1070 Park Ave. Corp. v. Fireman's Fund Ins. Co.

• Decision Date: 18 June 2018
• Docket Number: 17 Civ. 2474 (CM)
• Citation: 313 F.Supp.3d 528
• Parties: 1070 PARK AVENUE CORPORATION, Plaintiff, v. FIREMAN'S FUND INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

313 F.Supp.3d 528

1070 PARK AVENUE CORPORATION, Plaintiff,

v.FIREMAN'S FUND INSURANCE COMPANY, Defendant.

17 Civ. 2474 (CM)

United States District Court, S.D. New York.

Signed June 18, 2018

Filed June 19, 2018

David Bruce Karel, Wilkofsky, Friedman, Karel & Cummins, New York, NY, for Plaintiff.

Seth Ian Weinstein, Jay Weintraub, Lewis Brisbois Bisgaard & Smith LLP, New York, NY, for Defendant.

MEMORANDUM DECISION AND ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT, AND IN THE ALTERNATIVE, CONDITIONALLY GRANTING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

McMahon, C.J.

This insurance coverage dispute pivots on the definition of the word "vehicle" as used in an "all risks" policy insuring a luxury cooperative apartment building on the Upper East Side of Manhattan.

The material facts are simple and undisputed. The gas line running to a line of apartments ruptured shortly after a recycling bin was brought into the basement by the company that runs the New York City e-cycle (electronics recycling) program. As a result, the gas had to be turned off throughout the building. The New York City Administrative Code requires that a building's gas system pass an integrity test before gas can be turned back on once it has been turned off. The contractor who was hired to conduct the test ascertained that, in order to pass the test—which is conducted at a considerably higher pressure than the system operates at under normal use—a number of pipes and valves had to be replaced, which necessitated opening walls in the residents' kitchens. The building incurred costs in excess of a half million dollars.

The building demanded reimbursement for the costs it incurred in connection with the restoration of gas service under the "all risks" policy that insured the building. Its insurer, Fireman's Fund, disclaimed coverage, on the ground that the policy did not cover damage attributable to the testing of gas lines that was mandated by local ordinance. The building protested, arguing that there was an exception to the exclusion if the damage to the gas system that occasioned the municipally-required testing was caused by a "vehicle." It argued that the recycling bin—essentially an oversized garbage bin mounted on four wheels—qualified as a "vehicle."

The matter has been presented to the Court on cross-motions for summary judgment.

I conclude that the term "vehicle"—which appears in the policy's Gas Systems Endorsement as part of the phrase "Aircraft or Vehicles"—does not encompass what is, in essence, a mobile trash can. Therefore, I grant Defendant's motion for summary judgment and direct that Plaintiffs case be dismissed.

However, in the event that a higher court disagrees with my assessment, I conditionally grant so much of Plaintiffs cross motion for summary judgment as challenges Fireman's Fund's other reasons for denying coverage for the loss in question—reasons relating to "wear and tear" and to defects or deterioration allegedly resulting from faulty maintenance.

FACTS

The following facts are undisputed.

The Incident

1070 Park Avenue is a first class cooperative apartment building on the Upper East Side of Manhattan. It has been operational for eighty years.

The building has gas lines that run to the kitchens of every apartment.

Although the gas system was installed decades ago, there is no evidence in the record that the building was experiencing any problems with the gas lines or the delivery of gas to the residents' kitchens prior to the incident that forms the basis for this lawsuit. (Pl.'s Statement of Undisputed Facts ("Pl's 56.1") ¶ 10, ECF No. 99.)

The building participates in New York City "e-cycle" program, which is a recycling program for electronics, such as televisions, computer equipment, tablets, mobile phones and office machines. (Decl. of Jay Weintraub in Support of Def's Mot. Summ. J. ("Weintraub Decl."), Ex. Z, ECF No. 87–54.) Participating buildings receive heavy duty "storage bins" in one of two sizes from the New York City Department of Sanitation, into which building staff places electronics that are discarded by tenants. The city arranges for the periodic pick-up of the electronic recyclables from the building and their disposition, in partnership with an entity known as Electronic Recyclers International, Inc. (Id. )

Like many oversized trash bins, the e-cycling storage bins have wheels on them, which makes it easier to move them from the place where they store refuse to the place where they are emptied.

At 1070 Park Avenue, the e-cycle bin is kept in the laundry room in the basement of the building.

On the afternoon of July 14, 2016, the contractor who collects the building's "e-cycle" recycling material arrived at the building to replace the existing bin with a new recycling bin.

The new bin, which was larger than its predecessor, was also placed in the laundry room.

Shortly after the recyclers left the premises, someone smelled gas. Building staff discovered that the gas meter leading to Unit 1C had been damaged, causing a gas leak. Building employees observed that the meter was both dented and dislodged. (Aff. of Daniel Lambe in Support of Def.'s Mot. Summ. J. ("Lambe Aff."), Exs. Bl & B2, ECF No. 90–10, 90–11.)

The meter had not been damaged earlier in the day and there had been no smell of gas earlier in the day. (Id. ).

The building staff concluded that the damage was caused by the individuals who were placing the new, larger recycling bin in the laundry room; they must have bumped into and damaged the gas meter. As there were no eyewitnesses and the recyclers did not report any accident to anyone in the building, the evidence supporting this theory is circumstantial. However, there is absolutely no evidence of any other possible cause for the damage to the meter and the resulting gas leak; and three building employees testified that employees of the recycling company brought an oversized e-cycling bin into the basement immediately before the building began to smell of gas. (Aff. of Mohammad Fayyaz in Support of Pl's Mot. Summ. J., ECF No. 95; Aff. of Amado Olivieri in Support of PL's Mot. Summ. J., ECF No. 96; Aff. of Edmundo Maceda in Support of PL's Mot. Summ. J., ECF No. 97.)

Circumstantial evidence is of no less probative value than direct evidence. There being no evidence whatever (direct or circumstantial) that contradicts the evidence of the building employees, the Court thus deems it undisputed that the recyclers caused the leak by their careless handling of the recycling bin, which hit the gas meter and damaged it.

Upon being summoned, Con Edison "red tagged" the building and shut off the gas to the entire building. Peter Lambe Plumbing was engaged to repair the leak and effect restoration of gas service to the building.

Per the Administrative Code of the City of New York, once the gas was turned off by Con Edison, it could not be turned back on until the building's entire gas distribution system was checked. See N.Y.C. Admin. Code § 27–292(d).

This integrity testing, a form of high pressure testing, resulted in considerable cost to the building. It was determined that, in order to pass the testing, all gas meter assemblies in the building needed to be upgraded to include by-pass meter bars, and all apartments needed to have appliance service valves and new flex connectors installed. This required opening up walls in every apartment.

The total cost to repair/upgrade the system to the point at which the New York City Building Inspector would authorize Con Edison to restore gas service was $556,967.60.

The Policy

The building is insured under a Commercial Lines Insurance Policy, policy number NYP 2006109–15, issued by defendant Fireman's Fund. The policy was in full force and effect on the date of the incident.

Although nominally an "all risks" policy, the policy lists numerous exclusions. One of them—the one most pertinent to this case—is found in the Gas Systems Endorsement. It reads as follows:

1. This policy will not cover the following:

a. costs associated directly or indirectly with the enforcement of any law or ordinance that requires the testing of a gas system for integrity or condition; or

b. any loss to a gas system caused by testing for integrity or condition.

This exclusion does not apply if the testing is required due to a direct loss causing physical damage to Covered Property from Fire; Lightning; Explosion; Aircraft or Vehicles ; Riot or Civil Commotion; Sinkhole Collapse; Volcanic Action; Falling Objects; Weight of Snow, Ice or Sleet that is covered by the policy.

(Lambe Aff., Ex. A9, ECF No. 90–9) (emphasis added).

Fireman's Fund was obviously aware that local law (such as the New York City Administrative Code) might require that the building's gas system be tested for integrity or condition, and that such test might yield various direct (the costs associated with hiring a plumber, conducting the tests and paying fees) and indirect costs (such as the cost of having to access normally inaccessible parts of the system or to upgrade parts so that the system could operate with integrity at higher than normal pressures). Having anticipated the possibility, it specifically excluded all such costs from coverage under the policy.

But as always seems to be the case where insurance policies are concerned, there is an exception to the exemption. If the damage to the Covered Property (and the parties do not suggest that the building's gas meter is not "Covered Property") results from certain specified causes, the exclusion does not apply, and the costs associated with the enforcement of the gas testing ordinance are covered. Among those causes was injury to the covered property caused by "Aircraft or Vehicles. "

Plaintiff takes the position that the recycling bin—which is described by the City of New York as a "storage bin"—qualifies as a "vehicle," in that it has wheels (the better to move it from the laundry room to the place where the recyclers pick it up). Defendants accused Plaintiff of trying to create...