Opinion
Index No. EC2022-34298
10-18-2023
Whitehall Central School District, Plaintiff, v. New York Schools Insurance Reciprocal, Defendant.
Capezza Hill, LLP, Albany (Shelli L. Calland and Benjamin W. Hill of counsel), for plaintiff. Rupp Baase Pfalzgraf Cunningham LLC, Buffalo (Brandon M. Snyder of counsel), for defendant.
Unpublished Opinion
Capezza Hill, LLP, Albany (Shelli L. Calland and Benjamin W. Hill of counsel), for plaintiff.
Rupp Baase Pfalzgraf Cunningham LLC, Buffalo (Brandon M. Snyder of counsel), for defendant.
ROBERT J. MULLER, J.
On August 24, 2020, a severe rainstorm resulted in extensive water damage to plaintiff's elementary school and high school, as well as surrounding facilities. Plaintiff filed an insurance claim with defendant that same date under the terms of its "Special School Policy" and "Builders' Risk and Installation Policy." Defendant then conducted its initial investigation and, on September 24, 2020, issued its coverage determination explaining that portions of the claim were covered under the terms of the Policies, while others were not. Defendant thereafter paid plaintiff $1,500,00.00 toward the claim.
Plaintiff procured the Builders' Risk and Installation Policy after contracting with a third-party to perform certain repairs to the elementary and high schools, which repairs were underway at the time of the loss. Plaintiff also had a third "Inland Marine Policy" with defendant, but this policy does not appear relevant to the parties' dispute.
Plaintiff sought additional monies and, on November 3, 2020, defendant sent correspondence to plaintiff requesting a sworn proof of loss statement itemizing the damages caused by the rainstorm. Plaintiff submitted this proof of loss on January 1, 2021, requesting $13,134,354.80 in satisfaction of the claim. On January 20, 2021, defendant sent correspondence to plaintiff rejecting this proof of loss, but advising that it would "continue with its claim investigation, which [would] include further physical assessment of [plaintiff's] properties." Defendant further stated as follows:
According to plaintiff, the Special School Policy has a coverage limit of $32,306,143.00 for buildings and contents, while the Builders' Risk and Installation Policy has a coverage limit of 9,362,518.00 for the elementary school and $2,225,173.00 for the high school.
"[We have] been attempting to schedule an inspection of [plaintiff's] roof for some time now, but [have] been met with roadblocks and delays.... Please provide us with amenable dates immediately so [we] can complete the roof inspection."
It appears that the roof inspection was thereafter conducted, with defendant sending correspondence to plaintiff on August 20, 2021 enumerating 13 separate requests for additional documents and information in "follow-up to the recent property inspections." Plaintiff apparently responded to three requests, with defendant then sending correspondence on November 12, 2021 requesting responses to those remaining.
There is no dispute that both the Special School Policy and the Builders' Risk and Installation Policy include provisions whereby plaintiff must cooperate in the investigation of any claims and appear for an examination under oath, if requested by defendant.
On January 10, 2022, plaintiff submitted a sworn supplemental partial proof of loss statement requesting $197,809.02, in addition to the $13,134,354.80 previously requested. This supplemental statement was also rejected by defendant. In February 2022 plaintiff apparently provided defendant with additional documentation in response to its remaining requests, with defendant then sending correspondence on March 7, 2022 advising that some requests "still [had] yet to be satisfied," including several requests which merely sought narratives relative to the damage sustained. Defendant subsequently sent correspondence to plaintiff on June 6, 2022 stating as follows:
"Given that the information and documents continue to be deficient, [defendant] is electing its right under [plaintiff's] insurance contracts to conduct an examination under oath."
On August 23, 2022, plaintiff commenced this action against defendant alleging, inter alia, that it made a good faith effort to comply with defendant's investigation, but defendant's ongoing requests for documents and information were unnecessary and overly burdensome. Plaintiff asserts three causes of action: (1) that it is entitled to a declaratory judgment that defendant violated the terms of the Policies and must cover the entirety of its loss; (2) that defendant is liable for breach of contract as a result of violating the terms of the Policies and must cover the entirety of its loss, together with interest, attorneys' fees and costs; and (3) that defendant is liable for deceptive business practices under General Business Law § 349 and must pay "compensatory damages, punitive damages, interest, and attorneys' fees and costs."
Presently before the Court is defendant's pre-answer motion seeking to dismiss plaintiff's first and third causes of action, as well as any claims for compensatory damages, punitive damages, attorneys' fees and costs. In addition to dismissal, defendant "requests that reference to the aforementioned portions of [plaintiff's] complaint be stricken from the complaint." Each aspect of the motion will be addressed ad seriatim.
At the outset, defendant contends that plaintiff's first cause of action for a declaratory judgment must be dismissed as duplicative of its second cause of action for breach of contract. Indeed, a claim for declaratory judgment is duplicative where plaintiff has an "'adequate, alternative remedy in another form of action' - namely, [a] cause of action for breach of contract" (Upfront Megatainment, Inc. v Thiam, 215 A.D.3d 576, 578 [1st Dept 2023], quoting Apple Records, Inc. v Capitol Records, Inc., 137 A.D.2d 50, 54 [1st Dept 1988]; see Pacella v Town of Newburgh Volunteer Ambulance Corps. Inc., 164 A.D.3d 809, 814 [2d Dept 2018]; Maldonado v DiBre, 140 A.D.3d 1501, 1505 [3d Dept 2015], lv denied 28 N.Y.3d 908 [2016]). Here, the relief sought by plaintiff in its breach of contract cause of action is identical to that sought in its declaratory judgment cause of action, as are the allegations underlying these causes of action.
While plaintiff contends that its declaratory judgment cause of action is not duplicative of its breach of contract cause of action because, "[a]s the litigation proceeds, there may be a need for a judicial declaration concerning the meaning or effect of particular Policy provision[s]," the Court finds this contention to be without merit. The meaning and effect of policy provisions is regularly determined in breach of contract causes of action. To the extent that plaintiff relies upon Kings Infiniti Inc. v Zurich Am. Ins. Co. (43 Misc.3d 1207 [A], 2014 NY Slip Op 50515[U] [Sup Ct, Kings County 2014]) in support of its contention, this case is readily distinguishable. There, plaintiff insured sought a declaratory judgment that the policy in effect at the time of the loss did not contain certain pages referenced by defendant insurer in its disclaimer and, further, that defendant insurer was liable for breach of contract for violating the policy. Insofar as these two causes of action were separate and distinct, the Court properly found that they were not duplicative. This is not the case here.
Under the circumstances, the Court finds that defendant is entitled to dismissal of plaintiff's first cause of action for a declaratory judgment.
Turning now to plaintiff's third cause of action under General Business Law § 349, defendant contends that this cause of action must be dismissed for failure to state a claim (see CPLR 3211 [a] [7]). On a motion to dismiss for failure to state a claim the Court "'must afford the complaint a liberal construction, accept as true the allegations contained therein, accord the plaintiff the benefit of every favorable inference and determine only whether the facts fit within any cognizable legal theory'" (Rodriguez v Jacoby & Meyers, LLP, 126 A.D.3d 1183, 1185 [3d Dept 2015], lv denied 25 N.Y.3d 912 [2015], quoting He v Realty USA, 121 A.D.3d 1336, 1339 [3d Dept 2014] [internal quotation marks and citations omitted]; see Snyder v Brown Chiari, LLP, 116 A.D.3d 1116, 1117 [3d Dept 2014]).
General Business Law § 349 makes unlawful "[d]eceptive acts or practices in the conduct of any business" and "creates a private right of action under which a litigant may recover actual damages" (Baskin v Mabco Transit, Inc., 176 A.D.3d 1539, 1544 [3d Dept 2019], appeal dismissed 35 N.Y.3d 977 [2020], lv denied 36 N.Y.3d 903 [2020]); see generally Belair Care Ctr., Inc. v Cool Insuring Agency, Inc., 168 A.D.3d 1162, 1165-1166 [3d Dept 2019]; Benetech, Inc. v Omni Fin. Group, Inc., 116 A.D.3d 1190, 1190-1191 [3d Dept 2014]). "As a threshold matter, '[a] claim brought under this statute must be predicated on an act or practice which is consumer-oriented, that is, an act having the potential to affect the public at large'" (Baskin v Mabco Transit, Inc., 176 A.D.3d at 1544, quoting Elacqua v Physicians' Reciprocal Insurers, 52 A.D.3d 886, 888 [3d Dept 2008] [internal quotation marks and citation omitted]; see Accredited Aides Plus, Inc. v Program Risk Mgt., Inc., 147 A.D.3d 122, 134 [3d Dept 2017]). "'Private contract disputes, unique to the parties... do not fall within the ambit of the statute'" (Baskin v Mabco Transit, Inc., 176 A.D.3d at 1544, quoting Kaufman v Medical Liab. Mut. Ins. Co., 92 A.D.3d 1057, 1058 [3d Dept 2012] [internal quotation marks, ellipsis, brackets and citations omitted]; see Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 N.Y.2d 20, 25 [1995]).
Here, the complaint alleges, in pertinent part:
"Instead of paying what it knows is owed, [defendant] has focused on delaying payment of the claim by demanding that [plaintiff] allow repeated inspections of the property and produce countless irrelevant documents....
"[Defendant] has demonstrated a practice of refusing to settle claims piecemeal, even where an agreement can be had on the settlement value of a portion of a claim, and forcing policyholders to institute suits to recover amounts due under its policies.
"[Defendant's] acts and practices have been and continue to be materially unfair and deceptive. [Defendant] delayed payment of insurance proceeds to [plaintiff], despite knowing that [plaintiff] needed those funds to make repairs so the schools could be used for their intended purpose - to educate children.
"[Defendant] has adopted a claim settlement policy and practice that is designed to frustrate the fair and efficient settlement of claims. This practice is in direct violation of the New York Insurance Law and Rules promulgated thereunder.
"In particular, [defendant] has failed to comply with its obligations under New York's Unfair Claims Settlement Practices Act, which requires, among other things, that [defendant] attempt in good faith to effectuate a 'prompt, fair and equitable settlement' of [plaintiff's] claim (Insurance Law § 2601 [a] [4])."
Even when according plaintiff the benefit of every favorable inference, the Court finds that it has failed to state a cause of action for deceptive business practices under General Business Law § 349. "An act or practice is consumer-oriented if it has 'a broader impact on consumers at large in that [such act or practice is] directed to consumers or potentially affect[s] similarly situated consumers'" (Baskin v Mabco Transit, Inc., 176 A.D.3d at 1544, quoting Benetech, Inc. v Omni Fin. Group, Inc., 116 A.D.3d at 1190-1191 [internal quotation marks and citations omitted]; see Kaufman v Medical Liab. Mut. Ins. Co., 92 A.D.3d at 1058). Although plaintiff alleges that defendant has a practice of refusing to settle claims piecemeal-thus forcing policy holders to institute lawsuits-these allegations are wholly conclusory, with the complaint focused solely upon defendant's alleged violation of plaintiff's Policies. There is no suggestion whatsoever that there exist similarly situated policyholders. Under the circumstances, this is a private contract dispute, unique to the parties, that does not fall within the ambit of General Business Law § 349 (see Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 N.Y.2d at 25; Daire v Sterling Ins. Co., 204 A.D.3d 1189, 1193 [3d Dept 2022]; Baskin v Mabco Transit, Inc., 176 A.D.3d at 1544; Kaufman v Medical Liab. Mut. Ins. Co., 92 A.D.3d at 1058).
Briefly, insofar as plaintiff's allegations pursuant to Insurance Law § 2601 are concerned, "this State does not currently recognize a private cause of action under Insurance Law § 2601" (Rocanova v Equitable Life Assur. Socy. of U.S., 83 N.Y.2d 603, 612 [1994]; see New York Univ. v Continental Ins. Co., 87 N.Y.2d 308, 317-318 [1995]; Dinstber v Allstate Ins. Co., 110 A.D.3d 1410, 1411 [3d Dept 2013]). As such, plaintiff has failed to state a cause of action in this regard as well (see Kings Infiniti Inc. v Zurich Am. Ins. Co., 2014 NY Slip Op 50515[U] at *8).
The Court therefore finds that defendant is entitled to dismissal of plaintiff's third cause of action for deceptive business practices under General Business Law § 349.
Turning now to that aspect of the motion seeking to dismiss any claims for compensatory damages, punitive damages, attorneys' fees and costs, to the extent that plaintiff has failed to state a cause of action under General Business Law § 349, the Court finds that it is not entitled to any such damages under that cause of action.
Although punitive damages are not mentioned elsewhere in the complaint, the Court further finds that plaintiff is not otherwise entitled to them. "[T]o state a claim for punitive damages as an additional and exemplary remedy when the claim arises from a breach of contract, defendant's conduct must be actionable as an independent tort (see New York Univ. v Continental Ins. Co., 87 N.Y.2d at 315-316), and here there exists no independent tort (see Brown v Government Empls. Ins. Co., 156 A.D.3d 1087, 1091 [3d Dept 2017]; Dinstber v Allstate Ins. Co., 110 A.D.3d at 1411).
To the extent plaintiff seeks attorneys' fees in its breach of contract cause of action, plaintiff states as follows in its memorandum of law:
"[Plaintiff] acknowledges that its current allegations likely do not support an award of attorneys' fees on its breach of contract claim. [Plaintiff] reserves the right to seek attorneys' fees on its breach of contract claim if [it] can establish that [defendant] 'had no arguable basis to challenge [plaintiff's] claim and... no reasonable carrier would, under the given facts, challenge the claim' (D.K. Prop., Inc. v National Union Fire Ins. Co. of Pittsburgh, Pa., 59 Misc.3d 714, 715 [Sup Ct, NY County 2018], revd on other grounds 168 A.D.3d 505 [1st Dept 2019])."
While perhaps unlikely that plaintiff will prevail in establishing that no reasonable carrier would challenge its $13 million claim, given the standard applicable to a motion to dismiss, the Court declines to dismiss plaintiff's request for attorneys' fees in its second cause of action at this juncture. Plaintiff's request for costs in the second cause of action should likewise remain, with such an award at the discretion of the Court (see CPLR 2301 [2]).
Finally, it is unclear what exactly defendant is seeking when it requests that-in addition to dismissal-"reference to [plaintiff's first and third causes of action, as well as its claims for compensatory damages, punitive damages, attorneys' fees and costs] be stricken from the complaint." To the extent that defendant is seeking to compel the filing of an amended complaint without these causes of action and claims, such request is denied. Indeed, plaintiff's claim for attorneys' fees and costs remains relative to its second cause of action, and defendant has failed to provide any basis upon which to "strike" the dismissed causes of action and claims from the complaint. Under the circumstances, this aspect of the motion is denied in its entirety.
Based upon the foregoing, defendant's motion is granted to the extent that plaintiff's first and third causes of action are dismissed, along with their claims for compensatory and punitive damages. The motion is otherwise denied, with plaintiff's claims for attorneys' fees and costs preserved under the second cause of action.
Defendant is hereby directed to serve an answer to plaintiff's remaining cause of action within thirty (30) days of the date of this Decision and Order.
Therefore, having considered NYSCEF document Nos. 5 through 21, 23, 27, 28, and 32 through 35, and oral argument having been heard on September 29, 2023 with Shelli L. Calland, Esq. and Benjamin W. Hill, Esq. appearing on behalf of plaintiff and Brandon M. Snyder, Esq. appearing on behalf of defendant, it is hereby
ORDERED that defendant's motion is granted to the extent that plaintiff's first and third causes of action are dismissed, along with their claims for compensatory and punitive damages; and it is further
ORDERED that the motion is otherwise denied, with plaintiff's claims for attorneys' fees and costs preserved under the second cause of action; and it is further
ORDERED that defendant shall serve an answer to plaintiff's remaining cause of action within thirty (30) days of the date of this Decision and Order.
This Decision and Order has been e-filed by the Court. Counsel for defendant is hereby directed to serve with notice of entry.