30-40 East Main St. Bayshore, Inc. v. Republic Franklin Ins. Co.

• Decision Date: 29 June 2010
• Citation: 74 A.D.3d 1330,904 N.Y.S.2d 740
• Parties: 30-40 EAST MAIN STREET BAYSHORE, INC., et al., respondents, v. REPUBLIC FRANKLIN INSURANCE CO., et al., appellants.
• Court: New York Supreme Court — Appellate Division

904 N.Y.S.2d 740 74 A.D.3d 1330 30-40 EAST MAIN STREET BAYSHORE, INC., et al., respondents, v. REPUBLIC FRANKLIN INSURANCE CO., et al., appellants. Supreme Court, Appellate Division, Second Department, New York. June 29, 2010.

Faust Goetz Schenker & Blee, LLP, New York, N.Y. (Lisa L. Gokhulsingh of counsel), for appellants.

Reilly, Like & Tenety, Babylon, N.Y. (Molander & Associates, Bohemia, N.Y. [Garth Molander] of counsel), for respondents.

WILLIAM F. MASTRO, J.P., HOWARD MILLER, LEONARD B. AUSTIN, and SHERI S. ROMAN, JJ.

In an action, inter alia, to recover damages for breach of a business owners insurance policy, the defendants appeal, aslimited by their brief, from so much of an order of the Supreme Court, Suffolk County (Farneti, J.), dated December 12, 2008, as denied that branch of their motion which was for summary judgment dismissing the complaint.

ORDERED that the order is modified, on the law, by deleting the provision thereof denying that branch of the defendants' motion which was for summary judgment dismissing the complaint, and substituting therefor a provision granting that branch of the motion which was for summary judgment dismissing all of the causes of action with the exception of the cause of action allegingconsequential damages, consisting of loss of rent not allowed in the appraisal process conducted pursuant to Insurance Law § 3404; as so modified, the order is affirmed insofar as appealed from, with costs to the defendants.

The plaintiff 30-40 East Main Street Bayshore, Inc., owned certain commercial property in Suffolk County. The plaintiff Louis J. Modica was the sole principal of that corporation. A number of tenants occupied various establishments at the property. On November 7, 2000, a fire broke out in one of the units, substantially destroying it, and damaging another of the units. At that time, there was a business owners policy of insurance in effect covering the premises, issued by the defendant Utica Mutual Insurance Company, which was affiliated with the defendant Republic Franklin Insurance Company (hereinafter together referred to as Utica or the insurer). The policy provided coverage for a number of categories of loss, such as damage to the subject building, as well as to "Covered Property," which included tenants' "improvements and betterments," consisting of such items as trade fixtures. In addition, the policy provided coverage for loss of "Business Income," as therein defined.

Following Utica's "net partial payment" to the plaintiffs in July 2001 in the amount of about $177,000, and the parties' failure to agree on the total amount of the loss sustained as a result of the fire, the plaintiffs brought this action in November 2002. They claimed damages in the amount of $375,000, allegedly arising from structural damage to the premises, to "permanent improvements" affixed thereto, as well as loss of business income in the form of lost rent. The plaintiffs also alleged that Utica breached its obligation under the policy to conduct an appraisal of the loss pursuant to Insurance Law § 3404, by failing to name a disinterested appraiser. They sought injunctive relief directing the insurer to comply with Insurance Law § 3404.

The appraisal issue was addressed in earlier motion practice. In an order dated March 12, 2007, the Supreme Court, inter alia, granted that branch of the plaintiffs' cross motion which was to compel the insurer to designate a disinterested appraiser. An appraisal was thereafter conducted, and in August 2007, the appraisers awarded the insured a total of $536,971.42, consisting of the actual cost to construct the base building ($292,272.35), improvements and betterments ($146,965.07), and a "covered portion" of lost rent (in the total amount of $97,734). The appraisal noted that there was an additional amount of lost rent (also in the amount of $97,734), allegedly arising from construction delays due to inadequate funding from the insurer. However, this latter amount of lost rent wasnot awarded, as it implicated a "Coverage Issue" not within the appraisal process.

Based on that award, the plaintiffs made a prior motion, which is not the subject of this appeal,...