to be decided by a jury and not on summary judgment. (See Vega v Restani Constr. Corp., 18 N.Y.3d 499, 505 [2012].)
(b) Whether section A4.1 of the MVA ever applied
Section A4.1 of the MVA provides:
" A4.1 Title To and Use of EPM. From time to time Tiffany may entrust to Vendor gold, platinum, silver, castings, components or precious stones ("Entrusted Precious Materials" or "EPM") for use in the production of goods for Tiffany. Title to EPM shall remain in Tiffany at all times, even after the EPM has been incorporated or fabricated into goods. Vendor shall: (a) keep EPM separate and apart from its own precious materials and the precious materials of third parties and to tag or otherwise identify EPM as the property of Tiffany; (b) use EPM only for the production of goods for Tiffany and not substitute other materials in place of EPM in any goods to be provided Tiffany; and (c) return EPM to Tiffany on demand."(NYSCEF No. 27 at 11.)
First, Defendants argue that Section A4.1's applicability is, by its terms, "expressly" contingent on the metals being sent to the vendor" for use in the production of goods for Tiffany" and because "it is undisputed that no scrap delivery to RMC was for production of any "goods for Tiffany," Section A4.1 was never triggered. (See NYSCEF No. 77 at 13.) Defendants claim that Section A4.1 requires RMC use the EPM "only for the production of goods for Tiffany" and because Tiffany never sought the return of its precious metals, RMC was not using the metals only for the production of goods for Tiffany. (See id.) This argument requires Tiffany to have intended to seek the return of the refined metals when it sent the unrefined metals to RMC for Section A4.1 to apply. (See NYSCEF No. 141 at 2.) Defendants contend that the language in Section A4.1 creates a condition to its application. In support thereof, defendants cite to the New Account Application filled out by Tiffany in June 2017 in which the applicant stated "[r]efining will be cashed out; future opportunity is procurement of Artisanal metal; possibly Pm Grain." (See NYSCEF No. 51 at 6.) Defendants, citing Messier's deposition, also contend "in connection with its manufacturing needs, Tiffany obtained any gold it needed through the procurement side and never relied on scrap to fill that need." (See NYSCEF No. 141 at 3.) Defendants have not established with admissible evidence that Tiffany cashed out every month prior to their demand for the return of their metals on November 21, 2018, and therefore cannot show that this condition, if it did exist, was not satisfied.
Second, defendants contend that Section A4.1 does not apply, because there is no evidence that Tiffany tried to enforce any of the restrictions in that section concerning segregation of the EPM. (See id. at 3.) Defendants argue that although Tiffany maintains that, under the MVA, RMC was required to segregate the metals throughout the refining process, in practice Tiffany never asked RMC to segregate the metal. (See id.)
Defendants' first and second arguments fail because there is no indication in the language of Section A4.1 imposing a condition precedent on its application. It is an established rule of contract law that courts will not construe a contractual duty as a condition precedent absent clear language that it was so intended. (See Unigard Sec. Ins. Co., Inc. v N. River Ins. Co., 79 N.Y.2d 576, 581 [1992]; accord Roan Meyers Assoc., L.P. v CT Holdings, Inc., 26 A.D.3d 295, 296 [1st Dept 2006].) It must be apparent from the contract itself that the parties intended to impose a condition. (See Torres v D'Alesso, 80 A.D.3d 46, 57 [1st Dept 2010].) There is no language in Section A4.1 effectuating a condition precedent. (See MHR Cap. Partners LP v Presstek, Inc., 12 N.Y.3d 640, 645 [2009] [internal quotation marks and citation omitted] [use of terms such as "if," "unless" and "until" constitutes "unmistakable language of condition"]; Natl. Fuel Gas Distrib. Corp. v Hartford Fire Ins. Co., 28 A.D.3d 1169, 1170 [4th Dept 2006] [requirement following the word "PROVIDED" indicates the creation of a condition]; Oppenheimer & Co. v Oppenheim, Appel, Dixon & Co., 86 N.Y.2d 685, 690 [1995] [internal quotation marks and citations omitted].)
Defendants have offered no evidence for the contention that application of Section A4.1 was contingent upon Tiffany's intending to seek the return of its refined metals or upon Tiffany's enforcing the restrictions on segregation. Defendants offer no reasonable explanation for why Tiffany and RMC would conduct negotiations regarding the MVA, strike sections found inapplicable, and then sign the contract, for it not to apply to their transactions going forward where there was no other applicable contract.
Whether the transactions between Tiffany and RMC abided by the terms of the MVA does not impact whether the MVA applied. The parties negotiated and executed a valid contract to govern their business relationship. Rather, the issue raised by defendants goes to whether RMC breached the agreement by not conforming to its requirements.
(c) Whether plaintiffs' claim is foreclosed by the RMC Bankruptcy
The next issue is whether plaintiffs are collaterally estopped from asserting issues defendants contend were resolved in the RMC Bankruptcy.
Collateral estoppel, or issue preclusion, prevents "a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party whether or not the causes of action are the same." (Simmons v Trans Express Inc., 37 N.Y.3d 107, 112 [2021] [emphasis in original] [internal quotation marks and citations omitted].) It is undisputed that issue preclusion in New York has at least four elements: (i) "'[t]he issues in both proceedings are identical'"; (ii) "'the issue in the prior proceeding was actually litigated and decided'"; (iii) "'there was a full and fair opportunity to litigate in the prior proceeding'"; and (iv) "'the issue previously litigated was necessary to support a valid and final judgment on the merits.'" (Century Indem. Co. v Brooklyn Union Gas Co., 74 Misc.3d 1221 [A], 2022 NY Slip Op 50192[U], *2 [Sup Ct, NY County 2022], quoting Conason v Megan Holding, LLC, 25 N.Y.3d 1, 17 [2015]. )
The Court of Appeals has applied a fifth element of decisiveness in Kaufman v Eli Lilly & Co., (65 N.Y.2d 449, 455 [1985]), as cited by plaintiffs, which is that the issue in the prior action must be decisive in the present action. (See Century Indem. Co., 2022 NY Slip Op 50192[U], *2-3.) The Court of Appeals and the Appellate Division, First Department, have two conflicting lines of precedent on this issue, one requiring the fifth element, one not. (See generally id.; compare Conason, 25 N.Y.3d at 17 [four elements], and Rojas v Romanoff, 186 A.D.3d 103, 108-109 [1st Dept 2020] [four elements], with Howard v Stature Elec., Inc., 20 N.Y.3d 522, 525 [2013] [five elements], and Gjonaj Realty & Mgt. Corp. v Capacity Grp. of NY LLC, 173 A.D.3d 534, 535 [1st Dept 2019] [five elements].) This distinction is immaterial in the current case, however.
The party invoking collateral estoppel has the burden of proving the issues in the present case are the same as those in the previous one, while the party opposing its application has the burden of establishing they didn't have a full and fair opportunity to litigate the issue in the prior action. (See Kaufman v Eli Lilly & Co., 65 N.Y.2d 449, 456 [1985].)
Defendants contend that Tiffany is collaterally estopped from arguing against the Silo One decision. (See NYSCEF No. 77 at 5-8.) Defendants seek to preclude plaintiffs from relitigating two factual findings made by the RMC Bankruptcy Court, namely, that (i) the scrap metal transactions governed by the RMC T&Cs should not be deemed sales; and (ii) its own pool account balance is not merely reflective of a debt owed by RMC. (See NYSCEF No. 77 at 7-8.) Defendants contend that the Bankruptcy Court found that "the scrap sent for refining under the RMC T&C were sold to Tiffany" and that "[t]he decision is relevant to any customers whose scrap transactions were governed by the RMC T&C," not just the named customers. (See NYSCEF No. 141 at 5.) Regarding the third element, defendants contend that Tiffany had "the opportunity to address the arguments in the motion and did participate in the briefing by filing a Joint Response with other RMC customers[, (NYSCEF No. 66),] and also participated at oral argument[, (NYSCEF No. 67)]." (See NYSCEF No. 77 at 7.) Additionally, defendants dispute whether plaintiffs can be bound by the decision as nonparties by contending that the decision extends not only to the named customers in that case, but to "any customers whose scrap transactions were governed by the RMC T&C." (See NYSCEF No. 141 at 6.)
In opposition, plaintiffs first contend that the issue in the Silo One decision is different to the issue being decided here. Here, the issue is "whether Tiffany entrusted Tiffany EPM to RMC, such that Tiffany suffered a covered loss when RMC refused to return Tiffany EPM" and a subpart of this issue is whether the MVA or the RMC T&C governed the relationship. (See NYSCEF No. 130 at 13.) Second, plaintiffs contend that Tiffany did not have a full and fair opportunity to litigate this issue before the Bankruptcy Court. (See id. at 14.) Although plaintiffs don't state explicitly that Tiffany was not a party to the prior proceeding, they make the following points: (i) RMC and the Senior Lenders only moved for summary judgment on the Bucket One customer claims; (ii) the court only interpreted the RMC T&Cs as applied to the eight Silo One Customers in Bucket One, which did not include Tiffany (see Matter of Miami Metals I, 603 BR at 730-731 [addressing the ownership dispute of the Silo 1 Customers whose only governing contract was the RMC T&Cs]); and (iii) the court acknowledged that Tiffany's ownership issues would be subject to a different and later schedule. (See id.)
As discussed above, issue preclusion requires a full and fair opportunity to litigate the issue in question. It is well established that "the doctrine of collateral estoppel bars a litigant from disputing an issue in another proceeding when that issue was decided against the litigant in a proceeding in which he had a "full and fair opportunity" to contest the matter." (Feinberg v Boros, 99 A.D.3d 219, 226 [1st Dept 2012] [emphasis added]; accord Aspen Specialty Ins. Co. v RLI Ins. Co., Inc., 194 A.D.3d 206, 213 [1st Dept 2021] ["to bind a claim or issue against a party, that party must have been a party to the prior litigation."].) Thus, issue preclusion "can only be asserted against a party to the first lawsuit, or one in privity with a party." (Rojas v Romanoff, 186 A.D.3d 103, 108 [1st Dept 2020].) This court has explained that "[t]his requirement is one of constitutional dimension: Due process of course, would not permit a litigant to be bound by an adverse determination made in a prior proceeding to which he was not a party or in privity with a party." (RevPoint Media, LLC v Plural Mktg. Solutions, Inc., 80 Misc.3d 1226 [A], 2023 NY Slip Op 51101[U], *3 [Sup Ct, NY County 2023] [internal quotation marks omitted], quoting ABN AMRO Bank, N.V. v MBIA Inc., 17 N.Y.3d 208, 227 [2011], quoting Gilberg v Barbieri, 53 N.Y.2d 285, 291 [1981].)
Here, defendants are attempting to bind plaintiffs to a decision to which plaintiffs were not a party. The bankruptcy judge in the Silo One decision explicitly stated that its summary judgment decision applied to the eight "Silo One Customers" and Tiffany is not one of them. (See Matter of Miami Metals I, 603 BR at 730.) Although plaintiffs participated in the overall bankruptcy action by filing a brief and participating at oral argument, the court never decided these issues in relation to plaintiffs. (See NYSCEF Nos. 41 [Customer Statement of Tiffany]; 64 [Supplement to Customer Statement of Tiffany]; 67 [Oral Argument] at 130:5-131:20, 144:5-145:24.) Because the party against whom issue preclusion is invoked must be bound by the prior proceeding and plaintiffs clearly are not bound by the Silo One decision, plaintiffs did not have an opportunity to be heard on which agreement governed Tiffany's and RMC's relationship-although plaintiffs were creditors in the overall bankruptcy.
Those eight "Silo One Customers" were (1) Alex Morningstar Corp. d/b/a Morningstar's; (2) Bay Area Metals; (3) Brilliant Jewelers / MJJ Inc.; (4) Geib Refining Corp.; (5) Mitchell Levine (Erie Management Partners, LLC) (Plat/ Co.); (6) Noble Metal Services, Inc.; (7) Pyropure, Inc. d/b/a Pyromet; and (8) Texas EZPAWN, L.P. (See Matter of Miami Metals I, 603 BR at 731.)
Nor are plaintiffs in privity with a party to the Silo One decision, such that it is consistent with due process to bind plaintiffs now to findings made in that decision. Although privity is "an amorphous concept not easy of application," it "requires a sufficient legal or practical connection between two parties that one party's opportunity to be heard on the issue being litigated will protect the due-process rights of the other party." (RevPoint Media, 2023 NY Slip Op 51101[U], *3.) In the issue-preclusion context, privity encompasses, among others, "'those who are successors to a property interest, those who control an action although not formal parties to it, those whose interests are represented by a party to the action, and possibly coparties to a prior action.'" (See id., quoting Juan C. v Cortines, 89 N.Y.2d 659, 667 [1997].)
Defendants contend that the RMC Bankruptcy decision extends not only to the named customers in that case, but also to "any customers whose scrap transactions were governed by the RMC T&C." (See NYSCEF No. 141 at 6.) But they have provided no legal support for this assertion. It would appear that defendants are arguing that there is privity because Tiffany's interests were represented by the Silo One Customers.
"Representation of interests, in the preclusion context, does not merely mean that the two parties' interests are aligned." (RevPoint Media, 2023 NY Slip Op 51101[U], *3 [emphasis in original].) Rather, representation in this context is used in a more formal sense. (See id.) Generally, to establish privity the connection between the parties must be such that the interests of the nonparty can be said to have been represented in the prior proceeding. (Green v Santa Fe Indus., Inc., 70 N.Y.2d 244, 253 [1987].) Thus, there can be privity to "cause a judgment against an insured to have binding effect in a subsequent action against his liability insurer." (See id.) This case is similar to the situation in Green v Santa Fe Industries, where the Court of Appeals found for claim-preclusion purposes that a judgment in an action brought by one set of minority shareholders that sued in their own behalf-not in a stockholders' derivative action-challenging a corporate merger did not preclude a later action brought by a different set of minority shareholders on the same legal theory. (See id. at 253-54.) The only relationship between the two sets of shareholders is that they owned stock in the same company, which was insufficient for privity purposes. (See id.)
Not only did the Debtors and Senior Lenders in the RMC Bankruptcy only move for summary judgment on the Bucket 1 claims, the court narrowed that group to eight customers it deemed had similar enough interests to consolidate their claims in one case. Regardless of why the Debtors did not name plaintiffs, that plaintiffs did not have an opportunity to litigate these issues in the prior action means that issue preclusion does not bar plaintiffs' claims. (See Jarrett v Bank of Am., Corp., 78 Misc.3d 1234 [A], *4 [Sup Ct, NY County 2023].) Plaintiffs were not parties to that action and therefore plaintiffs' claims and allegations here are not precluded.
The Bankruptcy Court's summary-judgment ruling (and supporting findings) in the Silo One decision cannot be afforded issue preclusive effect. Plaintiffs were not a party to the proceeding, and plaintiffs were not in privity with any party to the Silo One decision.
2. Insurable interest
The insurable interest clause in the Policy provides that "to recover under this insurance the Assured must have an insurable interest in the subject-matter insured at the time of the loss." (See NYSCEF No. 23 at 36.) That provision limits the insured's recovery to the extent of plaintiffs' insurable interest. The Policy does not define the term "Insurable Interest."
To recover under a policy of insurance, the insured must show that it has an "insurable interest" in the property. (See Silberman v Royal Ins. Co., 184 A.D.2d 562, 562 [2d Dept 1992].) The term "insurable interest" is defined by statute as "any lawful and substantial economic interest in the safety or preservation of property from loss, destruction or pecuniary damage." (Insurance Law § 3401.)
Under New York law, ownership is not required for an insurable interest. (See Rohrbach v Germania Fire Ins. Co., 62 NY 47, 55 [1875]; Riggs v Comm. Mut. Ins. Co., 125 NY 7, 11-12 [1890].) Accordingly, proof of title, legal or equitable, is not required to support an insurable interest. (See Weissman v Galway Constr. Corp., 239 A.D.2d 410, 411 [2d Dept 1997] ["A legal or equitable interest in the property insured is not necessary to support an insurable interest."]; Scarola v Ins. Co. of N. Am., 31 N.Y.2d 411, 412-413 [1972] [internal quotation marks omitted] ["[A]n interest, legal or equitable, in the property burned, is not necessary to support an insurance upon it;... it is enough if the assured is so situated as to be liable to loss if it be destroyed by the peril insured against; that such an interest in property connected with its safety and situation as will cause the insured to sustain a direct loss from its destruction, is an insurable interest."].)
Rather, "a person has an insurable interest in property if he would stand to gain some advantage or profit from its continued existence, or if he would stand to suffer some loss or disadvantage by its destruction." (NY Bd. of Fire Underwriters v Trans. Urban Constr. Co., Inc., 91 A.D.2d 115, 122 [1st Dept 1983]; accord Riggs, 125 NY at 12-14 [although "stockholder[s] in a corporation has no legal title to the corporate assets or property, nor any equitable title which [they] can convert into a legal title," they have sufficient interest in such property to have an insurable interest in it because, for example, its loss may affect... dividends]; Sabharwal v Hyundai Mar. & Fire Ins. Co., Ltd., 216 A.D.3d 1015, 1017 [2d Dept 2023] [although plaintiff in 2017 had transferred title from himself to the LLC of which he was the sole owner, he had an insurable interest in the subject property because the destruction of the subject property would cause plaintiff economic detriment].) The interest must be of such a character that "the destruction of the property will have a direct, and not a mere remote or consequential, effect upon it." (Azzato v Allstate Ins. Co., 99 A.D.3d 643, 649 [2d Dept 2012]; accord Symbol Press, Inc. v S&L Props. Assoc., 183 A.D.2d 634, 634 [1st Dept 1992].) Indeed, "[g]reat liberality is indulged in determining whether a person has anything at hazard in the subject matter of the insurance, and any interest which would be recognized by a court of law or equity is an insurable interest." (Scarola, 31 N.Y.2d at 413.)
Defendants contend that Tiffany no longer held an insurable interest in the property at the time of bankruptcy because it had allegedly sold the property and that "where an insured divests itself of all interest in property and is left only with a promise to pay, courts will not find an insurable interest." (NYSCEF No. 77 at 14, citing Azzato, 99 A.D.3d at 647-650.) In response, plaintiffs contend that Tiffany did not sell its EPM to RMC, but entrusted it to RMC while retaining ownership of the EPM until a decision was made to cash out, Therefore Tiffany continued to have an insurable interest in the EPM while entrusted to RMC. (See NYSCEF Nos. 130 at 6-7, 12 & 129 at 8-14.)
As an initial matter, defendants have mischaracterized the holding in Azzato v Allstate Insurance. That case involved two married plaintiffs who brought an action to recover benefits under their landlord's package insurance policy following a fire at the insured property. (See id. at 644.) The insurer established that the wife was not named on the deed to the subject property or the supplemental fire claim form. (See id. at 650.) Therefore, the insured had the burden of showing that she had an insurable interest such that "the loss of the subject dwelling would have directly affected her pecuniary interests." (See id.) That plaintiff helped pay for the subject property or helped to maintain was insufficient to show she had an insurable interest in the subject property, especially because she did not allege to have earned any income from the subject property, resided in it, or had any legal or equitable right to do so. (See id.) Therefore, the lack of insurable interest did not solely depend on the fact that the wife was not named on the deed, but rather because the court found that the wife would not suffer any economic or pecuniary loss from its destruction. Accordingly, defendants' conclusion of the law is unsupported.
Regardless, this court finds that defendants do not show, with admissible evidence, that Tiffany cashed out its account with RMC. As a result, defendants fail to establish that Tiffany was not the owner of the metals at the time of the loss, and thus fail to establish as a matter of law that plaintiffs did not have an insurable interest. However, as explained above, ownership is not required for an insurable interest to exist. Even if Tiffany had sold the property to RMC, that would not defeat its insurable interest if plaintiffs can show that Tiffany had any lawful and substantial economic interest in the preservation of the property from loss and would suffer pecuniary loss or damage from its destruction. (See Scarola, 31 N.Y.2d at 412.)
3. Fortuitous loss
Insurance coverage, even under an all-risk insurance policy, extends only to fortuitous losses. (See Renaissance Art Invs., LLC v AXA Art Ins. Corp., 102 A.D.3d 604, 605 [1st Dept 2013] ["[A]s a matter of law[,] insurance coverage, even under an all risk policy, extends only to fortuitous losses" and "[w]hether or not a loss is fortuitous... is a legal question to be resolved by the Court."]; Simplexdiam, Inc. v Brockbank, 283 A.D.2d 34, 38 [1st Dept 2001].) The term "fortuitous event" is defined by statute as "any occurrence or failure to occur which is, or is assumed by the parties to be, to a substantial extent beyond the control of either party." (Insurance Law § 1101 [a] [2].) Fortuitous has been described in this context as "happening by chance or accident." (Wider v Heritage Maint., Inc., 14 Misc.3d 963, 968 [Sup Ct, NY County 2007]; accord 80 Broad St. Co. v U.S. Fire Ins. Co., 88 Misc.2d 706, 707 [Sup Ct, NY County 1975], affd 54 A.D.2d 888 [1st Dept 1976].) Accordingly, losses that result from inherent defects, ordinary wear and tear, or an insured's intentional misconduct do not constitute fortuitous losses. (See Frelinhuysen Morris Found. v AXA Art Ins. Co., 2013 WL 5740207, 2013 NY Slip Op 33607[U], *1 [Sup Ct, NY County 2013].)
Under an all-risk policy, "an insured need not prove the cause of the loss and is not bound to go further and prove the exact nature of the accident or casualty which, in fact, occasioned [the] loss." (Simplexdiam, 283 A.D.2d at 39 [internal quotation marks and citations omitted].) This is because "[t]he very purpose of an all risk policy is to protect the insured where it is difficult to explain the disappearance of the property; thus, the insured need not establish the cause of the loss as part of its case." (Id.) Therefore, the burden on the insured to show a fortuitous loss is relatively light.
Defendants contend that Tiffany did not suffer a fortuitous loss. According to defendants, the sale of property in New York law is not a fortuitous event, and having intentionally divested itself of all interest in the property, plaintiffs cannot now claim that the loss of the metal was fortuitous. (See NYSCEF No. 77 at 14.) Plaintiffs respond that Tiffany had no control over RMC's conversion of Tiffany EPM or its refusal to return the property and, thus, that plaintiffs suffered a fortuitous loss of its property when RMC refused to return Tiffany EPM. (See NYSCEF No. 130 at 12.)
As an initial matter, the case on which defendants rely, NY State Elec. & Gas Corp. v Lexington Ins. Co. (204 A.D.2d 226 [1st Dept 1994]), is factually distinguishable and does not support their argument. The deliberate action in that case was not the sale of goods but the deliberate moving of the blower spacer component by the insured from its generating plant for diagnostic testing and preventative maintenance. The insured attempted to claim under its all-risk insurance policy for the resulting downtime. The First Department held that the resulting downtime could not be deemed a fortuitous event within the meaning of the subject all risk policies, an event beyond plaintiff's control. (See id.) Because the insured removed the component, the resulting downtime was squarely within its control, and the loss was not fortuitous. (See id.)
Here, the subject refined metals were in RMC's possession. Their disposal was beyond plaintiffs' control. Absent any documentary evidence that Tiffany sold the subject metals to RMC upon delivery, defendants' conclusory assertions that Tiffany had intentionally divested itself of all interest in the property are insufficient to prevent denying summary judgment. It is undisputed that Tiffany had not yet received payment for the metals it had delivered to RMC for refining. Therefore, it is arguable that Tiffany still retained, at the very least, an economic interest in the property, as the option still technically remained to have the refined metals returned or to cash out.
On the record before this court, if plaintiffs suffered the loss alleged, that loss was fortuitous. The contracts between the Tiffany and RMC required Tiffany to deliver its metals to RMC for refining. Thus, the loss was "to a substantial extent beyond [plaintiffs'] control," because RMC had full control over the metals. (See A&B Enter., Inc. v Hartford Ins. Co., 198 A.D.2d 389, 390 [2d Dept 1993].) Further, the loss of the metals did not result from an inherent defect or ordinary wear and tear, and nothing indicates that RMC disposed of the metals as a result of plaintiffs' own intentional conduct. (See Hankook Tire Am. Corp. v Samsung Fire & Mar. Ins. Co., 2021 NY Slip Op 32798[U], *9-10 [Sup Ct, NY County 2021]; accord Frelinhuysen, 2013 NY Slip Op 33607[U], *1 ["Although the fraud engaged in by Salander and the Gallery was not fortuitous as to them or any entity related to them,... as to this insured-the plaintiff-it was fortuitous."].)
Defendants have not met their burden to show that Tiffany's loss was not fortuitous.
4. Physical loss or damage
The Policy provides that "[i]nsurers undertake to indemnify the Insured for all physical loss and/or damage occurring during the period of insurance arising out of any cause whatsoever except the exclusions set forth below." (See NYSCEF No. 23 at 8.) The Policy does not define physical loss or damage.
Where, as here, "[a]n insured seek[s] to recover for a loss under an insurance policy [it] has the burden of proving that a loss occurred and also that the loss was a covered event within the terms of the policy." (Consol. Rest. Operations, 205 A.D.3d at 80-81.) When a dispute over insurance coverage arises, a court must first look to the policy's language. (Fieldston Prop. Owners Assn., Inc. v Hermitage Ins. Co., Inc., 16 N.Y.3d 257, 264 [2011].)
New York courts have held that for there to be "direct" "physical" "loss or damage" to property, there must be "some physical problem with the covered property," not just the mere loss of use. In a recent decision, the Court of Appeals held that "direct physical loss or damage" requires "a material alteration or a complete and persistent dispossession of insured property." (See Consol. Rest. Operations, Inc. v Westport Ins. Corp., 2024 NY Slip Op 00795, *1 [Ct App 2024] [interpreting a policy insuring "all risks of direct physical loss or damage to insured property."].) In coming to that conclusion, the Court of Appeals began with dictionary definitions of each of its constituent words. The term "physical" means "[o]f, relating to, or involving material things; pertaining to real, tangible objects." (See id. at *3.) "Loss" means "[t]he failure to maintain possession of a thing," and "damage" means the "loss or harm resulting from injury to person, property, or reputation." (See id.)
Defendants contend that there was no physical loss or damage to any insured property as required by the Policy, and therefore no coverage. (See NYSCEF No. 77 at 14.) Defendants cite various cases to support the assertion that "[c]ourts in New York and around the country have held that physical loss or damage unambiguously requires accidental injury to, destruction of, or theft of tangible property." (Id.) The court finds defendants' argument unpersuasive.
The cases defendants cite are factually distinguishable. First, the subject policy in each case covered" direct physical loss or damage." That standard inevitably ascribes a narrower coverage due to the additional modifier, namely, "direct", which is not present in the Policy here. (See Soundview Cinemas Inc. v Great Am. Ins. Grp., 71 Misc.3d 493, 496 [Sup Ct, Nassau County 2021]; Newman Myers Kreines Gross Harris, P.C. v Great N. Ins. Co., 17 F.Supp.3d 323, 326 [SD NY 2014]; Michael Cetta, Inc. v Admiral Indem. Co., 506 F.Supp.3d 168, 171 [SD NY 2020].) Second, whereas here the "physical loss" is not directed to anything, in the policies in the cited cases it was. For example, the "suspension" of "operations" that "must be caused by direct physical loss of or damage to property." Third, the policies at issue in those cases provided business income coverage. Fourth, the cases involved insureds claiming that their "loss of use" of premises (due to either COVID-19 or a power outage) was a "direct physical loss or damage" triggering their business income coverage.
It is true that "[f]ederal courts in New York and throughout the country have almost uniformly held that loss of use of premises due to COVID-19 related government orders does not trigger business income coverage based on physical loss to property." (Soundview Cinemas, 71Misc.3d, 496.) Such cases have been dismissed and courts have held, for example, that the loss of use due to COVID did not show "direct physical loss" or "physical damage" to the plaintiff's property and the policy "d[id] not extend to mere loss of use of a premises," but rather required "actual physical loss of or damage to the insured's property." (See Consol. Rest. Operations, 205 A.D.3d at 83.) However, this is not the issue to be resolved here. Defendants have not provided any New York case about the same policy language or case that analyzes all-risk policies.
The Policy provides coverage for "all physical loss and/or damage... arising out of any cause whatsoever except the exclusions." As used in this clause, the word "physical" functions as a prepositive modifier giving meaning to "loss" and "damage" individually. (See Consol. Rest. Operations, 2024 NY Slip Op 00795, *3 [internal quotation marks and citation omitted].) The terms "loss" and "damage" are not necessarily synonymous as physical damage is only one cause of "physical loss" of property. Thus, for example, an insured can suffer a physical loss of property through theft (as provided for in Addendum 1 of the Policy), without any actual physical damage to the property. This language is broader than that used in the cases above in that the "physical loss" can arise out of "any cause whatsoever." Consequently, Tiffany's permanent physical loss of the metals is not necessarily disqualified. Moreover, this court notes again that defendants have not shown that Tiffany's metal was sold at the relevant time.
Insofar as the meaning of physical loss or damage that the parties intended, that meaning cannot be discerned from the four corners of the Policy. This court cannot state, as a matter of law, that Tiffany did not suffer physical loss or damage under the circumstances present herein. Therefore, there is a triable issue of material fact whether Tiffany suffered a physical loss under the Policy.
Defendants have not demonstrated the absence of any material issues of fact and accordingly have failed to establish a prima facie case that the loss claimed is outside the scope of coverage of the policy.
B. The Applicability of the Financial-Default-Exclusion Clause
If a court concludes that an insured has met its burden showing the existence of a valid insurance policy and that it suffered a presumptively covered loss, the burden then shifts to the insurer to demonstrate that an exclusion contained in the policy defeats the claim. (See Throgs Neck Bagels, Inc. v GA Ins. Co. of NY, 241 A.D.2d 66, 70-71 [1st Dept 1998].)
The law governing this court's interpretation of exclusionary clauses in insurance policies is "highly favorable to insureds." (Pioneer Tower Owners Assn. v State Farm Fire & Cas. Co., 12 N.Y.3d 302, 306 [2009]; accord New Hampshire Ins. Co. v MF Glob. Fin. USA Inc., 204 A.D.3d 141, 152 [1st Dept 2022].) New York courts will enforce an exclusion only if it is set forth clearly and without ambiguity. (See Pioneer Tower, 12 N.Y.3d at 307 [2009].) This is especially so in the context of an all-risk policy. By its very nature, this type of policy is intended to provide comprehensive coverage unless a specific provision excludes liability.
An insurer desiring to "negate coverage by virtue of an exclusion... must establish [three things:] that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case." (Cont. Cas. Co. v Rapid-Am. Corp., 80 N.Y.2d 640, 652 [1993]; accord Belt Painting Corp. v TIF Ins. Co., 100 N.Y.2d 377, 383 [2003]; Throgs Neck Bagels, 241 A.D.2d at 71 [noting that an insurer must show "that its interpretation of the exclusion is the "only construction that [could] fairly be placed thereon"].) Correspondingly, the Court of Appeals has stated that courts should give policy exclusions a "strict and narrow construction, with any ambiguity resolved against the insurer." (Belt Painting Corp., 100 N.Y.2d at 383; accord Seaboard Sur. Co. v Gillette Co., 64 N.Y.2d 304, 311 [1984].)
The Policy contains a "Financial Default Exclusion Clause" providing that "[t]his insurance excludes losses directly or indirectly arising from financial default or non-payment or when a company can no longer or chooses to no longer meet its debt obligations in respect of property hereby insured." (NYSCEF No. 23 at 23 [emphasis added].) The parties acknowledge that the central dispute here concerns the meaning of the term "a company," as used in this clause.
The test to determine whether an insurance contract is ambiguous "focuses on the reasonable expectations of the average insured upon reading the policy." (Matter of Mostow v State Farm Ins. Cos., 88 N.Y.2d 321, 326-327 [1996].) Any "[a]mbiguity in an insurance policy, particularly as to the scope of an exclusion, must be construed against the insurer." (Tower Ins. Co. of NY v Breyter, 37 A.D.3d 309, 309 [1st Dept 2007].) Courts will not apply to an insurance policy a "'strain[ed reading] to find an ambiguity which otherwise might not be thought to exist.'" (See e.g. Uribe v Merchants Bank of NY, 91 N.Y.2d 336, 341 [1998], quoting Loblaw, Inc. v Empls. Liab. Assur. Corp., 57 N.Y.2d 872, 877 [1982].) As such, "provisions in a contract are not ambiguous merely because the parties interpret them differently." (Mount Vernon Fire Ins. Co. v Creative Hous. Ltd., 88 N.Y.2d 347, 352 [1996]; accord Hansard v Fed. Ins. Co., 147 A.D.3d 734, 737 [2d Dept 2017] ["[A]n ambiguity does not arise from an undefined term in a policy merely because the parties dispute the meaning of that term."].)
This court will address the parties' arguments in both motions together. The burden in both remains on the insurer to prove the exclusion applies. Additionally, this court will consider only the parties' arguments based on the interpretation of the clause.
Defendants contend that the Financial Default Exclusion is not ambiguous, citing Black's Law Dictionary's definition of the word "company" as "'[a] corporation-or, less commonly, an association, partnership, or union-that carries on a commercial or industrial enterprise.'" (NYSCEF No. 184 at 18-19, quoting Black's Law Dictionary [11th ed 2019] [definition of "company"].) Defendants argue that under this definition, RMC qualifies as a company as referenced in the Financial Default Exclusion. (See id.) Defendants further contend that nothing in that clause or the Policy requires that the debt or default be that of the insured rather than a third party. (See id.)
Plaintiffs contend that the financial default exclusion, properly interpreted, applies only to the financial default or nonpayment of a debt obligation by the insured, not a third party. (See NYSCEF No. 129 at 16.) This is because the clause refers to "a company." But when the Policy refers to a "third party," the clause specifically uses that phrase. (See id.) Plaintiffs argue that "[i]f the Insurers had intended the financial default exclusion to apply to financial and debt obligations of "third parties," they would have said so using that phrase." (Id. at 16-17.) Therefore, plaintiffs contend that "[o]n its face, th[e] exclusion applies only to an insured's property that is seized by a creditor or lienholder to satisfy the insured's 'debt obligation.'" (See NYSCEF No. 187 at 10.) Plaintiffs attack defendants' interpretation of "a company" as including third parties because the financial default exclusion refers to "insured property." Plaintiffs argue that by "[s]ubstituting 'a third party' for 'a company,' the exclusion reads 'when [a third party] can no longer or chooses to no longer meet its debt obligations in respect of property hereby insured.'" Because Tiffany entrusted the EPM to RMC, RMC did not have a "debt obligation" with respect to that insured property.
This court is unable to conclude that defendants' interpretation of the exclusion is the "only construction that could fairly [be] placed thereon" or that "no other reasonable interpretation" could apply in this case. (See Throgs Neck Bagels, 241 A.D.2d at 71.) Although an agreement that is clear and unambiguous on its face must be enforced according to the plain meaning of its terms, that is not the case here. (See Greenfield v Philles Recs., 98 N.Y.2d 562, 569 [2002].) Rather, there is a reasonable basis for a difference of opinion.
The financial default exclusion is the only instance in which the Policy refers to "a company" (lowercase). Other clauses in the Policy clearly delineate which entities they apply to. For example, the insolvency exclusion, which immediately follows, explicitly delineates that the exclusion applies to: "(i) [t]he Assured"; and "(ii) [a]ny Third Party to whom the Insured Interest has been entrusted." (See NYSCEF No. 144 at 23.) The Policy defines the term "Assured" as the "Insured." (See id. at 3.) The term "Third Party," although not defined, is used throughout the Policy and can be interpreted in its plain ordinary meaning without causing an absurd result. Confusingly, the term "Company" (uppercase) is defined in the Policy to mean the "Insurers." (See id.) To attribute this meaning to the term as used in the Financial Default Exclusion would be nonsensical. Additionally, construing the exclusion to apply to any company (per defendants' dictionary definition) would lead to the absurd result that it could apply to entities such as Insurers themselves or the very entity that defendants claim it does not refer to-Tiffany. (See N.Y.U. v Pfizer Inc., 151 A.D.3d 42, 52 [1st Dept 2017] ["A contract should not be interpreted to produce a result that is absurd, commercially unreasonable, or contrary to the reasonable expectations of the parties."].) To adopt such an overexpansive interpretation would violate the principle that exclusions are "not to be extended by interpretation or implication, but are to be accorded a strict and narrow construction." (Seaboard Sur. Co., 64 N.Y.2d at 311.)
Plaintiffs' interpretation is also flawed. It is true, as plaintiffs contend, that "'[t]he use of different terms in the same agreement strongly implies that the terms are to be accorded different meanings.'" (See NYSCEF No. 129 at 17, quoting NFL Enters., LLC v Comcast Cable Commcn., LLC, 51 A.D.3d 52, 61 [1st Dept 2008].) Therefore, the use of the terms "Assured" and "Third Party" in the immediately following clause implies that the use of the term "a company" in the immediately preceding clause bears a meaning different from those two terms under the Policy. The logic follows that if defendants had intended for the financial default exclusion to apply to a third party like RMC, it would have used that term. Correspondingly, if defendants intended the clause to apply to Tiffany, they would have used the term "Assured" as they did in the following insolvency exclusion clause. This logic contradicts plaintiffs' conclusion.
In short, neither party has established that its interpretation of the relevant clause is correct as a matter of law.
The first step in seeking to resolve an ambiguity is to consider "whether the parties have submitted extrinsic evidence that might resolve the ambiguity." (Century Indem. Co. v Brooklyn Union Gas Co., 74 Misc.3d 1208 [A], 2022 NY Slip Op 50083[U], *2 [Sup Ct, NY County 2022].)
It is not this court's preference to find a triable issue of fact concerning the terms of a written agreement between two sophisticated contracting parties. The options are limited where the contractual provision at issue is drafted in a manner that fails to eliminate ambiguities and the only extrinsic evidence offered is each party's self-serving statements regarding its own understanding of the agreement. Where, as here, "the parties have not submitted extrinsic evidence, the extrinsic evidence submitted is conclusory or otherwise sheds little light on the ambiguity, or the extrinsic evidence points decisively in one direction, the court may resolve the ambiguity as a matter of law, construing the policy against the drafter." (Id.; accord NY State Ins. Fund v Everest Natl. Ins. Co., 125 A.D.3d 536, 537 [1st Dept 2015] ["[I]f the disputed policy language were ambiguous, it would be construed against Everest, the drafter of the policy, since Everest offered no extrinsic evidence that supports its interpretation."].) Ambiguity in an insurance contract is generally construed against the insurer, as the drafter of the policy, under the doctrine of contra proferentum. (See Bonem v William Penn Life Ins. Co. of NY, 38 N.Y.3d 955, 961 [2022].) In such cases, "the ambiguity must be construed in favor of the insured." (See id. [internal quotation marks omitted].)
There is an exception to the application of this interpretive doctrine. The First Department has held that contra proferentum does not apply when the policyholder is a sophisticated party. (See Westchester Fire Ins. Co. v MCI Commcn Corp., 74 A.D.3d 551, 551 [1st Dept 2010] ["[C]ontra proferentem... would be inapplicable to this sophisticated policyholder."]; Certain Underwriters at Lloyd's, London v Essex Global Trading, Inc., 147 A.D.3d 595, 596 [1st Dept 2017] ["[T]he doctrine of contra proferentum... is inapplicable to [the insured], a sophisticated policyholder."].) This court, earlier this year, declined to apply the contra proferentem rule of construing a policy against the insurer where the insured was a sophisticated entity, was acting as a self-insurer, and was represented by a large corporate broker. (See Century Indem. Co. v Brooklyn Union Gas Co., 2024 NY Slip Op 24007, *11-12 [Sup Ct, NY County 2024].) In Century Indemnity Co. v Brooklyn Union Gas Co., the insured argued that any ambiguity should be construed against the insurer as the drafter of the policies under the contra proferentem doctrine. (See Century Indem. Co. v Brooklyn Union Gas Co., 75 Misc.3d 1205 [A], 2022 NY Slip Op 50388[U], *7 [Sup Ct, NY County 2022].) The insurer argued that the contra proferentem doctrine did not apply because the insured was a sophisticated party. (See id.) This court held that the contra proferentem doctrine did not apply to the subject insurance policies, because the insured was a sophisticated policyholder. (See id. at *12.) Absent contra proferentem, this court resolved the ambiguity by choosing which of the parties' two reasonable interpretations of the policy limits was the best interpretation of the policy.
Here, by contrast, neither party argues that the clause is ambiguous, and they do not contest the applicability of contra proferentem. Defendants do not argue that the contra proferentem doctrine does not apply. The word "company" in the financial default exclusion clause is ambiguous. The ambiguity must be construed in plaintiffs' favor under contra proferentum. Absent any argument about plaintiffs' level of sophistication, this court is unable to determine whether the exception to the contra proferentum doctrine applies. Applying contra proferentem, this court construes the financial default exclusion clause in favor of the insured plaintiffs to limit the exclusion to the financial default of the insured.
C. Effect of Tiffany's Settlement in the RMC Bankruptcy
Defendants contend that plaintiffs have no further right to seek indemnification under the Policy because plaintiffs have already recovered their loss when they settled their claims in the RMC Bankruptcy. (See NYSCEF No. 77 at 16-18.) This court disagrees.
1. The Deductible
Defendants contend that the $8,291,626.92 remaining on the deductible reduces plaintiffs' claim from $20,799,675.51 to $12,508,049. (See id. at 16-17.) Plaintiffs contend that the $8,291,626.92 remaining on the deductible reduces their claim from $22,879,643.00 to $14,588,016.08. (See NYSCEF No. 130 at 19.)
The exact amount is $12,508,048.60.
Both parties agree on the effect of the deductible on plaintiffs' claim against defendants; the parties disagree on the starting point for that reduction. Defendants argue that plaintiffs' total loss is $20,799,675.51 (see NYSCEF No. 77 at 16), whereas plaintiffs claim a total loss of $22,879,643.00 (see NYSCEF Nos. 129 at 15 & 130 at 18-19).
For purposes of this motion, plaintiffs' initial loss total is immaterial and the court does not address it.
2. The Settlement
Defendants argue that even if there was coverage for plaintiffs' loss, their recovery of $6,250,000 must be applied to reduce the claim under the Policy from $12,508,049 to $6,258,049. (See NYSCEF No. 77 at 17.) Defendants argue that the settlement amount plaintiffs received "cannot be applied to reduce the deductible obligation that Tiffany undertook." (NYSCEF No. 77 at 17.) Defendants cite Erlich v Am. Intl. Grp., Inc. (41 Misc.3d 1224[A], 2013 NY Slip Op 51827[U] [Sup Ct, NY County 2013], affd 128 A.D.3d 587 [1st Dept 2015]) for the principle that "[a]n insured is not entitled to recover their deductible from their insurer, because the insured is contractually obligated to satisfy the deductible." (See NYSCEF No. 77 at 17.)
Plaintiffs contend that defendants cannot reduce their liability based on the settlement because (i) the Policy contains no language permitting defendants to offset a loss with an insured's recoveries from third parties; and (ii) the settlement constitutes a "post-loss event" and thus has no impact on defendants' liability under the Policy which became fixed at $22.8 million at the time of the loss-i.e., when RMC refused to return Tiffany EPM. (See NYSCEF No. 130 at 16-18.) Plaintiffs rely on the "New York Rule" to establish the that amount of recovery is fixed at the time of the loss.
Defendants' argument misconstrues the court's holding in Erlich and misapplies the subrogation principle. Subrogation allows an insurance company to recover funds paid for a claim by pursuing the party that caused the loss. (See Winkelmann v Excelsior Ins. Co., 85 N.Y.2d 577, 581 [1995] ["Subrogation is the principle by which an insurer, having paid losses of its insured, is placed in the position of its insured so that it may recover from the third party legally responsible for the loss."].) An insurer's right to subrogation accrues once an insurer has paid for losses sustained by its insured that were caused by a "wrongdoer." (Millennium Holdings LLC v Glidden Co., 146 A.D.3d 539, 544 [1st Dept 2017]; accord Winkelmann, 85 N.Y.2d at 582.) Until an insurer pays its insured for the claim, the right of subrogation does not exist. Only after an insurer pays a claim can it go after the third party that caused the loss.
In Erlich, the case defendants cite, the trial court wrote that "no New York legal authority supports plaintiffs' contention that they are entitled to a refund of their deductible." (2013 NY Slip Op 51827[U], *5.) But defendants take the quoted language from Erlich out of context. The dispute in Erlich concerned the ability of insurance companies to retain settlement proceeds in subrogation actions against third-party tortfeasors, when the insured has already recovered the full value of the policy from its insurer, but not its uninsured losses. (See id. at *1.) Indeed, it was the insurer that had a settlement from its subrogation action against a third-party tortfeasor and the insureds that sought to disgorge the insurer of that amount. (See id. at *2.) The critical difference is that the insurers in Erlich had already paid the full policy limit. (See id. at *1.) The trial court held that, having received the full value of their claim under the insurance policy, the plaintiff insureds were not entitled to any of the proceeds of the settlement of the insurer's subrogation action against the third-party tortfeasor to recover their uninsured losses, i.e., their deductible and the loss due to depreciation. (See id. at *4.) Therefore, while it is true that plaintiffs here cannot recover their deductible from defendants, plaintiffs have not sought to do so and have subtracted the amount of the deductible from their claim. (See NYSCEF No. 130 at 19.) Defendants' argument flips the facts of Erlich illogically.
An insurer's subrogation rights are limited. When "'the sources of recovery ultimately available are inadequate to fully compensate the insured for its losses, then the insurer-who has been paid by the insured to assume the risk of loss-has no right to share in the proceeds of the insured's recovery from the tortfeasor.'" (Erlich, 2013 NY Slip Op 51827[U], *4, quoting Fasso v Doerr, 12 N.Y.3d 80, 87 [2009].) The Erlich court provides an example of how this would work:
"[I]f a policyholder suffers $200 of losses, only $100 of which are insured, and the carrier pays out the policy limit of $100 and then recovers $100 from the tortfeasor, that subrogation recovery can be disgorged by the policyholder if the tortfeasor lacks the funds to compensate the policyholder for its $100 of uninsured losses."(Erlich, 2013 NY Slip Op 51827[U], *4.)
The above example contradicts defendants' contention that an insured is not permitted to recover its deductible. Rather, an "insurer cannot share in proceeds the insured has obtained from a third party in addition to the insurance indemnity when the insured has not been made whole." (Winkelmann, 85 N.Y.2d at 583.) It is "[o]nly if the insured's recovery exceeds its loss can the insurer share in the excess proceeds." (Id.) Accordingly, courts have applied the "made whole" rule, under which an insurer "may seek subrogation against only those funds and assets that remain after the insured has been compensated." (Fasso, 12 N.Y.3d at 87 [emphasis added].) This designation of priority interests guarantees that an injured party's claim against a tortfeasor takes precedence over the insurer's subrogation rights.
The principle of subrogation is not applicable. Defendants have not paid the claim. Until an insurer does so, its right of subrogation does not exist. (See Winkelmann, 85 N.Y.2d at 582.) Contrasting with the situation in Erlich, plaintiffs here commenced their own lawsuit against RMC for their uninsured losses before collecting any insurance proceeds. Therefore, plaintiffs' recovery should not be reduced from their claim against defendants. The trial court in Erlich found that "the policy holder must commence its own action against the tortfeasor to recover its uninsured losses." (2013 NY Slip Op 51827[U], *5.) That is exactly what plaintiffs did.
What defendants are attempting to do in defense against plaintiffs' claim is the equivalent of subrogating against their own insured. This fails for two reasons. First, the anti-subrogation rule, espoused by the Court of Appeals, bars an insurer from seeking subrogation from its own insured. (See Pa Gen. Ins. Co. v Austin Powder, 510 N.Y.S.2d 67 [1986].) The purpose of that rule is to prohibit the insurer from passing its loss to its own insured. (See Millennium Holdings, 27 N.Y.3d at 415.) Second, under New York's "made whole" rule, the insured must be fully compensated before an insurer can pursue subrogation. (See Winkelmann, 85 N.Y.2d at 583.) Insurers have no right to share in the proceeds of the insured's recovery unless the insured has been fully compensated. (See id.)
Under New York law, an insured's insurable interest is not reduced by post-loss recovery that reduces the amount of loss. Rather, it is the insurable interests existing at the time of loss that determine the rights and liabilities as between the insured and insurer. (See Foley v Mfrs. Bldrs. & Fire Ins. Co., 152 NY 131, 134-135 [1897]; accord Eshan Realty Corp. v Stuyvesant Ins. Co. of NY, 12 A.D.2d 818, 818 [2d Dept 1961], affd 11 N.Y.2d 707 [1962].) This principle is referred to as the New York Rule and it has been applied to a line of fire insurance cases. The leading case espousing the New York Rule is the decision of the Appellate Division, First Department, in Alexandra Rest., Inc. v New Hampshire Ins. Co. (272 AD 346 [1st Dept 1947], affd 297 NY 858 [1948]). In that case, after a fire at the plaintiff insured's restaurant, the landlord became obligated to repair the fire damage and did so. The First Department held that the fact that the damage from the fire was repaired by a third party without any expense to an insured does not diminish the liability of the insurer to pay for the value of the property destroyed. (See id. at 351.)
It is only if an insured has received, in total, more than the actual amount of damages it suffered by a tortfeasor that an insurer, which has paid its insured for the loss, is entitled to reimbursement from the insured out of the insured's settlement with the tortfeasor. (See Franklin Fire Ins. Co. of Phila. v Weinberg, 197 AD 576, 579 [1st Dept 1921]; accord Callicoon Co-Op Ins. Co. v Osborne, 206 A.D.2d 796, 797 [3d Dept 1994].)
An insured may not recover twice for the same loss. But in this case, it appears that the settlement amount received by the insured, plaintiffs, from RMC did not cover, let alone exceed, their loss. The settlement amount received by plaintiffs from RMC does not reduce its claim.
3. The administrative claim
Defendants contend that plaintiffs' administrative claim of $6,442,294.27, which it assigned away, further reduces the plaintiffs' claim to nothing. (See NYSCEF No. 77 at 17-18.) Defendants base this assertion on two arguments: (1) that claim is expressly based on the sale of goods to RMC that were not paid for and thus that the transactions supporting the existence of an administrative claim cannot also support a claim under the Policy based on a bailment theory; and (2) if the administrative claim could support a claim under the Policy, plaintiffs expressly assigned all their rights, title, and interest in that claim to the senior lenders' collateral agent. (See id. at 17.) Therefore, plaintiffs may not make an inconsistent claim in this court that the transactions constituted a bailment.
Plaintiffs construe defendants' argument as an attempt to use their settlement with RMC's senior lenders as an admission that plaintiffs had only an administrative claim based on the sale of Tiffany EPM to RMC. (See NYSCEF No. 130 at 14.) Plaintiffs claim that defendants' argument is erroneous; a compromise between a litigant and a third party may not be introduced into evidence as an admission in a subsequent lawsuit involving the litigant. (See id., citing Bigelow-Sanford, Inc. v Specialized Com. Floors of Rochester, Inc., 77 A.D.2d 464, 466 [4th Dept 1980].) Plaintiffs further contend that their assignment of the administrative claim, as part of the settlement, is not an admission that plaintiffs did not own the EPM or entrust it to RMC. Plaintiffs asserted the administrative claim in the alternative. (See NYSCEF No. 130 at 15.) Last, plaintiffs contend that they are not judicially estopped from claiming in this court that Tiffany entrusted its EPM to RMC. (See id. at 15-16.)
Defendants' argument that plaintiffs cannot make an inconsistent claim in this court appears to be based on the doctrine of judicial estoppel. This doctrine "prevents a party who assumed a certain position in a prior proceeding and secured a ruling in his or her favor from advancing a contrary position in another action, simply because his or her interests have changed." (Becerril v City of NY Dept. of Health & Mental Hygiene, 110 A.D.3d 517, 519 [1st Dept 2013].) The doctrine applies only when there exists "a final determination endorsing the party's inconsistent position in the prior proceeding." (Ghatani v AGH Realty, LLC, 181 A.D.3d 909, 911 [2d Dept 2020]; see Bihn v Connelly, 162 A.D.3d 626, 627 [2d Dept 2018].) The doctrine "rests upon the principle that a litigant should not be permitted... to lead a court to find a fact one way and then contend in another judicial proceeding that the same fact should be found otherwise." (All Terrain Props., Inc. v Hoy, 265 A.D.2d 87, 93 [1st Dept 2000].)
Plaintiffs correctly contend that, in general, a settlement does not constitute judicial endorsement of either party's claims, and thus does not provide the prior success necessary for judicial estoppel. (See Borrelli v Thomas, 195 A.D.3d 1491, 1495 [4th Dept 2021]; but cf. God's Battalion of Prayer Pentecostal Church, Inc. v Hollander, 24 Misc.3d 1250 [A], 2009 NY Slip Op 51939[U], *8 [Sup Ct, Nassau County 2009] [plaintiff judicially estopped from recovering from defendant in light of a so-ordered settlement voluntarily entered into by the two parties in Bankruptcy Court].) This is because the party against whom the estoppel operates must have secured a judgment in its favor in the prior action by adopting a certain position and then sought to assume a contrary position simply because its interests have changed. (See Jones v Town of Carroll, 177 A.D.3d 1297, 1298 [4th Dept 2019]; Herman v 36 Gramercy Park Realty Assoc., LLC, 165 A.D.3d 405, 406 [1st Dept 2018]; Bihn, 162 A.D.3d at 627.)
However, courts have also held, in a bankruptcy context, that if a court so-orders a stipulation of settlement, it may be deemed to have endorsed a party's position sufficiently to estop it from later asserting a contrary position. (See Koch v Natl. Basketball Assn., Inc., 245 A.D.2d 230, 230-231 [1st Dept 1997] ["The doctrine of judicial estoppel, which, in a bankruptcy context, bars a party from pursuing claims not listed in a bankruptcy proceeding that resulted in the party's discharge, does not apply in the absence of a final determination in the bankruptcy proceeding endorsing the party's inconsistent position concerning his or her assets."]; Manhattan Ave. Dev. Corp. v Meit, 224 A.D.2d 191, 192 [1st Dept 1996], lv denied 88 N.Y.2d 803 [1996] [so-ordered stipulation settling a prior bankruptcy proceeding constituted inferential endorsement of plaintiff's position as to his assets such that it was estopped from suing on a debt that it failed to list in its bankruptcy filing].)
It is also true, however, that plaintiffs' success in securing an administrative claim for $6,442,294.27 through the settlement is not dispositive for purposes of judicial estoppel. The settlement agreement made no admissions or concessions regarding the parties' arguments. The settlement agreement contains a "no admission" clause, which provides that "[t]his Agreement is for settlement purposes only and shall not be construed or deemed an admission by any Party to this Agreement of wrongdoing, liability, fault, or the validity, invalidity, or merits of any claims." (See NYSCEF Nos. 69 at 24 & 127 at 24.) Absent a concession or admission about the ownership dispute, there was no position for the court to endorse beyond the fact that the parties agreed to settle the case. (See CE Riverhead, LLC v Cohen & Perfetto, LLP, 39 Misc.3d 1216[A], 2013 NY Slip Op 50626[U], *3 [Sup Ct, NY County 2013] [party not judicially estopped from taking a contrary position when the prior matter was settled, and the stipulation provided that it was not "an admission or concession of any liability of any kind."].) Because the record does not show that the Bankruptcy Court, in approving the settlement, relied on plaintiffs' statements regarding which agreement governed the relationship between Tiffany and RMC, the doctrine of judicial estoppel is inapplicable. Accordingly, plaintiffs are not judicially estopped from proceeding in this action.
Evidence that a party either offered, promised to offer, accepted, or promised to accept any consideration to satisfy a claim that is disputed as to either validity or amount of damages is inadmissible as proof of liability for or invalidity of the claim or the amount of damages. (See 82 Retail LLC v 82 Condo., 117 A.D.3d 587, 589 [1st Dept 2014].) Defendants provide no legal support for their assertion that plaintiffs' assignment of its administrative claim in the settlement means it has no insurable interest; the court, therefore, will not consider this conclusory statement.
Defendants' motion for summary judgment as to plaintiffs' first cause of action for breach of contract is denied.
III. Defendants' Motion to Dismiss Plaintiffs' Second Cause of Action
Defendants move in the alternative to dismiss plaintiffs' second cause of action under CPLR 3211. In moving to dismiss, defendants contend that plaintiffs' second cause of action for breach of the implied obligation of good faith and fair dealing is duplicative of its first cause of action for breach of contract. (See NYSCEF No. 77 at 19-21.) Defendants do not allege that plaintiffs have not adequately pleaded a separate cause of action for breaching the implied duty of good faith and fair dealing, but rather contend that the motion should be dismissed as duplicative of their breach-of-contract claim.
In opposing the motion, plaintiffs contend that (1) the bad-faith claim is not duplicative of the breach-of-contract claim; and (2) plaintiffs have stated a cause of action for a breach of good faith and fair dealing. (See NYSCEF No. 130 at 19-21.) This court agrees with defendants that plaintiffs' second cause of action duplicates its first cause of action and grants defendants' motion to dismiss.
On a CPLR 3211 (a) (7) motion, a court must determine "whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law." (Guggenheimer v Ginzburg, 43 N.Y.2d 268, 275 [1977] [internal quotation marks and citations omitted].) The pleading is afforded a liberal construction, in which all facts alleged in the complaint are accepted as true, and plaintiff is given the benefit of every possible favorable inference. (See Leon v Martinez, 84 N.Y.2d 83, 87 [1994].)
An insurer may be held liable for damages to its insured caused by the insurer acting in bad faith. (See Bi-Economy Mkt., Inc. v Harleysville Ins. Co. of NY, 10 N.Y.3d 187, 192 [2008]; Panasia Estates, Inc. v Hudson Ins. Co., 10 N.Y.3d 200, 203 [2008] [permitting an insured's claim for consequential damages based on insurer's breach of duty to investigate, bargain for, and settle claims in good faith]; NY Botanical Garden v Allied World Assur. Co., 206 A.D.3d 474, 475 [1st Dept 2022] [plaintiff stated a cause of action for breach of implied covenant of good faith and fair dealing by alleging that insurer did not conduct a complete or fair investigation of its claim]; Acquisita v NY Life Ins. Co., 285 A.D.2d 73, 82 [1st Dept 2001].) As in all contracts, insurance contracts imply a covenant of good faith and fair dealing, such that "a reasonable insured would understand that the insurer promises to investigate in good faith and pay covered claims." (Bi-Economy, 10 N.Y.3d at 196; accord E. Ramapo Cent. Sch. Dist. v NY Sch. Ins. Reciprocal, 199 A.D.3d 881, 884-885 [2d Dept 2021].) Breaching that duty can result in recoverable consequential damages that may exceed the policy's limits. (See Tiffany Tower Condo., LLC v Ins. Co. of Greater NY, 164 A.D.3d 860, 862 [2d Dept 2018].)
A cause of action for breach of implied covenant of good faith and fair dealing "is not duplicative of a cause of action sounding in breach of contract to recover the amount of the claim." (Gutierrez v Govt. Empls. Ins. Co., 136 A.D.3d 975, 977 [2d Dept 2016].) "Although there might be overlap in the facts alleged, a breach-of-implied-covenant claim is not duplicative of the breach-of-contract claim if it relies on different facts and seeks damages different from the contract claim." (Ace Am. Ins. Co. v Consol. Edison Co. of NY, Inc., 79 Misc.3d 1215 [A], *2 [Sup Ct, NY County 2023]; accord Bi-Economy, 10 N.Y.3d at 195; D.K. Prop., Inc. v Natl. Union Fire Ins. Co. of Pittsburgh, 168 A.D.3d 505, 507 [1st Dept 2019].)
Defendants contend that plaintiffs' breach-of-covenant claim cannot survive. Defendants argue that this claim is based on the same allegations as those underlying the accompanying breach-of-contract claim. (See NYSCEF No. 77 at 19.) Defendants point out that "Tiffany alleges Underwriters breached the covenant of good faith and fair dealing through 'their unreasonable, malicious, reckless, coordinated and/or intentional failure to pay Tiffany the benefits to which it is entitled under the Policy.'" Defendants claim that those claims are duplicative of the breach of contract claim. (See id.) Further, defendants allege that no meaningful distinction separates a claim for failure to pay and "delaying" payment when the claim is denied; "[t]hese allegations, address the "same ultimate grievance[s]" as the breach of contract claim." (Id.)
Plaintiffs' allegations plead sufficiently different conduct by defendants and are based on different facts from their breach-of-contract claim. In that claim, plaintiffs allege that defendants wrongly "refused to reimburse Tiffany for its covered loss," thereby breaching its Policy. (See NYSCEF Nos. 129 at 18; 2 at 7-9.) In the breach-of-good-faith-and-fair-dealing claim, plaintiffs allege that defendants "delay[ed] payment of the insurance proceeds" and "fail[ed] to conduct a timely, fair, complete and proper investigation... and... timely determination of the Claim" by "institut[ing] a scheme to overwhelm Tiffany with onerous, overly burdensome and irrelevant requests for information with the intent to wear down Tiffany's employees involved in the Claim and force Tiffany to abandon the Claim or settle it for far less than the total amount owed by Insurers." (NYSCEF No. 2 at 8.) Plaintiffs allege that defendants took over 17 months to make a final determination and defendants made excessive and irrelevant information requests such as "all of the voluminous discovery materials from Tiffany's and RMC's contested matter in the RMC Bankruptcy Case, far beyond what was reasonably necessary to determine coverage." (Id.) Plaintiffs further claim that defendants sought access to the electronic repository of all documents produced in the customer litigation in the RMC Bankruptcy Case, even those unrelated to Tiffany's claim. (See id.) Plaintiffs contend that this conduct was "engaged in for the purposes of placing their own pecuniary interests ahead of Tiffany's and withholding from Tiffany the rights and benefits to which it is entitled under the Policy." (See id. at 11.)
Accepting these allegations as true and affording plaintiffs the benefit of every possible favorable inference, as is required on a motion to dismiss (see Leon, 84 N.Y.2d at 87), this court finds that plaintiffs have sufficiently plead the requisite element of bad faith. (See Bi-Economy, 10 N.Y.3d at 195; NY Botanical Garden, 206 A.D.3d at 475.)
However, plaintiffs seek the same categories of damages for both the breach-of-contract and the breach of the implied duty of good faith and fair dealing. (See NYSCEF No. 2 at 11.) On both causes of action, plaintiffs seek "compensatory damages, consequential damages, prejudgment interest, attorneys' fees and costs." (See id.) The only difference is that in addition to the above-listed damages, plaintiffs also seek punitive damages for the second cause of action. (See id.) Moreover, plaintiffs allege the same consequential damages for both the breach-of-contract and the bad-faith claims: attorney fees and costs from suing Insurers to obtain coverage for the claim. (See NYSCEF Nos. 130 at 21 & 2 at 9-10.) Although plaintiffs' consequential damages for the breach-of-834579contract claim also include sue and labor costs, these damages are a direct result of the breach of contract damages. Because plaintiffs' second cause of action does not seek different categories or types of damages, the cause of action seeking damages for breach of the implied covenant of good faith and fair dealing is dismissed as duplicative of the cause of action alleging breach of contract.
Defendants' motion to dismiss plaintiffs' second cause of action is granted. Plaintiffs may still on their first cause of action for breach of contract seek "consequential damages resulting from [defendants'] failure to provide coverage if such damages ("risks") were foreseen or should have been foreseen when the contract was made." (D.K. Prop., 168 A.D.3d at 506.) The foreseeability determination "should not be decided on a motion to dismiss and must await a fully developed record." (Id. at 507.)
Motion Sequence 003
In motion sequence 003, plaintiffs move under CPLR 3212 for partial summary judgment on the first cause of action, asking the court to find that (1) "a bailment existed between RMC and Tiffany pursuant to the terms of the MVA and that Tiffany entrusted Tiffany EPM to RMC"; (2) "the MVA... governed the relationship at issue in this litigation between Tiffany and RMC"; (3) "Tiffany suffered a loss covered by the Policy in the amount of $14,588,016.08 ($22,879,643.00 - $8,291,626.92), plus sue and labor costs in an amount to be determined, with nine percent interest per year in an amount to be determined"; (4) "Tiffany's settlement in the RMC Bankruptcy Case of $6.25 million does not reduce the amount of loss"; (5) "the Insurers breached the Policy by refusing to reimburse Tiffany for its covered loss"; and (6) "[e]nter summary judgment in favor of Tiffany on the Insurers' First, Second, Third, Fourth, Fifth, Sixth, Ninth, Tenth, Eleventh Twelfth, Thirteenth, and Fourteenth Affirmative Defenses." (See NYSCEF No. 129.)
IV. The Branch of Plaintiffs' Motion Seeking Partial Summary Judgment on Whether the MVA or the RMC T&Cs Governed
This court has no trouble concluding that plaintiffs have established that the MVA was the governing contract between RMC and Tiffany at the outset of their business relationship. But for the reasons above, plaintiffs fail to establish as a matter of law that the MVA remained the governing contract after Tiffany signed the RMC T&Cs.
Courts, "in construing the provisions of a contract[,]... should give due consideration to the circumstances surrounding its execution, to the purpose of the parties in making the contract, and, if possible, give the agreement a fair and reasonable interpretation." (See Aron v Gilman, 309 NY 157, 163 [1955].)
Plaintiffs' interpretation of Section A4.1 uses a plain reading of the language to contend that the "refined metals" are goods that RMC produced for Tiffany under that section. (See NYSCEF No. 130 at 7.) Plaintiffs argue that the ordinary definition of "goods" is "tangible personal property" and that the refined metals RMC produced for Tiffany qualify as "goods" under this definition. (See id. at 7-8, citing Strauss v Schlimm, 144 N.Y.S.2d 229, 231 [Sup Ct, Nassau County 1955], and Finnegan v Campeau Corp., 915 F.2d 824, 827 [2d Cir 1990].) In support of this interpretation, plaintiffs offer Mary Messier's testimony in which she testified that she understood that the refined Tiffany EPM RMC produced for Tiffany constituted "goods for Tiffany" within the meaning of Section A4.1. (NYSCEF No. 90 at 146:22-148:2.) She further testified that had Tiffany elected the return of the refined metal, "[i]t would go into [Tiffany's] production." (Id.)
Plaintiffs further provide evidence concerning the circumstances surrounding Tiffany and RMC's execution of the MVA, including the "extensive negotiation over the terms of the MVA before entering into it," to prove that the parties intended for it to govern the refining transactions. (See NYSCEF No. 130 at 8, citing NYSCEF No. 131 at ¶¶ 30-56.)
In response, defendants reiterate the arguments made in their motion for summary judgment, which this court has already dismissed above. Whether or not RMC in the later transactions conformed to the MVA's requirements does not determine the applicability of that contract, but rather whether RMC breached its obligations under the MVA.
Plaintiffs' evidence establishes the purpose of the parties in making the contract. The letter of intent signed by both parties on May 26, 2016, before the execution of the MVA, states that RMC was to be a "Tiffany Approved Supplier for Metal Refining." (See NYSCEF No. 94 [Letter of Intent].) That "Approved Supplier" status was contingent on the execution of the MVA. (See id.) The circumstances surrounding its execution further show that the parties intended the MVA to govern their relationship. The various emails reflect the parties' intent to keep Section A4.1 in the MVA. For example, when Tiffany sent the MVA to RMC, Tiffany noted that the document was a "one size fits all" agreement and, therefore, RMC should note sections it did not consider applicable. (See NYSCEF Nos. 96 & 97.) RMC later "noted sections of the MVA that RMC did not believe applied to the services it proposed to provide Tiffany." (See NYSCEF Nos. 131 at ¶ 49-50; 99; 101.) RMC marked the entirety of Sections A1-A3 and A6-A8 of the Special Terms as "N/A"; however, RMC did not mark the entirety of Section A4 "N/A," just A4.3 "Accounting for EPM," which after discussions was kept in the final version. (See NYSCEF Nos. 131 at ¶ 51-56 & 99.) This evidence establishes that the parties intended to include Section A4.1 in their final contract.
For the reasons stated above in connection with motion sequence 002 (see supra section II.A.1 of motion sequence 002), however, issues of fact regarding the parties' intent preclude summary judgment. (See Mallad, 32 N.Y.2d 285 at 291.) This branch of plaintiffs' motion for partial summary judgment is denied.
V. The Branch of Plaintiffs' Motion Seeking Partial Summary Judgment on the Issue of Bailment and Entrustment
Plaintiffs contend that they are entitled to summary judgment because their loss is covered under the Policy's entrustment-coverage provisions. (See NYSCEF No. 129 at 8.) That provision provides that if Tiffany "entrust[s] goods to 'Third Party Vendors' as approved by Tiffany Risk Management or Laurelton Diamonds," then the Policy will cover Tiffany "up to the sum insured of USD 25,000,000 [for] each and every loss." (See NYSCEF No. 3 at 11.) Plaintiffs contend that Tiffany expressly identified RMC to the Insurers as a Tiffany-approved Third Party Vendor under this provision, that the metals it sent to RMC were "precious metals" covered under the Policy, and that Tiffany entrusted those metals to RMC. Plaintiffs' entrustment argument is premised on the fact that a bailment relationship was established both contractually by the MVA and impliedly through the parties' course of dealing. Having addressed plaintiffs' contentions regarding the contractual bailment above in defendants' motion, the court will now address the latter.
A. Legal Principles Governing Bailments
Under New York law, a bailment is defined as follows:
"[A] delivery of personal property for some particular purpose, or a mere deposit, upon a contract express or implied, and that after such purpose has been fulfilled it shall be redelivered to the person who delivered it, or otherwise dealt with according to the directions or kept until he reclaims it as the case may be. It is essential that there be actual or constructive delivery by the bailor as well as actual or constructive acceptance of the property of the bailee."(Mays v NY, New Haven & Hartford R.R. Co., 197 Misc. 1062, 1063-1064 [App Term, 1st Dept 1950].)
One type of bailment is a bailment for mutual benefit, which include bailments locatio operis faciendi meaning that the bailee is obligated to perform work on the bailed item in exchange for consideration. (See e.g. Aronette Mfg. Co. v Capitol Piece Dye Works, Inc., 6 N.Y.2d 465, 468 [1959] [fabric sent to by plaintiff to defendant to be treated with a waterproofing formula and then returned to plaintiff is held on bailment].) This type of bailment arises from a contractual agreement. When a bailment arises from a contractual agreement for the transfer of goods, the bailee's failure to deliver the goods upon proper demand implicates contractual rights. (See Konrad v 136 E. 6th St. Corp., 246 A.D.2d 324, 326 [1st Dept 1998].)
A bailment does not necessarily depend on a contractual relationship. (See Foulke v NY Consol. R.R. Co., 228 NY 269, 275 [1920].) Rather, "it is the element of lawful possession, however created, and duty to account for the thing as the property of another that creates the bailment, regardless of whether such possession is based on contract in the ordinary sense or not." (Martin, 235 A.D.2d at 197; accord Pivar v Grad. Sch. of Figurative Art of the NY Acad. of Art, 290 A.D.2d 212, 212-213 [1st Dept 2002].) A bailment involves a change in possession but not title. The determination of whether the relationship is a bailment depends on whether there is a relinquishment of exclusive possession, control, and dominion over the property, and also on the place, conditions, and nature of the transaction. (See Osborn v Cline, 263 NY 434, 437 [1934]; Hutton v Pub. Stor. Mgt. Inc., 177 Misc.2d 540, 541 [App Term, 2d Dept 1998].)
B. Whether a Bailment Relationship Existed
Plaintiffs contend that the legal relationship between RMC and Tiffany constituted a bailment. As this court has already concluded that neither party has established as a matter of law which agreement governed the relationship between Tiffany and RMC at the time of loss, it follows that neither party has proven the existence or absence of a bailment through contract. As such, plaintiffs may not make conclusory statements based on the application of the MVA. Alternatively, using factors delineated in Matter of Sitken Smelting & Refining, Inc. (639 F.2d 1213, 1216-1217 [5th Cir 1981] [applying Alabama law]), plaintiffs contend that their relationship was a bailment due to the character of the transactions. Although the factors are derived from a Fifth Circuit decision, which is not binding on this court, this court will assess the arguments most relevant under New York law.
1. Whether Tiffany retained the right to have property returned or disposed of
If plaintiffs can definitively establish that they retained the right to have their property returned or disposed of at their direction, this would indicate a bailment relationship. I in light of the conflicting extrinsic evidence and testimony, however, plaintiffs have not successfully done so.
Plaintiffs offer two arguments for why Tiffany retained title to the metals it delivered to RMC and why Tiffany retained the right to have its metals returned or direct RMC to sell them. First, plaintiffs contend that, although Tiffany cashed out every month, the parties' course of conduct is consistent with the intent that title remain in Tiffany while the property was in RMC's possession. (See NYSCEF No. 129 at 11-12.) Plaintiffs support this statement with documentary evidence that RMC retained insurance, per the MVA, and named Tiffany as an additional insured, which it was not required to do under the RMC T&C. This, plaintiffs contend, evinces their retained ownership of the EPM in RMC's possession because there would be no need to name Tiffany as an additional insured if Tiffany had sold the EPM and had no further interest in such goods. (See id. at 12-13.)
Second, plaintiffs contend that defendants have provided no evidence to rebut that RMC sent "Purchase Invoices" to Tiffany after Tiffany elected to sell its metals to RMC rather than when Tiffany initially delivered the metals to RMC. (See NYSCEF No. 187 at 3.) Plaintiffs contend that each month, RMC would send assay results of its metals to Tiffany, and Tiffany would then instruct RMC on how to dispose of it. Plaintiffs further assert that when Tiffany did elect to sell the metal to RMC, RMC documented those transactions separately from the receipt or delivery of Tiffany EPM.
In response, defendants make two arguments for why Tiffany did not retain title or have the right to have its goods returned. First, defendants contend that Tiffany did not have the right to have its identical goods returned because Tiffany never exercised its option to have its scrap segregated. (See NYSCEF No. 184 at 13-14.) Defendants claim that the evidence clearly shows not only that Tiffany never opted to take metal from the RMC refining transactions, but that from the standpoint of procurement, Messier never had any need for those refined metals. Second, defendants argue that because RMC never segregated Tiffany's metal, RMC never had any standard of care over Tiffany's scrap. Defendants dispute as irrelevant that RMC purchased insurance.
Defendants do not attempt to address or refute whether Tiffany had the option either to have the goods returned or direct the goods' sale. Rather, they focus on Tiffany's never having exercised the option to segregate its metals.
As an initial matter, although plaintiffs cite non-binding authority for this factor, a bailor's option to have its bailed goods redelivered or otherwise dealt with according to its directions is recognized by New York courts. (See Sattler v Hallock, 160 NY 291, 298 [1899] ["[T]he relation is that of bailor and bailee, where the property is thus delivered to be manufactured or improved, and afterwards there is to be a sale and a return or a division of the proceeds."]; Leventritt v Sotheby's, Inc., 5 A.D.3d 225, 226 [1st Dept 2004] [bailment of the subject painting was created when plaintiff art collector entrusted it to defendant art gallery to sell it at auction]; Mueller v Morrell & Co., Inc., 116 A.D.3d 598, 598 [1st Dept 2014] [bailment of wine futures was created when plaintiff bought them on the condition that when they were delivered to defendant, defendant would store them for plaintiff until he was able to take delivery]; Katz v Kar, 192 A.D.2d 695, 695 [2d Dept 1993] [bailment created when plaintiff entrusted defendant with diamonds with the understanding that defendant would sell them and turn over the proceeds to plaintiff].)
On the one hand, there is the deposition testimony of Tiffany employees Messier and Andrew Hart in which they state that Tiffany retained the option to have its physical metal returned or to direct RMC to cash out and that RMC never sold EPM absent Tiffany directing RMC to do so. (See NYSCEF Nos. 90 at 85:4-15, 87:24-89:7, 89:12-90:22, 93:10-16, 134:6-20; 93 at 27:19-28:3, 36:16-37:17, 93:6-8.) Steven Warbert (RMC's Vice President of Sales) also testified that he believed that title remained with the customer until the settlement date. (See NYSCEF No. 112 at 15:1-9, 21:12-22:3, 24:8-21, 28:18-25.)
To support the assertion that title remained with Tiffany, plaintiffs offer the following evidence: (1) an email from Rubin to Messier, in which Rubin wrote, "In the instances in which a client has pooled metal, we always need to wait for the client to price the metal in pool or to request physical metal in return" (see NYSCEF No. 102 [emphasis added]); (2) a series of emails in which Heather Cash (RMC) sends Jonathan Henry (Tiffany) assay reports (to test the ingredients and quality of the metals) for specific lots and asks how Tiffany would like to proceed, and 10 days later Henry asks for the lots to be sold (see NYSCEF No. 105); (3) a 2018 RMC Inventory Overview Memo prepared by Evan Gluck of EisnerAmper, RMC's auditor, which states that "[i]nventory classified as 'customer pool-metal' represents metals that have been received by RMC from a customer, but title has not yet transferred to RMC" (see NYSCEF No. 111 at 430) ; and (4) an RMC document produced during the RMC Bankruptcy titled "Process Definition: Refining," which states that "[o]re material received from customers is deemed as customer property until RMC has paid the customer for the material" (See NYSCEF No. 114 at 93767.)
Comite testified in his deposition that RMC hired EisnerAmper in 2018 to assist with a physical inventory count. (See NYSCEF No. 103 at 192:14-193:6.)
Next, contrary to defendants' contention, the Court of Appeals has acknowledged that "additional insured" is a "recognized term in insurance contracts," and "the well-understood meaning of the term is an entity enjoying the same protection as the named insured." (Pecker Iron Works of NY v Traveler's Ins. Co., 99 N.Y.2d 391, 393 [2003].) It is reasonable to infer that there would be no need to procure insurance and name Tiffany as an additional insured under RMC's policy if Tiffany had retained no ownership interest in the EPM while it was in RMC's care.
On the other hand, defendants have proffered deposition testimony directly contradicting the above. For example, Rubin testified in his deposition that RMC purchased scrap from Tiffany that Tiffany sent to RMC for refining and that "upon receipt title transferred [to RMC]." (See NYSCEF No. 138 at 399:11-23, 451:18-25.) Defendants also highlight the portion of Messier's deposition testimony where she states, regarding the subject metals, that she would have asked for cash because there was no need for physical metal back. (See NYSCEF No. 90 at 102:19-103:13.) Messier testified that, to her knowledge, there were no internal discussions at Tiffany concerning whether to take cash or physical metal. (See id. at 106:13-16.)
Plaintiffs' second argument fails due to insufficient evidence. In alleging that RMC sent assay reports every month, plaintiffs offer two sets of emails, allegedly containing assay reports not attached in the exhibits. (See NYSCEF Nos. 105; 106.) From these two sets of email chains, it does appear that RMC would first send Tiffany an assay report, and then that Tiffany would advise of what they wanted done with the metals. However, the exhibits represent transactions in March, April, and May 2017. This evidence is insufficient to prove two years' worth of practice. Absent the supporting assay reports referenced in the emails, this court cannot confirm the contents of those reports. The deposition testimony cited does not resolve this issue. Messier testified that RMC sent assay reports to Tiffany but she did not mention with what frequency they were sent. Further, the purchase invoice on which plaintiffs chiefly rely to show that RMC documented its purchases of the metals separately from the receipt or delivery of the metals is not so clear as to be self-explanatory, particularly about RMC's documenting history. The affidavit of plaintiffs' attorney in the RMC Bankruptcy does not attempt to explain the information contained in the invoice. Without further evidence, such as proof of invoices and delivery receipts, the court finds that plaintiffs tender insufficient evidence to demonstrate the absence of a material fact.
A genuine issue of material fact remains about whether title remained with Tiffany while in RMC's possession and whether Tiffany sold the metals to RMC or retained the option to have the metals returned or cash out. The record is replete with inconsistent and contradictory testimony, and the extensive evidence submitted by both parties fails to establish one way or another as a matter of law.
2. Whether RMC segregated Tiffany's metals
On the record, this court cannot conclude whether Tiffany's metals were segregated while in RMC's possession. The parties' conflicting evidence and deposition testimony raise genuine issue of material fact about whether RMC segregated Tiffany's metals.
Plaintiffs first assert that the MVA requires RMC to identify Tiffany's EPM as Tiffany's property and the forms accompanying the deliveries of Tiffany EPM did so. Plaintiffs offer David Comite's deposition testimony, where he is presented with a settlement and purchase invoice containing charges for treatment and refining, which identifies a "lot number" for the refining and a "reference number" identifying the EPM. (See NYSCEF No. 103 at 235:3-236:24.) Plaintiffs also offer RMC's settlement and purchase invoices, which identify the seal numbers and lot numbers of Tiffany's EPM. (See NYSCEF No. 104.) Second, plaintiffs contend that under their agreement, RMC was required to segregate Tiffany's metal from other goods and that RMC made oral and written representations to Tiffany that it would use "Closed Circuit Refining," and Tiffany understood that its EPM would be segregated and refined in a "closed circuit" process. (See NYSCEF Nos. 95 & 129 at 13.)
In response, defendants first contend that Tiffany has failed to offer any evidence that its goods were imprinted with its name or otherwise tagged to identify them as Tiffany's property. (See NYSCEF No. 184 at 14.) Second, defendants contend that RMC never segregated Tiffany's scrap. (See id.) To support their assertion that Tiffany never had the right to have its identical goods returned, defendants contend that Tiffany never requested or paid for its scrap to be segregated in closed-circuit batches. (See id.)
On the one hand, there is the deposition testimony of Messier and Hart in which both testify that RMC committed to Tiffany that it would not commingle Tiffany's metals during the refining process until Tiffany informed RMC that Tiffany wanted to cash out. (See NYSCEF Nos. 90 at 87:24-89:7, 98:12-100:2, 135:2-136:11, 137:14-25, 145:3-15 & 93 at 131:5-1, 161:16-21, 169:8-25.) Contrary to defendants' position, Comite, during his deposition, identified two stages in the refining process when Tiffany's metals were tagged to identify them as Tiffany's property: (1) after RMC melted the metals and molded them into bars and attached a sticker containing the lot number and the bar code (See NYSCEF No. 103 at 84:11-85:8); and (2) after RMC sent a customer a pin sample analysis on which RMC and the customer agreed, RMC would create "house bars" and attach lot numbers to them, which were traceable back to those customers' lots. (See id. at 95:3-97:4.)
Comite confirmed that "these bars can be tied back to the lot number," and that "these lot numbers can be tied back to the customer that delivered those lots." (See id. at 86:19-24.)
On the other hand, Rubin testified that RMC did not segregate Tiffany's metals and promised to perform closed-circuit refining only to the extent it was scrap or recycled metal, not specifically Tiffany's metal. (See NYSCEF No. 138 at 405:7-406:15.) Rubin testified that RMC conducted closed circuit refining only on request. (See id. at 189:5-9.) Rubin also testified that RMC conducted closed-circuit refining for the metals Tiffany wanted to procure. (See NYSCEF No. 92 at 188:13-189:4.) Additionally, the Debtors' submitted a statement in the RMC Bankruptcy alleging that "[t]he Debtors cannot identify (1) the customer lots associated with given raw materials once commingled (i.e., upon dissolution if not earlier), (2) when given raw materials come out of the refining process or (3) what finished products are produced from given raw materials." (NYSCEF No. 176 at 9.) There is also conflicting testimony between Rubin and Comite. Comite testified that RMC never implemented the "Peace of Mined" program (closed-circuit refining) because RMC "had no end users who wanted it." (NYSCEF No. 103 at 347:16-348:21.) When asked about Comite's testimony, Rubin stated that Tiffany was a "major user of... the program" and "paid a premium for the product they received." (See NYSCEF No. 92 at 199:4-22.)
It appears from the documentary evidence and deposition testimony that RMC made both oral and written representations to Tiffany that it would segregate their metals and that Tiffany was under the belief throughout their relationship that RMC segregated its metals. But it is unclear whether RMC actually did so.
The court has not considered plaintiffs' argument, raised for the first time in reply, that if RMC wrongly failed to segregate Tiffany EPM in violation of the MVA, equitable estoppel bars reliance on RMC's failure to segregate to argue that the bailment was destroyed. (See e.g. Dannasch v Bifulco, 184 A.D.2d 415, 417 [1st Dept 1992] ["The function of reply papers is to address arguments made in opposition to the position taken by the movant and not to permit the movant to introduce new arguments in support of, or new grounds for the motion."].)
This factor might not, however, defeat plaintiffs' bailment argument. (See Murray Oil Prods., Inc. v Royal Exch. Assur. Co., 21 N.Y.2d 440, 444 [1968] [bailment relationship existed even though the oil deposits of various bailors were not segregated but were commingled in several large tanks, the entire amount of oil was treated as a community pool, and it could not be determined whose oil was in any tank at a particular time].) The commingling of fungible goods alone does not defeat a bailment when the bailor specifically intended to retain ownership of a known share of the commingled goods. (See id. at 445.) However, that would require this court to find that the goods here are fungible, and neither party has presented evidence on the issue. Accordingly, whether RMC segregated Tiffany's metals remains a question of fact precluding summary judgment.
Given the conflicting evidence and testimony on this issue and that resolution will require credibility determinations, a jury must decide whether the transactions created the relation of bailor and bailee. (See Osborn, 263 NY at 437.) This branch of plaintiffs' motion for partial summary judgment is denied.
VI. The Branches of Plaintiffs' Motion Seeking Partial Summary Judgment on Liability, the Amount of Plaintiffs' Loss, and the Effect of the Settlement
Plaintiff asks this court to determine as a matter of law that defendants breached the Policy. A plaintiff asserting a claim for breach of contract must establish (1) the existence of a contract; (2) the party's own performance under the contract; (3) the other party's breach of the contract; and (4) resulting damages. (See Harris v Seward Park Hous. Corp., 79 A.D.3d 425, 426 [1st Dept 2010].) Because this court has concluded that plaintiffs have not established as a matter of law that they have suffered a loss covered under the Policy, plaintiffs have not established as a matter of law that defendants breached the Policy. This branch of plaintiffs' motion for partial summary judgment is denied.
Plaintiffs claim their total loss is $22,879,643.00-the value of the metals on February 18, 2019, the date RMC officially refused to return the metals in the senior lenders' omnibus response to customer statement (NYSCEF No. 120). (See NYSCEF No. 129 at 15.) Plaintiffs contend that, applying the formula in the Policy, "[a]s of February 18, 2019, the Cost Price plus 10% of the lost Tiffany EPM was $22,879,643.00." (See NYSCEF Nos. 131 [Responses to Insurers' Statement of Undisputed Facts] at ¶ 108 & 2 at ¶ 38.) Plaintiffs do not explain how they arrived at this number. Rather, plaintiffs mention in a footnote that "[u]pon the Court finding that Tiffany suffered a covered loss, Tiffany will be prepared to produce proof of the exact amount of its damages for entry of a judgment in that amount." (See NYSCEF No. 129 at 7 n 3.)
The applicable Policy provision states that the basis for valuation is as follows: "Insured's own property: Replacement Value, at the time of loss but not less than Cost Price plus 10%." (NYSCEF No. 23 at 35.)
Plaintiffs are jumping the gun in requesting this court find that, as a matter of law, that defendants owe $14,588,016.08. This court is unable to determine whether this amount is owed until plaintiffs present evidence on the matter. Absent proof of the exact amount of damages, this court may not resolve the issue. This branch of plaintiffs' motion for partial summary judgment is denied.
The branch of plaintiffs' motion for partial summary judgment asking the court to hold that plaintiffs' settlement in the RMC Bankruptcy does not reduce the amount of loss is granted for the reasons discussed above in connection with defendants' motion in motion sequence 002. (See discussion supra section II.C of motion sequence 002.) This court holds that the settlement plaintiffs recovered in the RMC Bankruptcy does not reduce any claim they may have against defendants under the Policy.
VII. The Branch of Plaintiffs' Motion Seeking Partial Summary Judgment Dismissing Insurers' Affirmative Defenses
A plaintiff moving for summary judgment dismissing the defendant's affirmative defenses must establish, prima facie, that "the affirmative defenses raised by the opposing party are inapplicable." (See S. Nassau Med. Grp., P.C. v 105 Rockaway Realty, LLC, 208 A.D.3d 812, 814 [2d Dept 2022].) Failure to satisfy this prima facie burden "requires a denial of the motion, regardless of the sufficiency of the opposing papers." (William J. Jenack Est. Appraisers & Auctioneers, Inc. v Rabizadeh, 22 N.Y.3d 470, 475 [2013].)
1. Apart from the fifth and sixth affirmative defenses, plaintiffs' opening motion papers do not address defendants' affirmative defenses (or otherwise provide evidence that would disprove those defenses). Plaintiffs also do not address the other affirmative defenses in their reply memorandum. Regarding the remaining affirmative defenses, plaintiffs are seeking summary judgment in their favor on these affirmative defenses based on the conclusory assertion that "they are all based on the erroneous position that Tiffany did not entrust Tiffany EPM to RMC." (See NYSCEF No. 129 at 2.) Plaintiffs have not established that defendants' affirmative defenses, though numerous, are without merit as a matter of law.
Although some of defendants' affirmative defenses could be considered conclusions of law without any factual support or substantiation or have no merit under a CPLR 3211 (b) motion to strike, the court cannot consider this possibility. That is not what plaintiffs have alleged.
Plaintiffs' motion for summary judgment on defendants' first, second, third, fourth, ninth, tenth, eleventh, twelfth, thirteenth, and fourteenth affirmative defenses is denied.
2. Defendants' fifth affirmative defense alleges that "[a]ny loss suffered by Tiffany is a result of RMC's inability to pay monies owed to Tiffany and therefore the Financial Default Exclusion applies." (See NYSCEF No. 19 at 8.) As noted in defendants' motion above (see discussion supra section II.B of motion sequence 002), the court finds this provision to be ambiguous and applies contra proferentem to construe that clause in the insured's favor. If plaintiffs have suffered a covered loss, the financial default exclusion would be inapplicable as plaintiffs were not in financial default. Plaintiffs' motion for summary judgment dismissing defendants' fifth affirmative defense is granted.
3. Defendants' sixth affirmative defense provides that "[a]ny loss suffered by Tiffany is a result of RMC filing for bankruptcy" and therefore the Policy's Insolvency Exclusion applies." (See id. at 9.) The Policy contains an "Insolvency Exclusion Clause" that provides "[l]oss arising directly from the Insolvency, Administration, Voluntary Arrangements with Creditors, Bankruptcy or Receivership of: (i) The Assured[; or] (ii) Any Third Party to whom the Insured Interest has been entrusted." (NYSCEF No. 144 at 23.) Although this clause does not explicitly provide that "[t]his insurance excludes" like the clause immediately preceding it, it can be inferred that the losses provided are intended to be excluded. The clause goes on to state: "Notwithstanding the above it is specifically noted and agreed that this Exclusion shall not apply in event of Physical Loss or Physical Damage following Insolvency, Administration, Voluntary Arrangements with Creditors, Bankruptcy or Receivership of any Third Party to whom the Assured has entrusted Insured Interest." (Id.)
Plaintiffs contend that the term "arising directly from" in the Insolvency Exclusion is equivalent to "caused by" and therefore that the exclusion applies only to a loss "arising directly from [ i.e., caused by]... Bankruptcy" of a "Third Party." (See NYSCEF No. 129 at 17.) Here, by contrast, plaintiffs contend that the loss was caused by RMC's wrongful disposal of Tiffany EPM, in violation of the MVA and without Tiffany's authorization. Therefore, plaintiffs argue that Tiffany's loss has nothing to do with any purported sale of Tiffany EPM pursuant to a bankruptcy court order and does not "arise directly from" the bankruptcy of a third party pursuant to the insolvency exclusion clause. Because "substantially all of Tiffany EPM was misappropriated and sold by RMC before the RMC Bankruptcy Case commenced," it "was not in any way a result of or caused by the bankruptcy." (See id. at 17.)
Plaintiffs contend that if this court finds that Tiffany entrusted its metals to RMC, then its physical loss could have occurred only either before the bankruptcy when RMC disposed of the EPM or after filing for bankruptcy when RMC refused to return it. (See NYSCEF No. 187 at 11-12.) Applying the narrower, proximate-cause test, plaintiffs contend that in either situation the insolvency exclusion does not apply because (i) "if the physical loss occurred when RMC disposed of Tiffany EPM prior to bankruptcy, it was not "directly" caused by RMC's bankruptcy"; and (ii) "if the physical loss occurred after the bankruptcy filing when RMC refused to return Tiffany EPM, the Insolvency Exclusion's exception applies." (See id. at 12.) Plaintiffs do not strictly argue which of the two is the valid point at which the loss occurred.
Here, the court cannot find in plaintiffs' favor on this affirmative defense. It cannot be said that this defense is without merit. A question of fact remains about when the metals Tiffany delivered to RMC were disposed of by RMC and how. The record evidence does not establish conclusively when the loss of the metals occurred. Debtors' February 19, 2019, response to the customers' statements states only that as of the petition date, Tiffany's assets were "[c]ommingled, processed, and likely sold" and that as of February 15, 2019, were "[s]old or otherwise irretrievable." (See NYSCEF No. 63 at Exhibit D at 7 [page 56 of PDF].) As such, this court is unable to determine at summary judgment whether the loss suffered by Tiffany occurred following "Bankruptcy... of any Third Party to whom the Assured has entrusted Insured Interest." Moreover, at this juncture, the court is unable to conclude that the precious metals were an insured interest.
Plaintiffs' motion for summary judgment on defendants' sixth affirmative defense is denied.
Accordingly, it is
ORDERED that the branch of defendants' motion seeking summary judgment under CPLR 3212 dismissing plaintiffs' first cause of action (mot seq 002) is denied; and it is further
ORDERED that the branch of defendants' motion seeking dismissal under CPLR 3211 of plaintiffs' second cause of action (mot seq 002) is granted, and that cause of action is dismissed; and it is further
ORDERED that the branches of plaintiffs' motion seeking partial summary judgment in plaintiffs' favor on (i) whether the MVA or RMC T&Cs controlled and (ii) whether the parties' course of dealing gave rise to a bailment relationship (mot seq 003) are denied; and it is further
ORDERED that the branches of plaintiffs' motion seeking partial summary judgment in plaintiffs' favor on (i) whether the defendants' breached the Policy and (ii) the amount of plaintiffs' total loss (mot seq 003) are denied; and it is further
ORDERED that the branch of plaintiffs' motion seeking partial summary judgment concluding as a matter of law that plaintiffs' settlement in the RMC Bankruptcy does not reduce the amount of loss (mot seq 003) is granted; and it is further
ORDERED that the branch of plaintiffs' motion seeking dismissal of defendants' affirmative defenses (mot seq 003) is granted only as to defendants' fifth affirmative defense (and that defense is dismissed), and is otherwise denied; and it is further
ORDERED that the parties shall appear before this court for a telephonic status conference on May 31, 2024; and it is further
ORDERED that plaintiffs serve a copy of this order with notice of its entry on all parties.