City of Elmira v. Selective Ins. Co. of N.Y.

• Decision Date: 14 April 2011
• Parties: CITY OF ELMIRA, Respondent–Appellant,v.SELECTIVE INSURANCE COMPANY OF NEW YORK, Appellant–Respondent.
• Court: New York Supreme Court — Appellate Division

83 A.D.3d 1262
921 N.Y.S.2d 662
2011 N.Y. Slip Op. 02995

CITY OF ELMIRA, Respondent–Appellant,
v.
SELECTIVE INSURANCE COMPANY OF NEW YORK, Appellant–Respondent.

Supreme Court, Appellate Division, Third Department, New York.

April 14, 2011.

[921 N.Y.S.2d 662]

Calusen Miller, P.C., New York City (Melinda S. Kollross of counsel), for appellant-respondent.

[921 N.Y.S.2d 663]

Anderson, Kill & Olick, P.C., New York City (Marshall Gilinsky of counsel), for respondent-appellant.Before: PETERS, J.P., LAHTINEN, MALONE JR., KAVANAGH and GARRY, JJ.PETERS, J.P.

[83 A.D.3d 1262] Cross appeals from an order of the Supreme Court (O'Shea, J.), entered April 7, 2010 in Chemung County, which denied defendant's motion for summary judgment dismissing the complaint and partially granted plaintiff's motion for summary judgment.

Plaintiff owned a historic three-story brick building in the City of Elmira, Chemung County known as the Armory Building. On March 10, 2006, a windstorm caused a portion of the Armory's southern wall to collapse. Plaintiff subsequently hired Hunt Engineers, Architects & Land Surveyors, PC to assess the Armory's condition. Hunt issued a report which concluded that the collapse of the southern wall was caused by hidden deterioration of mortar which weakened the wall and left it unable[83 A.D.3d 1263] to withstand gusting winds. Hunt also reported that similar conditions existed in other areas of the Armory which rendered the building hazardous to its occupants and the public, and recommended that it be vacated until the exterior walls were rebuilt. The report was provided to plaintiff's Fire Marshall who, in his capacity as plaintiff's Code Enforcement Officer, found the Armory to be in violation of several sections of the New York State Property Maintenance Code and determined that it not be occupied until the repairs recommended by Hunt were performed. He further concluded that, if such repairs were not performed, the Armory should be demolished immediately.

After Hunt provided an estimated cost to renovate the Armory of $7,350,000, plaintiff elected to have the Armory demolished and accepted a bid from a firm for $1,022,000 to do so. Plaintiff purchased a building on another site for approximately $227,000 for relocation of the functions formerly served by the Armory. Plaintiff thereafter submitted claims to defendant, its insurer, under its “all-risk” insurance policy. Acknowledging that the collapse of the Armory's south wall was covered under the policy, defendant paid plaintiff a sum of $440,000 for the damage sustained in March 2006,¹ but refused to cover the cost of demolishing the undamaged portions of the Armory and purchasing a replacement building at a different location.

Plaintiff commenced this action for breach of contract, claiming that it was entitled to coverage under the “Ordinance or Law” provision of an endorsement to the policy referred to as the ElitePac endorsement, which extended coverage to include certain losses resulting from enforcement of “any ordinance or law.” After the parties each moved for summary judgment, Supreme Court denied defendant's motion and partially granted plaintiff's motion, awarding plaintiff $500,000 for demolition costs and approximately $227,000 for the cost of replacing the Armory under the Ordinance or Law provision. These cross appeals ensued.

When confronted with an insurance coverage dispute, “ ‘[c]ourts must determine the rights and obligations of parties under an insurance contract based on the policy's specific language’ ” ( Pepper v. Allstate Ins. Co., 20 A.D.3d 633, 634, 799 N.Y.S.2d 292 [2005], quoting State Farm Mut. Auto. Ins. Co. v. Glinbizzi, 9 A.D.3d 756, 757, 780 N.Y.S.2d 434 [2004]; accord White v. Rhodes, 34 A.D.3d 951, 952, 823 N.Y.S.2d 786 [2006] ). “While unambiguous

[921 N.Y.S.2d 664]

provisions of a policy are given their plain and ordinary meaning, where policy language is unclear or [83 A.D.3d 1264] subject to multiple reasonable interpretations, such ambiguities are resolved against the insurer” ( Matter of Progressive Ins. Cos. [Nemitz], 39 A.D.3d 1121, 1122, 834 N.Y.S.2d 394 [2007] [internal quotation marks and citations omitted]; see Travelers Indem. Co. v. Commerce & Indus. Ins. Co. of Can., 36 A.D.3d 1121, 1122–1123, 828 N.Y.S.2d 658 [2007] ). “The test for determining whether an insurance provision is ambiguous ‘focuses on the reasonable expectations of the average insured upon reading the policy’ “ ( Butler v. New York Cent. Mut. Fire Ins. Co., 274 A.D.2d 924, 925–926, 711 N.Y.S.2d 607 [2000], quoting Matter of Mostow v. State Farm Ins. Cos., 88 N.Y.2d 321, 326–327, 645 N.Y.S.2d 421, 668 N.E.2d 392 [1996]; see State Farm Mut. Auto. Ins. Co. v. Glinbizzi, 9 A.D.3d at 757, 780 N.Y.S.2d 434).

The Ordinance or Law provision of plaintiff's policy provided, in relevant part, that:

“(1) If a Covered Cause of Loss occurs to covered Building property, we will pay:

(a) For Loss or damage caused by enforcement of any ordinance or law that:

(i) Requires the demolition of parts of the same property not damaged by a Covered Cause of Loss;

...

(c) The cost to demolish and clear the site of undamaged parts of the property caused by enforcement of the building, zoning or land use ordinance or law.”

As the language makes clear, the...