40 Gardenville v. Travelers Prop. Cas. of America

• Decision Date: 09 February 2005
• Docket Number: No. 02-CV-788S.,02-CV-788S.
• Citation: 387 F.Supp.2d 205
• Parties: 40 GARDENVILLE, LLC, Plaintiff, v. TRAVELERS PROPERTY CASUALTY OF AMERICA, Defendant.
• Court: U.S. District Court — Western District of New York

387 F.Supp.2d 205

40 GARDENVILLE, LLC, Plaintiff, v. TRAVELERS PROPERTY CASUALTY OF AMERICA, Defendant.

No. 02-CV-788S.

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

February 9, 2005.

COPYRIGHT MATERIAL OMITTED

Frank C. Muggia, Frank C. Muggia & Associates, PLLC, Orchard Park, NY, for Plaintiff.

Lisa A. Coppola and Stephen A. Sharkey, Rupp, Baase, Pfalzgraf, Cunningham & Coppola LLC, Buffalo, NY, for Defendant.

DECISION AND ORDER

SKRETNY, District Judge.

I. INTRODUCTION

In this case, Plaintiff 40 Gardenville, LLC, seeks a declaration that Defendant Travelers Property Casualty Insurance of America is obligated to indemnify it for losses resulting from mold contamination at 40 Gardenville Parkway. Currently before this Court are Defendant's Motion for Summary Judgment and Defendant's Motion for Contempt.

II. BACKGROUND

A. Factual Summary

The following facts are undisputed for purposes of the instant motions, except where indicated. On December 21, 2001, Plaintiff's principals, Gerald Hickson and James Kirchmeyer, purchased a vacant commercial building located at 40 Gardenville Parkway in West Seneca, New York ("the building" or "40 Gardenville"). (Defendant's Rule 56 Statement of Undisputed Material Facts ("Def.'s Statement"), ¶ 11;¹ Hickson Dep. 9:2-8; 18:8-10).² To cover any loss to the building, Mr. Hickson procured an all-risk policy of insurance ("the policy") from Travelers. (Def.'s Statement, ¶¶ 5-12; Compl., Ex. A). By its terms, the policy commenced on December 20, 2001 and terminated on December 20, 2002. (Compl., Ex. A). Travelers' underwriter, David Coad, did not inspect 40 Gardenville or arrange for the building to be inspected prior to issuing the policy. (Coad Dep. 15:12-16:23).³

The policy provides, in relevant part, "[w]e cover `loss' commencing during the policy period." (Id. at 12). Further, the policy sets forth the following exclusions:

We will not pay for "loss" caused by or resulting from any of the following ... (a) Hidden or latent defect, mechanical breakdown or failure ... or any quality in the property that causes it to damage or destroy itself ... (b) Corrosion, rust or dampness.

(Id. at 18). Lastly, it states "[t]his policy's terms can be amended or waived only by endorsement issued by [Travelers] as part of this policy." (Id. at 4).

Prior to purchasing the building, Mr. Hickson and Mr. Kirchmeyer took several steps to determine the viability of the investment. Specifically, they retained Siracuse Engineers to undertake a structural soundness study, Arrow Appraisal to assess the fair market value of the property, and LCS Environmental to perform a "phase one environmental" assessment. (Hickson Dep. 20:1-27:23).

According to Mr. Hickson, Siracuse Engineers, Arrow Appraisal, and LCS Environmental company produced reports setting forth their respective findings. (Hickson Dep. 20:1-27:23). Each company also provided an invoice for services rendered. (Hickson Dep. 20:1-27:23). Mr. Hickson further testified that Arrow Appraisal was a client of Mr. Kirchmeyer and a tenant at 40 Gardenville, and that 40 Gardenville, LLC, may have "bartered" with Arrow Appraisal for services, instead of paying for them. (Hickson Dep. 27:20-29:1).

Before December of 2001, Mr. Hickson inspected the interior of the building between three and eight times, sometimes accompanied by Mr. Kirchmeyer. (Hickson Dep. 18:5-23; 31:2-16). On one occasion, Mr. Hickson walked through the building with Michael Masters, a representative of BRD Construction, which had been retained to estimate the cost of rehabilitating the building. (Hickson Dep. 29:3-31:1). Mr. Hickson testified that he observed leaks in the roof and large holes on the exterior walls, water draining into buckets and leaking from the open valve of the sprinkler system, puddles of standing water, and wet carpeting throughout the building. (Hickson Dep. 33:10-37:23 42:9-43:3). He was advised, presumably by Mr. Masters, that the entire roof would have to be replaced. (Hickson Dep. 34:2-4). Mr. Hickson also observed a substance resembling dirt on the vinyl baseboards along the second floor that he later learned was mold. (Hickson Dep. 59:4-60:22). Specifically, he offered the following testimony regarding this substance:

Q: Did you see any mold in the building before closing? Hickson: We — I saw something at the base which I thought was dirt, now since somebody came in and said it's mold, now I know it is mold.

Q: The base of what, what did you see that looked like dirt?

Hickson: At the base of the — I don't know what they call it.

Mr. Muggia: Base board.

Hickson: Base boards, like a vinyl base board.

Q: Right. What floor are we talking about?

Hickson: Second.

Q: Okay.

Hickson: I believe it's the second.

(Hickson Dep. 59:4-59:17).

According to Mr. Masters and BRD's construction log, BRD Construction did nothing to stop water from further infiltrating the building until March or April of 2002, when they began repairs on the roof. (Masters Dep. 30:6-34:23; App. Def.'s Statement, Ex. F).⁴ On May 2, 2002, BRD Construction ceased all work on 40 Gardenville when they discovered evidence of mold contamination. (Compl., ¶ 10).⁵ They advised Mr. Hickson and Mr. Kirchmeyer that same day that extensive mold remediation would be required. (Compl., ¶¶ 11, 16). On May 10, 2002, 40 Gardenville, LLC, reported to Travelers that the building was contaminated with mold. (Compl., ¶ 12). A representative from Travelers inspected the property on May 23, 2002, and requested additional information regarding the mold contamination on June 12, 2002. (Compl., ¶¶ 13, 14). Ultimately, Defendant denied Plaintiff's claim for mold loss on the basis that the policy does not provide coverage for losses commencing before the policy period or for losses caused by dampness. (Compl., ¶ 18).

B. Procedural History

Plaintiff commenced this lawsuit on October 22, 2002, by filing a Summons and Complaint in Erie County Supreme Court. (App. Def.'s Statement, Ex. A). Defendant filed a Notice of Removal and Answer in the United States District Court for the Western District of New York on November 12, 2002. (Docket Nos. 1 & 2).

On December 30, 2003, Defendant moved for an order compelling Plaintiff to disclose the report rendered by Arrow Appraisal prior to the purchase of the building, which Mr. Hickson referred to during his deposition. By Order entered on April 22, 2004, the Honorable Hugh B. Scott, United States Magistrate Judge, directed Plaintiff to disclose all appraisal and inspection reports within thirty days, finding that the reports were relevant to the issue of when mold was detected on the property. (Docket No. 55). On May 24, 2004, Plaintiff's counsel advised Defendant by letter that "my clients have confirmed that they did not retain Arrow Appraisal on this transaction." (Sharkey Aff. in Supp of Contempt, Ex. H). Instead of the Arrow Appraisal report, Plaintiff provided a copy of an appraisal report prepared by Emminger, Hyatt, Newton & Pigeon, Inc. (Sharkey Aff. in Supp. of Contempt, Ex. I). According to this report, Emminger's representative inspected the building on February 25, 2003, more than one year after its purchase, and prepared the report exclusively for Jamestown Savings Bank. (Sharkey Aff. in Supp. of Contempt, Ex. I). Plaintiff's counsel represented that the Emminger report is "the only [appraisal] known by my client." (Sharkey Aff. in Supp. of Contempt, Ex. I).

On April 13, 2004, Defendant filed a Motion for Summary Judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.⁶ Thereafter, on June 9, 2004, Defendant moved for an order of contempt against Plaintiff for failing to comply with Judge Scott's April 22, 2004 Order. As a sanction, Defendant seeks a declaration that the mold contamination at 40 Gardenville predated the inception of the policy.⁷ This Court heard oral argument on September 16, 2004, and reserved decision at that time.

III. DISCUSSION

A. Summary Judgment

Rule 56 of the Federal Rules of Civil Procedure provides that summary judgment is warranted where the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A "genuine issue" exists "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). A fact is "material" if it "might affect the outcome of the suit under governing law." Id.

In deciding a motion for summary judgment, the evidence and the inferences drawn from the evidence must be "viewed in the light most favorable to the party opposing the motion." Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 1609, 26 L.Ed.2d 142 (1970). "Only when reasonable minds could not differ as to the import of evidence is summary judgment proper." Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir.1991). Ultimately, the function of the court is not "to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249, 106 S.Ct. 2505.

B. Defendant's Motion for Summary Judgment

Plaintiff seeks a judgment declaring that Travelers is obligated to indemnify 40 Gardenville, LLC, under the policy for all mold, mold remediation, and mold related expenses. Defendant moves for summary judgment on the basis that the claimed loss is not covered under the policy. Specifically, Travelers argues that the mold loss was not a fortuitous loss and that it is expressly excluded from coverage by the terms of the policy. This Court will address each argument in turn.

1. Fortuitous Loss and Known Loss

To establish a prima facie case for recovery in New York State, an all-risk insured must prove: "(1) the...